How Microsoft Reformed Its ‘Toxic’ Culture

Company culture at Microsoft in 2013 had grown so “toxic,” said independent chairman John Thompson, the board couldn’t get its top choices of executives from outside the company to sign on as the $526 billion software behemoth’s new CEO.

“The culture of this place was: If you’re the smartest person in the room, you can also be the rudest and crudest person in the room,” Thompson said during a recent talk at Stanford’s annual Directors College event. “Intellect mattered, and therefore the interpersonal actions were not what they needed to be.”

The CEO succession the board oversaw in 2014 led to a strategic and cultural shift, and board members followed it with a series of governance improvements and an infusion of new directors. Since 2012, the board size has expanded by two, and eight new independent directors have joined the board. Six directors have left. Governance experts are urging other boards to follow the lead of companies such as Microsoft and regard directorships as tours of service based on company strategy rather than an appointment that typically spans close to a decade or longer.