In Defense of the HP Board

Static Chaos's picture

By Static Chaos

The HP board has taken a lot of heat for their decision to vote out CEO and Chairman Mark Hurd. But the HP board had no other choice in the matter. Some of the confusion surrounding the Mark Hurd saga is the fact that the media is looking for some bigger story than there actually is, after all, controversy sells in their business. Moreover, Mark Hurd who is trying to conduct spin and damage control to save his future corporate career is making a pretty clear cut, necessary, and deserved firing look more mysterious than it actually is. This is a no-brainer, and every board, including Larry Ellison`s would have come to the same conclusion: namely, Mark Hurd had to go.

In almost every account there is a lot of confusion about what really happened. The reason for this is that these are sensitive topics, and corporations have to utilize certain discretion when discussing the events regarding his resignation. But I have read enough about the case, and am pretty good at filtering through the politically correct corporate speak framed by high paid lawyers.

Here is essentially what happened: Mark Hurd had an affair with an event contractor for HP, it ended badly, she was hurt, and wanted to get even with him, so she filed a sexual harassment claim against Mark Hurd and HP. When HP looked into the merit of the claim, they noticed that this event contractor was paid through perks and other means a larger salary than normal for said job duties. This is a major problem for HP and the board. Hurd used his position to show favoritism towards an employee who he had an affair with.

Then Mark Hurd tried to cover up his affair and special treatment of this contractor by filing misleading and inaccurate expense reports, and other corporate reports regarding this contractor`s pay, and working schedule which he had to sign off on and approve. This is another huge red flag for HP and corporate ethics and represents a policy violation at the least. Furthermore, corporations work so hard at pushing corporate policy code of conduct training from the top down to the rank and file employees, and their CEO sets a dangerous hypocritical precedent. Again he had to go for this fact alone.

However, the ultimate reason that Mark Hurd had to go is that he put HP in a bad position. Through his poor decision making process Mark Hurd put HP in the position of having to defend itself against a sexual harassment claim, all because Mark Hurd put himself and HP in this situation in the first place by having a relationship with an employee, i.e., “they visited each other`s hotel rooms late at night.” Yes I am reading between the lines on this statement, and so should you.

HP cannot have a CEO who puts the company in this position. The CEO gets paid a large sum of money to essentially represent the company, to set the standard for all employees to follow, to essentially represent the HP brand for Main Street. Remember this is a public company, and any CEO understands their responsibility as a CEO, and what they represent as the high profile face of the company. Plainly, HP cannot afford to have a reckless CEO who brings about sexual harassment claims due to exercising poor judgment with an employee of the company. So the only person at fault here is Mark Hurd, and the board handled this saga the way any board of a fortune 500 company would upon similar circumstances, according to the book.

The shareholders were put in a bad situation by Mark Hurd, but they should be proud of the way the board acted decisively in this case, to limit the damage, and clean the slate for a bright future with the next CEO leader with no long-term lingering damage which some CEO scandals can inflict on shareholders if not handled properly. They revealed what occurred, didn`t cover up, and made the best decision for the long term interests of shareholders. The HP board should be applauded for doing the right thing in this case, unlike Enron, Arthur Anderson and many other boards who failed to conduct proper oversight of their CEO and protect shareholders from any reckless behavior which could damage long term shareholder value.

So now the question should be resolved as to why the board fired Mark Hurd, but what about the large severance payout. Well, this is complicated by employment contracts, and the way they are worded. Plus Mark Hurd settled with the contractor, so they couldn`t gain evidence for a termination case without severance.

All in all, HP probably could have fought this with Mark Hurd, but it would only drag things through the court, may not even have been a winnable case (I am sure they consulted legal on this fact). I know that the sums involved seem like a lot of money to the average person on the street, but once you factor in the cost of having this saga drag on through the next CEO regime, and distracting HP from competing with the likes of Dell, Apple, Cisco, and IBM in the ultra competitive IT landscape. It makes for economic sense to just clear the desk as soon as possible and move on.

Remember, this isn`t your father`s HP, HP is the largest technology company in the world based on the all important metric of revenues, not market cap which is often based upon an overly inflated stock price with unproven revenues a la Bidu. So even if it comes as a $40 million dollar write-off, as a shareholder it is well worth it to get this ordeal done with in one fell swoop, and move on to the bright future that HP is positioning itself for in the technology space over the next decade. And make no mistake technology, and the productivity gains and quality of life enhancements brought about through technological innovation is what has driven American and global business growth for the last twenty years.

Static Chaos

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KevinB's picture

I agree the HP board did the only thing they could; if anything, they were too generous, but perhaps they figured the cost was worth getting it out of the papers faster, and just moving on.

But I can't help but wonder what might have happened if Monica had decided to sue?

ddtuttle's picture

We DO NOT know the whole story here.

Hurd is a neanderthal, and his sexual exploits are the least of his indiscretions.
He is seriously hated by the employees of a company that was once the best to work for in Silicon Valley. This knucklehead ran NCR, a CASH REGISTER COMPANY, and he was running HP like a coal mine. Of course, "Carly" was no cup of tea, but Hurd was the wrong choice from day one.
Zero innovation, zero vision, zero leadership.

He finally fucked up in a way that provided the required pretense to get rid of him.

Larry Ellison is known to have had MANY sexual harassment suits against him. I'm not condoning it, but Larry is integral to Oracle's success, so they dealt with it. HP wanted Hurd out, and he gave them the reason on a silver platter, but that's not the real reason.

Disclosure: NONE

Escapeclaws's picture

The problem is CEO pay. If the ratio were 1000 times the pay of the average worker these moral lapses would never happen. Increase CEO pay.

Buck Johnson's picture

Spot on, I totally agree with your assessement.  I knew something was fishy about this whole thing.

ZackLo's picture

I heard something about half of the workers hating him anyway? Sounds good to me multi-billion dollar company,employee moral will be raised with the new CEO. Lots of cash on balance sheet. Plus they just bought their own antivirus company to put on their computers. Also I bet share buy backs are getting pretttty attractive.

RingToneDeaf's picture

Play fair, do not cheat (especially on your spouse) and work hard.

What is wrong with that?

That is why this country is so F'ed up, no one plays fair.

 

Arm's picture

Prudish American sexual ethics.  It was just sex and it was only $8k, which are peanuts by CEO standards.  A good CEO like Hurd is worth it.  Absolutely all CEO's have their faults.  I would rather it be a $8k former porn star than a $100 million pet project he can't let go off.

So some $8 billion in shareholder wealth was destroyed for the sake of a fudged account whose notice was drawn to it by an accusation of consensual sex?

suckapump's picture

The problem wasn't the sex. And it wasn't just sex. The point was that Hurd is a corporate officer and owes a duty of loyalty to HP. He breached that duty when he converted company funds for his own personal use (i.e., to give to his mistress).

Ironically, his golden parachute is a lot larger than the amount in question, so HP loses if they keep him, they lose if they don't.

ISEEIT's picture

"Prudish American sexual ethics"? "It was just sex and it was only $8k"

Our entire system is on the precipice of collapse.

Do you suppose it possible that dishonesty and hubris may have played at least some supporting role in the collapse around the corner?

You bet your ass that we all have faults. We also have brains to discern standards, expectations, and LAWS, RULES, and DUTIES.

No fucking wonder that this shit is going down.

They won.

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