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Death by Shareholder

I just wanted to write a quick post to introduce a concept: “Death By Shareholder.” Yahoo is the current epitome of this, though I worry that Google and/or Apple may get there eventually too.

Anyway, here’s the concept:

An innovative tech company, caught in the orgiastic throes of growth goes public, gets a board-of-directors, and a “real” CEO. The board and CEO then - despite the best of intentions - stifle whatever made the company great under a layer of bureaucracy, management-speak, and quarterly growth/revenue targets. The company starts to lose its edge and market-share.

The board then gets antsy and starts pushing management hard (throwing out CEO’s for example), which focuses the company on internal issues, resulting to further neglect of customers, perpetuating the problems that started the company bleeding in the first place.

Take a hard look at Yahoo, what’s spilling out of Jerry Yang’s mouth, and their recent, sad history of innovation-through-acquisition - it all points to a company that’s ruled by shareholders, not customers.

When all is said and done, I call it Death by Shareholder. I don’t know if its symptomatic of a bad Board, a bad CEO, or a company that should have stayed private, or what. It seems like the technology world demands a particularly well-balanced mix of activist board that imposes accountability, and hands-off board that allows an innovative company to keep innovating. I suppose it ultimately falls on the CEO to mediate that relationship.

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