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Jul 17, 2018

Texas Instruments CEO ousted for violating code of conduct

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Texas Instruments Inc.’s (TXN.O) ouster of its newly promoted chief executive officer over his personal conduct was a rare foray into the spotlight for one of the most low-key companies in technology, demonstrating the increased scrutiny on leaders in all industries.

The Dallas-based chipmaker, which has focused on the esoteric but profitable world of analog semiconductors, concentrates its communications on areas like cash returns to investors and its capital management strategy. Following the surprise scandal surrounding code-of-conduct violations by Brian Crutcher, who took over June 1, the company’s answer was to go back to what works — it permanently reinstated his predecessor, Rich Templeton, who held the job for more than 13 years. Shares slipped less than two per cent in extended trading as Templeton’s return assuaged concerns about a disruption to the company’s business.

The board acted after receiving a report on Crutcher’s behaviour, Templeton said in an internal video address to employees on Tuesday. While the company didn’t elaborate on the behaviour or timing, its quick reaction underscores its desire to quickly return to the steadiness that employees and investors have come to expect of the 88-year-old company — as well as an increasing corporate intolerance of bad behaviour by the people in charge.

“TI had become known as such a stable company,” said Tore Svanberg, an analyst at Stifel Nicolaus & Co. “All boards are under a lot of pressure to make sure they do the right thing.”

The semiconductor industry in particular has drawn attention for improper executive behaviour of late. Crutcher is the third chip company leader in less than two months to leave his job over a breach of rules on personal conduct, following the departures of Intel Corp.’s (INTC.O) and Rambus Inc.’s (RMBS.O) CEOs. Intel’s Brian Krzanich was found to have had an extramarital relationship with another employee. Those resignations, as well as the broader backdrop of the #MeToo movement focused on eradicating gender-based discrimination, harassment and abuse, may be triggering heightened scrutiny of the personal behaviour of tech-industry executives.

“The violations are related to personal behavior that is not consistent with our ethics and core values, but not related to company strategy, operations or financial reporting,” Texas Instruments said in a statement. A company spokesman declined to comment on the nature of the violation and whether it was related to a personal relationship.

By acting to remove Crutcher, directors were forced to go back on their ringing endorsement from just six months earlier.

“The directors have had a number of years to assess Brian’s ability, results and style, and we are highly confident he is TI’s next great leader,” Wayne Sanders, lead director of the board and chairman of the governance and stockholder relations committee, said in a January statement when Crutcher was named as the next CEO and president.

During his initial tenure as CEO, Templeton, 59, transformed Texas Instruments into the leading provider of analog chips and made it one of the most profitable companies in the industry. He remained chairman after Crutcher took the helm last month.

“My wife asked me if I was surprised, disappointed, mad or excited about returning as CEO,” Templeton said in the video. “The simple answer is ‘yes’ to all of those thoughts and emotions.”

He will most likely stay in the post until the company has identified his successor from within its ranks and trained that person, a path it typically follows, according to Stifel’s Svanberg.

For Crutcher, as for his counterpart at Intel, the involuntary exit is going to be expensive. He could be forced to surrender as much as US$43.3 million in stock awards, according to data compiled by Bloomberg.

Texas Instruments, which is scheduled to give its full earnings report next week, gave a preview of those numbers on Tuesday. The company said second-quarter revenue rose to US$4.02 billion, up nine per cent from a year earlier. Profit was US$1.40 a share, including a three-cents-US-per-share tax benefit. On average, analysts had predicted profit of US$1.30 a share on sales of US$3.97 billion.

At least 437 high-profile executives and employees had been accused of harassment or other misconduct as the #MeToo movement has increased scrutiny of all executive behaviour over the last 18 months, according to a tally updated daily by crisis-consulting firm Temin & Co. Of those, 259 were fired or left their jobs, the study found.

“Pandora’s box has been opened and there’s no putting the lid back on,” said Davia Temin, founder and CEO of Temin & Co. “There’s been a lot of bad behaviour, for a long time, and in the past it’s often been walled off or dealt with privately. But now scrutiny has been unleashed.”