CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

Tech exec exodus expected to continue

The early retirement of Sun COO Ed Zander shocked Wall Street and stunned employees, but he will have plenty of company among tech stars recently liberated from employment.

The early retirement of Sun Microsystems' second-in-command shocked Wall Street and stunned employees, but outgoing President and Chief Operating Officer Ed Zander will have plenty of company among tech stars recently liberated from employment.

Zander said Wednesday that he wanted out last spring but stayed "to help Sun get though what I thought was going to be a difficult year."

His last day will be July 1. After that, he will at least temporarily join the ranks of newly jobless executives, including AOL Time Warner Chief Executive Gerald Levin, Amazon.com Chief Financial Officer Warren Jenson, Palm CEO Carl Yankowski, Microsoft COO Rick Belluzzo, IBM CEO Lou Gerstner and Advanced Micro Devices CEO Jerry Sanders.

Zander may reappear at the top of another technology company, possibly as CEO. But even if he remains unemployed, he won't be the last to join the executive exodus.

Management experts and executive recruiters say that senior-level turnover, which picked up late last year, is likely to quicken in the next six to 12 months as the economy continues to sputter, stock prices remain depressed and companies continue massive rounds of layoffs. They're warning employees in the technology sector--still struggling to recover from the dot-com stock bubble of the late 1990s--to brace for a particular frenzy of senior-level resignations.

"Tech stocks are not performing the way we've liked them to, and there's got to be somebody the pressure is placed upon--and it's always the top executive," said Bob Winter, senior technical recruiter for Atlanta-based Management Decisions. "They're burning the candle at both ends, getting pressure from the board and shareholders at one end and having to lay off people below them. They're totally burned out and unhappy, so they quit."

Collective burnout?
Many executives base their resignations on intimate decisions surrounding their marriage, health, family or personal goals, and their motivations have little to do with economic cycles or current events. But the flow of resignations in recent months has many psychologists and professors of management worried that corporate America has come down with a case of collective burnout.

They say executive churn correlates with corporate performance, measured by stock price, earnings reports and the magnitude of layoffs. In general, the more companies falter, the more executives decide to bail out.

The bigger they are...

Numerous top executives at large tech companies have resigned or stepped aside during the past two years for a variety of reasons. (Dates are when departure was announced.)

Advanced Micro Devices
Jerry Sanders, CEO
Feb. 14, 2001

Amazon.com
Warren Jenson, chief financial officer
March 5, 2002

AOL Time Warner
Gerald Levin, CEO
Dec. 5, 2001

Barry Schuler, CEO of America Online
April 9, 2002

EMC
Mike Ruettgers, CEO
Jan. 17, 2001

Gateway
Jeffrey Weitzen, CEO
Jan. 29, 2001

IBM
Lou Gerstner, CEO
Jan. 29, 2002

John Thompson, vice chairman
Jan. 29, 2002

Microsoft
Rick Belluzzo, chief operating officer
April 3, 2002

Bill Gates, CEO
Jan. 13, 2000

Oracle
Jay Nussbaum, executive vice president
Nov. 30, 2001

Ray Lane, president
June 30, 2000

Gary Bloom, executive vice president
Nov. 17, 2000

Sun Microsystems
Ed Zander, chief operating officer
April 17, 2002

Larry Hambly, executive vice president
April 29, 2002

Mike Lehman, chief financial officer
April 25, 2002

WorldCom
Bernard Ebbers, CEO
April 30, 2002

Sun, for example, lost three other top executives in the two weeks preceding the departure of Zander. The company recently announced the retirements of Larry Hambly, executive vice president of enterprise services, and John Shoemaker, executive vice president of computer systems. CFO Mike Lehman will be replaced by Steve McGowan.

The resignations come after the men endured tough stints at Sun, once at the pinnacle of the tech economy. Zander, a blunt-speaking salesman from Brooklyn, had to oversee the elimination of 3,900 jobs last year alone. Meanwhile, Sun stock hit $64 in September 2000 but has slid 89 percent and closed Wednesday at $6.97 per share.

People familiar with Zander and others who have laid off large percentages of the work force say the process can be painful. Zander is a 15-year Sun veteran said to have numerous friends among the mid- to senior-level ranks--far from the stereotype of the mercurial boss who lords over the faceless worker ants.

The process of laying off workers may be especially harsh now, only two years after a legendary employee's market in which executives lavishly courted computer programmers and engineers with promises of big money and job security. Many managers feel a deep sense of guilt for the lofty promises they made or implied in the late 1990s.

"You offer people money, hire people, coach them, mentor them and then lay them off--and in some cases these are people you have close personal and business relationships with," said Mitchell Berger, CEO of New York-based executive-level search firm Stephen-Bradford Search. "They feel bad. (Information technology has) gotten mauled, and someone has to be a scapegoat. Clearly the executives are going to feel it more than others."

