Intel CEO “Retires” after Clashing with Board of Directors
Intel CEO Pat Gelsinger “retired” a few days ago on December 1 after he had been appointed to the position just three years ago in 2021.
The official Intel press release had stated Gelsinger retired on his own accord. Subsequently, news outlets, citing reliable insider sources, reported that Intel’s board of directors had presented the former CEO with an ultimatum to either resign voluntarily or be forced out.
The situation highlights the tensions that may arise in the course of corporate governance. As we have learned, corporate directors owe a fiduciary duty to the corporation and must act in its best interests. They may choose to delegate into existence management, who then run day-to-day operations and must also act in a corporation’s best interests, but are ultimately beholden to the directors.
Directors and management evidently disagreed on what constituted the best interests of the corporation, and in this case the former prevailed. “Management” is relevant as reports indicate that several of Gelsinger’s managerial associates will also quit or be forced out.
Gelsinger’s recovery plan envisioned that Intel would become a semiconductor manufacturing powerhouse and invested over $100 billion USD into cutting-edge facilities in the continental US while embarking on a hiring spree. During his tenure however, Intel stock prices had plummeted 60% while Nvidia replaced Intel on the Dow Jones Industrial Average. While the company continued to profit from its servers, from a technological standpoint, its consumer processors have been inferior in both performance and efficiency to AMD’s Ryzen line of CPUs for multiple years, and Intel’s nascent graphics cards have failed to compete with consumer offerings from rivals AMD and Nvidia, and have not been viable for datacentre applications such as training AI models.
While shareholders were undoubtedly displeased by those developments, directors evidently thought Gelsinger’s recovery plan was not in the best interests of Intel as a corporation.
The “best interests” consideration becomes especially interesting because the US gov’t had likely envisioned a greater role for Intel from a national security standpoint. During the pandemic, global supply chain issues caused widespread price hikes and chip shortages, since 90% of the world’s most advanced semiconductor manufacturing is located in Taiwan. As a result of geopolitical tensions, China, America, Russia, and the EU have all taken steps to establish production facilities within their own areas of jurisdiction. Intel, being an American company, likely featured prominently in American thinking; the CHIPS Act earmarked $52 billion USD for domestic chip production, of which $7.86 billion was finalized on November 24, 2024.
The fact that corporate law does not really consider employees is on display. Earlier this year, Intel had laid off thousands of employees at the behest of shareholder pressure. Interestingly, Intel insiders and employees, even those who had been furloughed, had expressed their continued confidence in Gelsinger’s vision. This broadly-shared sentiment was evidently insufficient to prevent his ousting.
Intel as a company has struggled for nearly a decade in a highly competitive industry, and it remains to be seen how an eventual replacement may act in the best interests of the company…
Sources: https://www.reuters.com/business/intel-ceo-pat-gelsinger-retire-2024-12-02/
https://www.theverge.com/22597713/intel-7nm-delay-summer-2020-apple-arm-switch-roadmap-gelsinger-ceo
https://www.theverge.com/2024/12/3/24311594/intel-under-pat-gelsinger
https://www.intel.com/content/www/us/en/newsroom/resources/us-chips-act-funding-intel.html#gs.if35z2
