HP CEO Mark Hurd rewarded with a $40m severance after being forced to resign

[Phokus]

BTW, I love how he got credit for HP's IT changes in that Wikipedia article. They hired a new CIO from Dell (Mott) and he was told to lower costs. The CIO was the one that came up with all of those changes, not Hurd. If all a CEO has to do his to tell is direct reports to "lower cost" and then he gets credit for everything, sign me up.

That's really all they do. From what i've witnessed, divisional presidents and chief financial officers actually do more work and are more responsible for the performance of the company.

 

[spidey07]

That's really all they do. From what i've witnessed, divisional presidents and chief financial officers actually do more work and are more responsible for the performance of the company.

Right. And their marching orders and direction are given by the CEO.

 

[lothar]

Actually he was worth the severance because if he would have fought them it would have cost HP and their Shareholders a hell of a lot more money. So it was worth it just to get rid of him.

Think about it, they didn't give him that money out of the kindness of their hearts or their gratitude.

Yup.

Whatever Mark Hurd did that cost him his job as CEO of Hewlett-Packard, the world's largest technology company, it wasn't enough to cost him a payday that could top $40 million.

Meanwhile, with little still known about why an actress and HP contractor threatened Hurd with a sexual-harassment lawsuit, stockholders took a $9 billion hit Monday, and HP's 300,000 workers were left to wonder about its future.

HP insisted that the problems it uncovered with the CEO's behavior were limited to falsified expense reports for his dinners and other meetings with Jodie Fisher, who helped organize HP events from 2007 to 2009 and greeted executives at the gatherings.

Hurd has settled with Fisher for an undisclosed sum, and both parties have said the relationship was not sexual. Hurd said an assistant prepared all of his expenses. He has offered to reimburse HP for the errors.

The company has offered no further details and says it is focused on finding a successor.

Hurd gets $12.2 million in severance, plus stock and options that could bring the total value of the package to more than $40 million, based on calculations by The Associated Press using HP's stock price Friday, before HP disclosed the resignation.

Analysts said the generous package shows Hurd was highly valued for restoring steady results to the company, a Silicon Valley institution, after a period of upheaval that followed the stewardship of Carly Fiorina. Fiorina, the Republican nominee for Senate in California, got a severance package worth $21.1 million after she was ousted from HP in 2005.

"It tells you how important people think he is to HP," said Jayson Noland, an analyst with Robert W. Baird & Co. "It gives you a sense for how valuable a really good CEO can be."

He noted the severance is a tiny fraction of the $125 billion HP expects to record in revenue this year.

Jeffrey Sonnenfeld, a professor at the Yale School of Management and an expert on CEO leadership and corporate governance issues, called Hurd's pay package a "damning indictment" of the way CEO hiring contracts are set up.

Sonnenfeld said the contracts are "overly lawyered" and make it essentially impossible to fire executives for cause and therefore stop any severance payment.

He said the falsified expense reports wouldn't have been considered materially significant events that would get him fired for cause, which is why the board allowed him to resign.

"If any employee at the firm had done what he did, they would have been fired immediately," Sonnenfeld said. "He was allowed to resign because he had lost the trust of the board."

Unlike regular employees, executives with the types of essentially bulletproof contracts such as Hurd's often can't be fired for cause unless they've committed a felony, according to Paul Hodgson, a senior research associate at The Corporate Library, an independent corporate governance research firm.

"If he really resigned," Hodgson wondered, "then why are they paying him severance at all?"

Fisher, 50, has appeared in racy movies with titles such as "Sheer Passion" and "Intimate Obsession" and recently a television dating show. She was paid up to $5,000 per event to greet people at HP events and make introductions among executives.

Neither she nor her attorney have discussed details of the harassment claim, which led to the discovery of the questionable expense reports for dinners Hurd had with Fisher.

The company held a webcast Monday to discuss the changes with its employees, but it was closed to the press, and there was no immediate word on what was said. The company's interim CEO, Cathie Lesjak, said Sunday that she did not plan to discuss further details of Hurd's case.

