Microsoft Directors Decided Bill Gates Needed to Leave Board Due to Prior Relationship With Staffer

During the probe, some board members decided it was no longer suitable for Mr. Gates to sit as a director at the software company he started and led for decades, the people said. Mr. Gates resigned before the board’s investigation was completed and before the full board could make a formal decision on the matter, another person familiar with the matter said.

“Microsoft received a concern in the latter half of 2019 that Bill Gates sought to initiate an intimate relationship with a company employee in the year 2000,” a Microsoft spokesman said. “A committee of the Board reviewed the concern, aided by an outside law firm to conduct a thorough investigation. Throughout the investigation, Microsoft provided extensive support to the employee who raised the concern.”

A spokeswoman for Mr. Gates said, “There was an affair almost 20 years ago which ended amicably.” She said his “decision to transition off the board was in no way related to this matter. In fact, he had expressed an interest in spending more time on his philanthropy starting several years earlier.”

Mr. Gates resigned from the Microsoft board on March 13, 2020, three months after he had been re-elected to his seat. In a press release filed with regulators and a post on LinkedIn, the billionaire said then he wanted to focus on his philanthropy and would continue to serve as a technical adviser to Chief Executive Satya Nadella. That same day, he also vacated his board seat at Berkshire Hathaway Inc., the conglomerate run by Mr. Gates’s friend Warren Buffett.

Mr. Gates and his wife Melinda French Gates announced earlier this month that they were ending their marriage after 27 years. In a joint statement posted on Twitter, the couple said, “We no longer believe we can grow together as a couple in this next phase of our lives.” In a divorce petition, Ms. French Gates said their marriage was “irretrievably broken.”

Ms. French Gates had been working with lawyers at several firms since at least 2019 to unwind the marriage, The Wall Street Journal reported last week. The couple hasn’t said what prompted the split. One source of concern for Ms. French Gates was her husband’s dealings with convicted sex offender Jeffrey Epstein, the Journal reported. A spokeswoman for Mr. Gates said in 2019 that he met with Mr. Epstein for philanthropic reasons and regretted doing so.

Mr. Gates was Microsoft’s chief executive until 2000, chief software architect until 2006 and chairman until 2014. In recent years, Mr. Gates continued to serve on the board and as a technical adviser to Mr. Nadella even as he shifted his focus to his philanthropy, the Bill & Melinda Gates Foundation. He continues to serve as a technical adviser to Mr. Nadella.

In April 2019, Microsoft said it would change its process for handling employee complaints of harassment and discrimination. The company also said at the time it would add additional training and boost the number of human resources staff who address complaints, among other changes.

Mr. Nadella announced the changes after women at Microsoft shared stories of sexual harassment and discrimination in an email chain within the company, the Microsoft spokesman confirmed. Quartz originally reported the email chain in 2019.

Members of the Microsoft board became aware in late 2019 of the letter from the female engineer, who demanded changes to her Microsoft job and also shared details of her relationship with Mr. Gates, the people familiar with the matter said. Mr. Nadella and other senior executives were aware of the woman’s allegations, some of the people said.

Some board members asked about Mr. Gates’s dealings with Mr. Epstein, one of the people said. Board members were told the relationship was focused on philanthropy and nothing more, this person said.

In December 2019—before the end of the probe—Mr. Gates was re-elected to Microsoft’s board at the annual shareholder meeting. As more became clear about the matter, board members were concerned Mr. Gates’s relationship with the woman had been inappropriate and they didn’t want a director associated with this situation in the wake of the #MeToo movement, the people said.

As part of her discussions with Microsoft, the employee asked that Ms. French Gates read her letter, people familiar with the matter said. It couldn’t be learned whether Ms. French Gates read the letter.

A Harvard dropout, Mr. Gates started Microsoft in 1975 with childhood friend Paul Allen and built it into one of the world’s biggest companies, making the pair two of the planet’s richest people. Mr. Gates married Melinda French, then a Microsoft employee, in January 1994.

Mr. Gates and his rival Steve Jobs, who died in 2011, became the faces most closely associated with the rise of personal computers. Microsoft and Apple Inc. now rank as the two of the largest public companies, with a market value of more than $1.8 trillion and $2.1 trillion, respectively.

“Microsoft will always be an important part of my life’s work and I will continue to be engaged with Satya and the technical leadership to help shape the vision and achieve the company’s ambitious goals,” Mr. Gates wrote in the March 2020 LinkedIn post announcing his departure from the board.

By 2020, the Gateses were already in discussions to divide their vast wealth and legal teams from both sides were privately in discussions with a mediator to work out a separation, the Journal previously reported.

The May 3 divorce filing says the couple had agreed to a separation contract to divide their assets—a fortune estimated at $130 billion by Forbes. The Gateses have said they would give away most of their wealth and have donated more than $36 billion to the Gates Foundation over the years. The couple said they planned to remain co-chairs at the foundation and jointly lead it after their divorce.

Write to Emily Glazer at [email protected], Justin Baer at [email protected], Khadeeja Safdar at [email protected] and Aaron Tilley at [email protected]