Starbucks CEO ouster: board too deserves scrutiny

The board of directors has ousted its CEO, Laxman Narasimhan, and installed a replacement. I read this detailed story about what brought about the CEO's fall- and, more interestingly- about how the board of Starbucks engineered his ouster.

Narasimhan was removed in less than two years at the helm. The story dwells at great length- and with evident relish- on the behind-the-scenes action that followed his April announcement of poor sales performance at Starbucks and the 16 per cent drop in the stock price that followed the next day. The Chairman of the board held meetings with  a leading investor and set up a meeting with Brian Niccol, Narasimhan's successor. 

A month after the April results, Satya Nadella,  Microsoft CEO, had left the board saying he was doing so with a heavy heart but while affirming full confidence in Narasimhan. The CEO had little inkling of his impending removal. Then, after everything was sewed up, came the "brutal" call from the Chairman to Narasimhan: he was out.

I must confess I read the story in some amazement. The way it is presented, we are supposed to applaud the cloak-and-dagger methods of the board in getting rid of a non-performing CEO. After going through the story carefully, however, I have a few questions:

• Where was the need for such secrecy? What if the board had conveyed to Narasimhan its discomfort with his performance and indicated to him that they might have to consider replacing him? Would the heavens have fallen? What is great about a board ambushing its CEO?
• The story says this is the third CEO change in three years. The same board had hailed Narasimhan as the "inspiring leader" Starbucks needed when it appointed him. What does this say about the board's judgement in selecting the CEO?
• The new CEO comes in with a package of $100 million, a huge increase over the package of $28 million offered to Narasimhan. What if the change does not work? Who would be accountable for the staggering package ? 
• The Chairman will cede her chair to Niccol, the new CEO, so that he is chair-cum-CEO. In governance terms, this is regressive. Separation of the two roles is considered the better option.

It may well be that Narasimhan had to go. But the board's own functioning needs to be put under the lens.That it's a star-studded board is all the more the reason to wonder about its functioning.