Chairman role has new meaning in tech industry

Because tech CEOs are resigning at an early age to become chairmen of their companies, they're far more active in setting long-term strategy and less inclined to be mere advisers.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
4 min read
Faster, quicker, younger.

Like many things related to technology, the pace at which chief executives pass the baton to new torchbearers is accelerating.

Tech CEOs typically started their companies, reaching the corporate peak at an early stage in a company's life, as well as their own. As a result, when they step away from the day-to-day CEO tasks to become chairman, they're far more active in setting long-term strategy and less inclined to be mere advisers.

Bill Gates Bill Gates of Microsoft, for example, announced last week that he would transfer the CEO post to current president Steve Ballmer. Gates, 44, plans to remain as chairman and fill the newly created post of chief software architect, helping set the company's long-term strategy.

And last week, Steve Case, CEO and chairman of AOL, said he would pass on the CEO post to Time Warner's Gerald Levin, following AOL's bid to buy Time Warner. Levin, Time Warner's chairman and chief executive, will serve as CEO of AOL Time Warner, while Case, 41, will serve as chairman.

Ted Waitt Ted Waitt, 36, founder of direct PC-seller Gateway also announced similar plans last month. Waitt plans to retain the chairman post, while handing the CEO post to company president Jeff Weitzen.

All of these company founders say they plan to remain active in the strategic direction of their companies but will turn over the day-to-day duties to the new CEOs.

"Most chairman are only transitional. The chairman-CEO is usually near retirement age and picks a successor. The predecessor stays on until the transition is complete and then retires," said Thomas J. Neff, chairman of executive search firm Spencer Stuart.

But with the tech industry sprouting countless new companies with founders in their 20s, many of these CEOs are far from retirement.

"Now, people move to the chairman's role early and see it as a way to share leadership," said Jeff Christian, who operates the executive search firm Christian and Timbers. "Maybe they'll focus on technology, or marketing. The role of chairman is definitely changing in technology."

Although roughly 10 percent to 15 percent of public companies have chairmen who only serve in that role, the ratio is expected to increase as technology firms mature, recruiters said.

Jon Holman of the executive search firm Holman Group noted that in "most other industries, you don't have 40-year-olds heading the largest companies as CEOs. The CEOs at companies like General Motors probably had to work their way up over 20 years. So when they get the CEO post, they'll stay there for a few years and retire, rather than keep an active role as chairman."

Several issues are pushing this change, say executive recruiters. The speed at which technology develops and the short span it takes for a small company to scale to a large operation prompts the need for more shared leadership.

Also, in this tight labor market, handing the CEO post to a valued executive is considered a tool for retaining top talent.

"A CEO-chairman who knows they aren't going anywhere and knows their chief operating officer is getting a lot of calls from recruiters may take this defensive move to retain their talent," said Christian.

The passing of the baton is also happening at a faster stage as a flood of new technology start-ups go public at very young ages. Venture firms are increasingly warning founders of these companies that Wall Street gains a greater comfort level when seasoned executives are in the CEO and chief financial officer posts, recruiters say.

"Founders used to see it as a horrible sign of failure if they were not the CEO. But now the VCs and entrepreneurs are agreeing from the get go that the stakes are too big," Christian said.

The technology industry has mixed results of former CEOs transitioning to the chairman only role.

Apple CEO and co-founder Steve Jobs, for example, had a difficult time.

Jobs recruited PepsiCo executive John Sculley as CEO in 1983, while he remained chairman at age 29. But Jobs wanted to remain too active in the daily operations and was bounced from his chairman post two years later.

He returned to the company two years ago as interim CEO and is credited with reviving the once-struggling company. Jobs recently announced he will take on the position permanently.

In sizing up the new roles for Gates, Case and Waitt, Gerry Roche, chairman of search firm Heidrick & Struggles, said: "The guys are the same and the functions may change, but will the title make a lot of difference? That remains to be seen."