Earlier this week, Intel's board gave CEO Pat Gelsinger the option to retire or be fired. He chose the former. Gelsinger delivers a speech at the COMPUTEX forum in Taipei, Taiwan June 4.Ann Wang/Reuters
Gus Carlson is a U.S.-based columnist for The Globe and Mail.
If there is anything surprising about the high-profile departures of CEOs at Intel INTC-Q and Stellantis STLA-N this week, it isn’t that they were sent packing – it’s that it took their boards so long to act.
For investors, the steady decline in the companies’ value, market share and competitive edge over the past year has been like watching a train wreck in slow motion. And they were helpless, their stakes burning while directors fiddled.
Like Boeing and Disney before them, the Intel and Stellantis disasters are the latest examples of board complacency and, perhaps, incompetence. In all four cases, boards rode their leadership nags relentlessly, even though it was obvious to most every other stakeholder that they were losing the race.
And in each case, the problems illuminating the CEOs’ weaknesses had been building for some time and were largely self-inflicted – not the result of any single external force or crisis.
The Intel story has been particularly gruesome. Patrick Gelsinger was appointed CEO in 2021 to spearhead a turnaround at the struggling Santa Clara, Calif., computer-chip maker.
The company’s ability to innovate had stalled, it was losing market share in its core businesses and it had missed opportunities in the cellphone market and artificial-intelligence apps. Meanwhile, competitors such as Nvidia were eating Intel’s lunch.
Rather than getting better under Mr. Gelsinger, Intel got worse. He hired recklessly, invested in the wrong things at the wrong time and was hopelessly out of step with the fast-changing industry – a remarkable series of stumbles for someone with deep tech roots.
Intel’s share price declined more than 60 per cent during his leadership tenure – it’s down more than 50 per cent so far this year, even as the NASDAQ index has risen almost 30 per cent.
The tipping point came with the company’s third-quarter bomb – a loss of US$16.6-billion, the worst in its 56-year history. Earlier this week, the board gave Mr. Gelsinger the option to retire or be fired. He chose the former.
Over at Stellantis, the parent company of Chrysler, Jeep, Fiat and Peugeot, the departure of CEO Carlos Tavares was way too long in coming. The flaws in his strategy – and the consequences – were well-publicized.
Mr. Tavares turned away loyal buyers by keeping prices too high on popular workhorse brands such as Jeep, Dodge and Ram. The tone-deaf posture caused inventories of unsold cars and trucks on dealer lots to soar, particularly in North America, where they reached almost half a million vehicles in the summer. U.S. sales fell 20 per cent in the third quarter while industrywide sales showed modest growth.
Layoffs loomed, there was talk of the company dumping some of its showcase brands such as Maserati and Chrysler, and Stellantis stock lost almost half its value during the year.
Then, in October, the company dropped a bomb of its own. Mr. Tavares stunned investors with a profit warning reflecting severe weakness in its perennial cash cow, the U.S. market.
But that wasn’t the worst of it. He also announced that he would stay on as CEO for another 18 months, until his contract expired in 2026, a remarkably arrogant move suggesting he was doing stakeholders a favour by remaining at the helm.
At that point, any reasonable person might have suggested that the board step in, thank Mr. Tavares for his contributions and show him the door. Any coach in any sport would do the same if they saw their star athlete losing his or her touch. After all, glory days don’t last forever.
But the Stellantis board stood pat – or wimped out, depending on how you want to look at its inaction. Perhaps it was because of Mr. Tavares’s reputation as an industry visionary. After all, he was the genius behind the combination of Peugeot and Fiat Chrysler to create Stellantis. Maybe the directors thought he had one more Hail Mary pass in his playbook.
He clearly didn’t, and his departure was announced Sunday, the announcement citing his differences in opinion with the board.
Despite the reputational cloud over CEOs who depart their corner offices in disgrace, it’s hard to feel sorry for Mr. Gelsinger or Mr. Tavares.
During his four-year stint as CEO, Mr. Gelsinger made about US$46-million, including a severance package reported to be around US$10-million. Had he been successful in turning around Intel, he could have made US$140-million.
Meanwhile, media reports suggest Mr. Tavares could receive €100-million in severance, though Stellantis has said that figure is inaccurate. Maybe so, but Mr. Tavares, who made almost US$40-million in 2023 – including a 56-per-cent performance bonus – won’t walk out empty-pocketed.
The numbers reflect a couple of truisms in business: You don’t get what you deserve, you get what you negotiate. And failure, it seems, is a pretty lucrative business in an era of craven boards.