The Rise & Fall Of Intel CEO Brian Krzanich Rev. 2.0

On 21 June 2018, Intel announced the resignation of Intel CEO and director Brian Krzanich after it was revealed that he had a past consensual relationship with an Intel employee in his chain of command. We look at the rise and fall of Intel CEO Brian Krzanich.

Updated @ 2018-06-24 : Added two new sections with details on the affair, and Brian Krzanich’s severance.

Originally posted @ 2018-06-22

 

The Rise & Fall Of Brian Krzanich

Brian Krzanich joined Intel in 1982, and was appointed Intel CEO in May 2013 – the latest in a short line of Intel veterans to make it to the top. Intel only had six CEOs in its 49+ year history.

Since then, he has presided over Intel’s move away from microprocessors into artificial intelligence, 5G and autonomous vehicles. During his tenure, Intel also saw its dominance in processor technology and even its once-vaunted superiority in silicon fabrication, chipped away by rivals.

Brian Krzanich’s position though was never in danger. Until the Intel board of directors was informed a week ago that Krzanich had a prior sexual relationship with another Intel employee under his direct chain of command.

Intel CEO Brian Krzanich Resigns Over Past Affair

To be fair – the affair was allegedly consensual, so it was not another #metoo moment. It also began before he became CEO in May 2013, and “ended a few years ago“.

However, the affair violated “Intel’s non-fraternisation policy which applies to all managers“. After investigations (that are still ongoing) by internal and external counsel confirmed the relationship, Brian Krzanich offered his resignation.

Intel was recently informed that Mr. Krzanich had a past consensual relationship with an Intel employee. An ongoing investigation by internal and external counsel has confirmed a violation of Intel’s non-fraternization policy, which applies to all managers. Given the expectation that all employees will respect Intel’s values and adhere to the company’s code of conduct, the board has accepted Mr. Krzanich’s resignation.

After his resignation was announced, Intel’s stock price took a dive – dipping 3.5% by Friday’s closing bell. Brian Krzanich could walk away with about $44.5 million, although Intel’s board could put a cap on that after their investigations conclude.

 

More Details Emerge About The Affair New!

For the sake of clarity (and not scandal), here are the details of the affair that led to Brian Krzanich’s resignation. We will update or correct the details, as and when they emerge :

  • The consensual affair began about a decade ago, circa 2008
  • The relationship ended “a couple of years ago“, but it’s not clear if it ended before his appointment as CEO in May 2013, or before the Intel non-fraternisation policy took effect in 2011.
  • The woman he had an affair with, was in middle management at that time, and did not work closely with Krzanich.
  • She is still working at Intel, but does not hold a senior position, or work closely with him.
  • The affair only came to light when she mentioned the relationship to a colleague, who “felt compelled” to report it to Intel’s general counsel on 14 June 2018.
  • Intel General Counsel Steven R. Rodgers informed the board, which initiated an investigation that is still ongoing.
  • Brian Krzanich tendered his resignation on 20 June 2018.

 

How Much Will Brian Krzanich Leave With? New!

Brian Krzanich was hired at-will, so he won’t have a golden handshake for leaving. That said, he could leave with about $44.5 million, in the form of $37.5 million worth of stock awards, and $7 million in deferred compensation, medical benefits and his pension plan.

On the other hand, Intel’s board could fire him for cause, and claw back about $30.6 million of his stock awards. That would leave him with just under $14 million.

The results of the ongoing investigation will determine whether Intel’s board will allow Brian Krzanich to retire with those stock awards, or terminate him for cause.

 

Brian Krzanich Out, Bob Swan In… For Now

The Intel board of directors immediately appointed Intel CFO Bob Swan as the interim CEO.

“The board believes strongly in Intel’s strategy and we are confident in Bob Swan’s ability to lead the company as we conduct a robust search for our next CEO. Bob has been instrumental to the development and execution of Intel’s strategy, and we know the company will continue to smoothly execute. We appreciate Brian’s many contributions to Intel,” said Intel Chairman Andy Bryant.

Intel CFO Bob Swan

However, as Bob Swan is relatively new and has little experience in manufacturing, he is unlikely to be appointed permanent Intel CEO. The Intel board made it quite clear that they would be looking for someone else :

The board has a robust succession planning process in place and has begun a search for a permanent CEO, including both internal and external candidates. The board will retain a leading executive search firm to assist in the process.

 

Dear Investors : We’re Still On Track

Intel is eager to point out that nothing will change with Brian Krzanich’s departure, at least for the moment.

Intel expects to deliver a record second quarter, with revenues of approximately $16.9 billion and non-GAAP EPS of approximately $0.99. With accelerating data-centric revenue, the company is off to an excellent start in the first half of the year and expects 2018 to be another record year. Intel will provide full second-quarter results and an updated outlook for the full year on the second-quarter earnings call on July 26.

Considering Intel’s loss of ground in recent years to rivals like AMD, NVIDIA and Qualcomm, perhaps Krzanich’s departure has a silver lining, and we may see a reinvigorated Intel under a new CEO with fresh ideas.

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