In the wake of a failed hostile takeover by Broadcom that was thwarted by President Trump’s executive order earlier this month, Qualcomm’s board was re-elected late last week, albeit with tepid support from shareholders. But the board could regret parting ways former CEO and chairman Paul Jacobs, who was not re-nominated for his board seat at last week’s meeting.
The board asked Jacobs to step down earlier this month because they did not believe he could serve as a director and work on a bid for a buyout of the company simultaneously—an idea Jacobs had floated after the failed Broadcom takeover.
“Qualcomm board’s huge mistake is driving off former CEO Paul Jacobs, son of founder Irwin Jacobs, as the strategic, cultural and scientific heart of the company,” senior associate dean for leadership studies at the Yale School of Management Jeffrey Sonnenfeld told Chief Executive. “Michael Dell stayed on his board through negotiations, recusing himself when necessary, and just last week Nordstrom considered an inside buyout with three Nordstrom family members bidding on the board. This is why transaction committees and related party committees exist. The board should simply have used this standard mechanism and ask Jacobs to recuse himself when necessary.”
“This is a vote of no confidence from [Qualcomm’s] owners.” – Jeffrey sonnenfeld
Reports indicate that a majority of Qualcomm’s directors, including current CEO Steve Mollenkopf, failed to get over 50% of votes—a stark indication of how company shareholders feel about its leadership.
“This is a vote of no confidence from [Qualcomm’s] owners. Qualcomm is a national treasure and investor resistance stoked by ISS and Broadcom is a quixotic tantrum with no purpose,” Sonnenfeld says. “Dell, Nordstrom, and many other companies often evaluate family buyouts without removing the interested directors. This is the purpose of related party and transactions committees where those who conflicted recuse themselves as the relevant sensitive moments. Qualcomm’s board was reckless to remove strategic, scientific, and cultural core of their business by having Paul Jacobs step off.”
The failed hostile takeover by Broadcom and subsequent criticism of Qualcomm by proxy advisor Institutional Shareholder Services Inc (ISS) for failing to inform Broadcom of an acceptable price for a takeover weighed on shareholders and the board in recent weeks.
“Yes, the Broadcom/ISS effort to deny Qualcomm a majority for a legitimate shareholder vote seems to be a quixotic tantrum since they cannot ever have a vote which revisits the government’s Committee on Foreign Investment in the United States/Presidential decision,” Sonnenfeld says. “In fact, the 10-day government-imposed deadline on the required shareholder vote last week seemed pointless and arbitrary.”