Case Studies
Why did Apple’s board fire Steve Jobs in 1985?
Why did Apple, the company Steve Jobs founded, fire him in 1985? The reasons are complex but quite simple when you boil it all down. Apple fired Steve Jobs because he had a massive disagreement with the CEO and the board. It’s an excellent case study in corporate governance education.
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There is perhaps no more extraordinary corporate success comeback story than that of Steve Jobs and Apple.
Younger readers might only remember Jobs as the person who spearheaded Apple’s modern success through products like the iPhone and MacBook. But there was a whole other episode in his long saga with Apple that is perhaps the most important from a corporate governance perspective: the one where he effectively got “fired”.
The year was 1985. Jobs was the co-founder and visionary of Apple, yet things would get an awful lot worse for him before his eventual, unrivalled success as the organisation’s leader. In fact, once he left Apple, it took eleven years for him to return – a fact often glossed over or omitted from many modern summaries of his life.
Jobs’ story would become an American classic and one that would have ample lessons for anyone interested in boardroom dynamics.
First, however, it begs the question: What happened? Why did Steve Jobs leave?
Steve Jobs hired the man who would later prove instrumental in his departure
Steve Jobs and Steve Wozniak famously started Apple in a garage and began to develop their unique business strategy. Like many people starting out in business leadership, the two men had only rough blueprints of how their business responsibilities would work: Jobs handled business and creativity, while Wozniak engineered their creations. It’s a simplistic summary, but it gives you an idea of the structure that allowed Apple to get off the ground.
But there was a problem: Both Jobs and Wozniak were young men without any real business experience, and they needed expert guidance if Apple was to have any hope of success. So, like many startups before and after (and in keeping with good governance practice), they built a board of directors, bringing in business experts to help get the fledgling tech company going.
The quest for outside expertise also led to the appointment of John Sculley (then President of PepsiCo) to the role of CEO in 1983. Jobs was personally involved in recruiting him.
From there, Apple began to churn out revolutionary computer products, led by the genius of Jobs and Wozniak. But a major issue for the circle of Apple’s leaders was Jobs himself. He may have been a tech genius, but his style of working was often criticised as incredibly high-pressure, uncompromising, rubbing people the wrong way with seemingly impossible goals and on-the-spot firings. It was a true “my way or the highway” approach.
Crucially, Sculley quickly grew fed up with this attitude, and it set the stage for an eventual ouster.
Apple ousts Steve Jobs in 1985 because of a leadership clash.
The trigger for Jobs’ departure was poor performance in early 1985. The Apple Macintosh had launched the previous year, and despite initial promise, sales began to slump. It combined with poor performance of another product – Lisa – to give a very bleak financial picture.
The crisis created a power struggle between Jobs and Sculley over the company’s direction. The board had no choice but to act and, in the end, decided to side with Sculley. It removed all of Jobs’ decision-making power at Apple, stripping him of any position where he might have operational leadership, and reducing him to a figurehead so that he had no more day-to-day authority.
A few months later, Jobs left the company.
This is where we have to acknowledge the greyness around the word “fired” when it comes to Jobs and Apple. Jobs technically left, but the manner in which his role was reduced was so severe that it veers into a kind of “constructive dismissal” territory that, in that company and era, was a firing in all but name. Many commentators on Apple’s history will use different terms for this entire saga depending on who they’re siding with.
Nevertheless, Jobs was out, and he would then go on to found NeXT, a company that produced high-end computers. Fast-forward to 1996, floundering and after failed talks to sell itself, NeXT sold to Apple for $429 million, which brought Jobs back to the company he originally founded.
After a massive sale tanked the price of the company’s stock, Apple’s board fired its then-CEO, Gil Amelio.
To replace him, the board hired Steve Jobs. And, from a governance perspective, what a great hire that turned out to be. The next fifteen years were dominated by some of tech’s most recognisable and successful products, including the iMac, iTunes, iPod and iPhone.
Should Apple’s board have done more to keep Steve Jobs in 1985?
Sculley would later appreciate Jobs’ effective leadership, especially the version of Jobs that returned to Apple in the 90s. By then, he had changed his style, and the products spoke for themselves. Sculley would refer to him as “probably the most successful CEO ever.” In that context, it would seem obvious that the board made a disastrous mistake in getting rid of him all those years previously.
But that way of thinking is fuelled by hindsight. Hindsight is important for future learnings, but it shouldn’t take pole position in assessing a board’s past actions.
Any board being judged on its decisions should abide by one simple rule: always be able to defend. Even if a decision turned out horribly, a good board will always be able to explain the rationale as it was apparent at the time with the information available. This should be thorough, enough to make critics stop and say “yeah, I would have done the same thing.”
In that context, firing Steve Jobs from his life’s work is a difficult thing to assess. You need to look at what the board could have done differently, how Jobs’ firing fit into their business strategy, what other options were on the table and given serious consideration.
However, a few things are clear from the board’s actions. Chief among them is that it sided with one person in a power struggle between Jobs and Scully. Apple’s board – fully aware of the strengths both people brought to the business – would have benefitted from looking beyond the friction and finding a settlement that satisfied all parties. If the directors of the day felt that was impossible, fair enough, but letting either Jobs or Sculley go at such a pivotal point would have ramifications either way, and create risk where perhaps they might not have needed to be any.
It’s worth thinking about.
This brings us back to a fundamental issue. A board must be adequately prepared and have appropriate director training.
The role of the board and its loyalty are not to one person or even the pure bottom line but the business’s long-term success.
This means that a board must be trained, understand the essentials of corporate governance, and be able to see through corporate disputes.
To do this, a board needs continual support and formal training.
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