Kim S. Cameron, professor of organizational behavior and human resource management at the University of Michigan Business School, said suicide, hospitalization and divorce rates typically shoot up during economic downturns--and the trend is more pronounced among senior executives than the people bearing the brunt of the layoffs.

"If you have any heart at all, it's incredibly difficult to put people out on the street," Cameron said. "I admit there are the chainsaw executives who say, 'It's not my problem,' but for most managers, it's very difficult."

Cameron said that the nature of layoffs also creates a vicious cycle of departures for many executives who remain at the company. Once a company announces layoffs, workers tend to put on an exaggeratedly happy posture to their bosses, limiting communication and stifling honest discourse and innovation.

"Morale goes into the tank," Cameron said. "The executives are seeing people's lives changed and hurt. They're getting criticized by shareholders and other people outside the organization. And you find yourself in an organization you don't like anymore where people are only passing positive news upward. It's not surprising when people say, 'Look, I don't need to be here anymore.'"

Abandon ship
But it might be tough for many rank-and-file tech workers to feel much sympathy for the person who passes out pink slips. In many cases, executives cashed out in the late 1990s and are sitting on millions of dollars in their nest eggs. To some extent, the voluntary resignations of Zander and others are luxuries--a snubbing of the workaday world that few underlings have when job prospects remain gloomy.

Career strategist and workplace expert John A. Challenger says it's also silly to pity the boss when he may be doing little more than abandoning a sinking ship. Challenger, who counsels people when they quit or get laid off, is expecting higher executive churn because of recent accounting and ethics controversies at Enron, Andersen Consulting, Global Crossing and other companies.

"Many of these companies have sorely disappointed shareholders. People have lost billions," Challenger said. "There is going to be more and more scrutiny in upcoming months surrounding these companies whose share prices perform so poorly, companies that restated earnings, companies whose executives cashed in. Who knows what kind of lawsuits are coming. The executives may be saying, 'I've put away enough money, and it's just time to get out. If we are going to be investigated, it would be hell--and I want no part of that.'"

It's unclear how the growing ranks of bosses will fare in their early retirements.

Many outgoing CEOs find it difficult if not impossible to be happy in idle retirements, and within a year they get back into corporate America or entrepreneurship--or they still consume media attention in more notorious ways.

Jack Welch, for example, retired as chairman and CEO of General Electric in September 2001, but earlier this year he found himself embroiled in a scandalous affair and divorce that made headlines around the world. Former Chrysler CEO Lee Iacocca tried to spearhead a failed takeover of his former employer, then recently disclosed his desire to work for DaimlerChrysler in an advisory capacity--and was utterly rebuffed by CEO Juergen Schrempp.

"You're walking away from all this?"
Dr. Robert R. Butterworth, a clinical psychologist and the director of International Trauma Associates, says even the most sympathetic or burned-out executive could come to regret the decision to exit corporate America early. And, he says, the newest crop of executive defectors will find little sympathy among older retirees; previous generations of executives retired as soon as they hit a certain age--not whenever the economy turned bleak or they feared mass layoffs.

"This is a new breed of cat in a psychological sense," Butterworth said of Zander and other relatively young executive defectors. "They're used to 'I'm in charge,' and they can afford to leave. But it may be foolish for someone who's used to being a technology pioneer to quit and just sit on their hands. There's going to be a little thing in the back of their heads that keeps popping up, telling them to get back to work. But they may not be in a very good position to jump back into another company, either because of their age or the economic situation."

Jim Warner may be one of the few people in a position to dole out wisdom on executive burnout and early retirement to Zander. The former software CEO first encountered Zander in the late 1980s, when Warner's start-up, Precision Visuals, was on Sun's short list of preferred software sellers.

Warner said he briefly got swept up in the "incredible energy" surrounding Zander and the software niche at the time, but he soon "got fried," let his company sink into a financial morass and then sold it.

Warner now counsels midlife executives toward more fulfilling lives and recently wrote a book, "Aspirations of Greatness: Mapping the Midlife Leader's Reconnection to Self and Soul." He thinks Zander might be experiencing a burnout similar to his own. Most of his clients are 50-something executives, and many hail from the tech sector.

"A lot of these guys are finding they've got a hole in their soul, and neither money nor their title can fill it," Warner said. "The salary, benefits, recognition and perks--they realize that they are all meaningless. I can guarantee that the people around Zander are saying, 'What, you're walking away from all this?' And he's just saying, 'Yes, I don't know what's next, but this is not it.' It takes a lot of guts and pain to go to that place, to go without a net."