INTC Intel Corporation

By Jay Greene and Vanessa Fuhrmans 

Intel Corp. said Chief Executive Brian Krzanich resigned for violating company policy by having a relationship with a co-worker, one of the most prominent CEOs to lose a job in an era of greater scrutiny over workplace behavior.

Intel learned of Mr. Krzanich's relationship in the past week from an employee who raised concerns, according to people familiar with the matter. The company said an investigation by internal and external counsel into what it called "a past consensual relationship" confirmed a violation of its nonfraternization policy, which was put into place in 2011 and applies to all managers.

The company, which said the investigation is continuing, accepted Mr. Krzanich's resignation Wednesday. Mr. Krzanich, who was CEO since 2013, couldn't be reached for comment.

Robert Swan, the company's chief financial officer, was named interim CEO.

Decades ago, board members were more likely to look the other way on office romances and other personal matters, but the CEO role today is more high-profile than ever, limiting the room for transgressions, said executive recruiters and corporate-governance experts.

The rise of the #MeToo movement has companies hewing closely to policies on both sexual harassment and consensual relationships, especially for business leaders, said Davia Temin, chief executive of Temin & Co., a Manhattan-based reputation and crisis-management firm.

"There's a new level of rigor that says if something is on the books, it needs to be upheld and not ignored," she said, adding that boards are increasingly concerned about a company's reputation.

Relationship rules at U.S. companies vary. Some companies ban senior managers from dating anybody further down the chain of hierarchy within the company, while others ask for co-workers to disclose their relationships. Many companies have no employee dating policy at all.

At many major companies, employment contracts for CEOs explicitly prohibit romantic relationships with employees, or give boards wide latitude to fire a chief for any behavior considered unethical, said Jason Hanold, head of executive-search firm Hanold Associates.

Though such language has been a feature of C-suite contracts for decades, boards have become more sensitive to improper behavior -- past or present -- in the #MeToo era, he said.

"Today it's a well-known expectation that comes with the CEO role," Mr. Hanold said. "To have a relationship with anyone in your organization, you're doing so knowing all of the risks."

Intel prohibits managers from having sexual or romantic relationships with direct or indirect reports, a spokesman said. The policy is a "hard ban" that applies to all managers regardless of seniority and requires employees to raise any concerns immediately, he said.

Intel held a companywide video call from its Santa Clara office at 11 a.m. local time, where Andy Bryant, the company's chairman, and Mr. Swan answered questions, according to an employee who watched the webcast meeting. During the call, Mr. Swan said he wasn't interested in staying on as the permanent CEO, the employee said.

Executives declined to answer employee questions about the relationship that led to Mr. Krzanich's resignation, saying they wanted to protect the privacy of the Krzanich family and the person involved, according to the employee.

"The general feeling is one of disappointment," the employee said. Intel goes out of its way "to make sure we understand what the rules are and that we follow them. To have the leader of the company violate these rules is disappointing."

Intel declined to comment on its internal communications related to the resignation.

Mr. Krzanich joins other CEOs who left following allegations of relationships with employees, including Harry Stonecipher, who left as CEO of Boeing Co. in 2005; Steven Heyer, who left Starwood Hotels & Resorts Worldwide Inc. in 2007; and Christopher Kubasik, who was the CEO-in-waiting when he left Lockheed Martin in 2012. Mr. Stonecipher said at the time that he "used poor judgment." Mr. Heyer denied any impropriety. And Mr. Kubasik said he regretted his conduct "did not meet the standards to which I have always held myself."

Mr. Krzanich started at Intel in 1982, rising through a series of technical and leadership roles to become chief executive in 2013. He set about a broad effort to diversify the company's offerings beyond processor chips for personal computers, a market in which Intel holds a more than 90% share, according to Mercury Research, leaving it scant room to grow as PC shipments decline.

Mr. Krzanich received $21.5 million in compensation in 2017, including stock awards and other incentive pay, up 13% from the previous year, according to a regulatory filing. Intel noted that Mr. Krzanich would have been eligible for $38 million had he left the company last year by voluntary termination or retirement. Intel didn't immediately say whether Mr. Krzanich would receive that compensation now.

His resignation marked a sudden turn for the tech giant as it seeks to extend its dominance in personal-computer chips into new frontiers in computing such as advanced automotive technologies and artificial intelligence.

It comes at a transformative time for Intel, which under him swallowed its two biggest acquisitions -- a $16.7 billion deal for Altera Corp. in 2015 and $15.3 billion for Mobileye NV a year later -- as it tries to branch out beyond its PC and server-chip strongholds and fend off rising threats from rivals such graphics-chip maker Nvidia Corp.

Along with announcing Mr. Krzanich's departure, Intel released a financial forecast that was above analysts' expectations. For the current second quarter, Intel expects adjusted earnings of 99 cents a share and revenue of $16.9 billion. Analysts polled by FactSet had expected adjusted earnings of 86 cents a share and revenue of $16.3 billion.

Intel shares finished New York trading down 2.4% at $52.19.

--Yoree Koh, Tripp Mickle and Aisha Al-Muslim contributed to this article.

Write to Jay Greene at Jay.Greene@wsj.com and Vanessa Fuhrmans at vanessa.fuhrmans@wsj.com

(END) Dow Jones Newswires

June 21, 2018 19:52 ET (23:52 GMT)

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