Corporate Social Responsibility / Human Resources / Organizational Strategy

Microsoft’s Thompson Becomes Member of Illumio Board

thompson

Microsoft chairman John Thompson is getting another job. He is now joining the board of a new security-software startup Illumio. Illumio’s goal is to help companies identify viruses and other malicious programs in order to keep corporate data from leaking into the hands of hackers. There couldn’t be a better fit for this position. Thompson already has plenty of experience in the computer security field. He was the CEO of Symantec, a malware detection program much like Illumio, for 10 years and is currently the CEO of a relatively young cloud-infrastructure startup called Virtual Instruments.

No mistake that Thompson is qualified for the job, he has a lot of experience in the specific field and has been on other boards. However, Thompson is an investor in the company which actually makes a significant difference. The Boards of Directors in public corporations act as fiduciary agents to shareholders, making them the voice of the shareholders in the company. The Boards of Directors can be broken into two groups, insiders and outsiders. Insiders are members of the board that are stakeholders in the company, such as Thompson. Outsiders are independent of the company and often times don’t understand the finer details of the firm. While insiders do have a better understanding of the firm there tends to be a conflict of interest. Enron has one of the most documented cases of corporate fraud in recent history and one of the factors that made it possible was a board that had direct ties to the corporation and simply just ignored signs of fraud because they were profiting. After Enron’s collapse, a law was passed forcing corporations’ boards to be comprised of mostly outsiders. While Thompson is legally allowed to be on the board, the fact that his wealth is directly tied to the performance of the firm can be a major conflict of interest. Board members are meant to serve the stockholders and the firm as a whole, if given the opportunity to profit, many board members have the possibility of really damaging the firm in order to make a quick buck. That’s why boards should be composed exclusively of outsiders. It’s the executives’ jobs to give the board all the information it needs to make a decision, and with the rapid growth of technology, information asymmetry has vastly decreased over the last few years.

There is no doubt that John Thompson would be a great member of the board for this company given his prior experience, but having a member of a board that’s supposed to be the voice of the stockholders having a personal stake in the company might lead to Thompson making decisions based solely on his own wealth. Making the possibility of yet another scandal in the business world very possible.

Mark Cooney


Sources:

Ovide, Shira. “Microsoft Chairman Thompson Joins Board of Security Startup Illumio.” Digits RSS. Wall Street Journal, 10 Nov. 2014. Web. 11 Nov. 2014.

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