How important is it for the stakeholders in a company that the ethics of the CEO match those of the organization?: An Analysis with respect to Bill Gates and Microsoft

(Background: On 1st July 2008 Bill Gates resigned as CEO of the Microsoft Corporation to pursue his work with the Bill and Melinda Gates Foundation. He is currently Chairman of the Microsoft Corporation. Bill Gates is a well known philanthropist and whilst CEO of Microsoft his pledges of money to fight many of the world’s diseases were media headline grabbers. In 2005 he gave £145 million ($258 million) to fight malaria, and in 2006 he pledged £507 million ($900 million) to cut deaths by tuberculosis. Yet corporate and personal philanthropy did little to avert negative headlines about Microsoft’s questionable business practices. Since 1999 Microsoft has been at the centre of a number of legal disputes with both the US Government and the European Commission. At the heart of the disagreements have been accusations that Microsoft had been exploiting its monopoly power in order to reduce competition, and consequently choice, in the marketplace. Microsoft was accused of anti competitive behavior in the United States and had severe financial penalties inflicted on them in an anti trust law court action in Europe. Whilst the financial penalties were relatively easy for Microsoft to bear, the company continued to face accusations of poor ethics and unfair tactics)

How well a business corporation performs in financial terms is significant for a broad group of people that includes potential/existing investors, creditors, employees or managers. With differing information needs and purposes, each category of stakeholders should be provided with data that is comprehensive, relevant and reliable, so as to allow an informed opinion to be reached on the corporation’s financial performance. However, all too often, the customer is left out of this equation. The situation is no different in the case of Microsoft Corporation, which has tremendous reach and market share, but whose customers have very little say in the affairs of the company. Bill Gates’ personal efforts as a philanthropist is widely appreciated,– both in terms of money and energy. Yet, the history of Microsoft since its inception shows that the organization is a purely economic enterprise, whose sole purpose is profits and whose foresight stops with the next quarter. This deviation in behavior between the Chief Executive Officer and his organization is the topic of discussion for this essay. The following passages will attempt to ascertain how important it is for the stakeholders that a consistent standard of ethic is adopted both in the realm of personal philanthropy and during business operations, in the context of Microsoft and its founder Bill Gates.

Microsoft’s mission statement is ‘to enable people and businesses throughout the world to realize their full potential’, yet, the activities of the company had attracted criticism from both competitors and end-users. While Bill Gates’ personal philosophy is admired across the world, the business philosophy adopted by Microsoft has been unduly aggressive and opportunistic. Almost since the founding of Microsoft, the company and its founder have been constantly engaged in courtroom battles. The foremost among the charges against Microsoft is its tendency to monopolize the software market through acquisitions and ruthless business strategies to corner greater market share. Microsoft has had the ire of all its competitors, including Apple Computer, Opera, Sun Microsystems and Netscape (Crane & Matten, 2007). The existing regulations for corporate responsibility are full of loop-holes, which organizations such as Microsoft tend to exploit. For example, both in the United States and in the United Kingdom, the only document that a company is required to release in the public domain is its Annual Report. Corporations whose shares are traded publicly issue an Annual Report at the end of each financial year for the perusal of its shareholders and other stakeholders. The stakeholders could be potential investors, creditors, employees, regulating agencies and competitors. In other words, Annual Reports indicate the financial health of a corporation to all concerned. It contains such information as financial statements, the Chairman’s statement, and the management’s assessment of prospects in the following years. In the case of Microsoft’s annual reports charts, graphics and descriptions of financial performance is given, but they don’t mention the means through which the company achieved those results and whether the means were fair or unfair (Crane & Matten, 2007). This gives opportunity for companies such as Microsoft to show an impressive set of numbers, the reality of which can be deciphered only by reading the fine print. In this case, even the so called ‘stake-holders’ and capital contributors are at risk of being deceived, which makes a strong case for introducing stricter regulations for monitoring and reporting of the activities of a company. The resultant transparency would then empower the customers and competitors alike, to see to it that their genuine interests are not jeopardized by the company’s activities (Chandler, p.45). As of now, company law statutes across the world does not mandate the publishers of annual reports to explicate their company’s overall performance in relation to the welfare of general public and the company’s competitors – a loop hole which Microsoft had ruthlessly exploited in the past (Wheeler, p.22). This situation also calls for enforcement of a consistent standard of ethics in the personal and professional conduct of a Chief Executive Officer.

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