Shares of HP fell about 8 percent to $42.60 on the first full day of trading since Hurd's abrupt resignation Friday. Its market value, which was about $67 billion when he started at HP in April 2005 and stood at about $108 billion before the announcement of Hurd's departure, dropped to about $99 billion.

Noland and other analysts say HP's stock swoon is likely temporary.
"It's just the uncertainty that this creates -- you lost a great CEO," he said.

Bob Phillips, co-founder of the Spectrum Management Group investment firm in Indianapolis, was perplexed. He did say his firm does not own HP stock because most of HP's growth under Hurd has come from acquisitions, not its core business.

Still, "It makes no sense," he said. "I think it's an overreaction at this point by the market in fear there's something much more substantial coming."

Some corporate governance experts have called for an overhaul of HP's board of directors in light of Hurd's troubles and a 2006 scandal in which chairwoman Patricia Dunn was forced out for overseeing an investigation that involved spying on reporters' and directors' phone records to suss out the source of leaks to the media.

Gary Lutin, chairman of a shareholder information service called The Shareholder Forum, said investors might question whether HP's board should be replaced, noting that many board members stayed on through the 2006 scandal. Six of HP's current 10 board members have been directors since 2006 or earlier.

Silicon Valley billionaire Larry Ellison, Oracle Corp.'s CEO and a friend of Hurd's, said the decision to oust Hurd went against the best interests of HP's employees, shareholders, customers and partners. Oracle is one of those partners.

In a statement issued Monday, Ellison called the action by HP's board an act of "cowardly corporate political correctness" and the worst personnel decision since Apple forced out Steve Jobs 25 years ago.

In a letter to the New York Times, Ellison said, “The HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.”

“That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them,” Ellison wrote.

Sonnenfeld, the Yale professor, said, however, he believes the board made the right decision and commended it for acting quickly.

"Hurd was a great operator for the here and now," he said, "but he had to go because of the long-term impact on the character of HP."

 

[Phokus]

Right. And their marching orders and direction are given by the CEO.

"Go do this". yeah that's worth 10's of millions of dollars.

You're dumb.

Very few CEO's actually deserve their pay. Some visionary CEO's like Steve Jobs do. A CEO of an oil company, for example, doesn't deserve to be paid much more than the finance guys who figure out which projects will generate the most returns or the engineers who create processes to extract oil more efficiently.

 

[IndyColtsFan]

Ellison sticking up for Hurd. Color me shocked.

 

[Phokus]

Silicon Valley billionaire Larry Ellison, Oracle Corp.'s CEO and a friend of Hurd's, said the decision to oust Hurd went against the best interests of HP's employees, shareholders, customers and partners. Oracle is one of those partners.

In a statement issued Monday, Ellison called the action by HP's board an act of "cowardly corporate political correctness" and the worst personnel decision since Apple forced out Steve Jobs 25 years ago.

In a letter to the New York Times, Ellison said, “The HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.”

“That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them,” Ellison wrote.

Oh hey, a fellow CEO sticking up for another CEO who stole from the company, color me shocked. How nice it is to be in the Chief Executive club.

 

[nobodyknows]

Actually he was worth the severance because if he would have fought them it would have cost HP and their Shareholders a hell of a lot more money. So it was worth it just to get rid of him.

Think about it, they didn't give him that money out of the kindness of their hearts or their gratitude.

So let him sue, it cost him money also.

Mark's resignation followed an internal investigation into a claim of sexual harassment asserted against Mark and HP by a woman who is former contractor to HP. The investigation was conducted by outside counsel in conjunction with HP's General Counsel's office and was overseen by the Board. Based on the investigation it was determined that the former contractor's claim of sexual harassment was not supported by the facts.

The investigation did reveal, however, that Mark had engaged in other inappropriate conduct. Specifically, based on the facts that were gathered it was found that Mark had failed to disclose a close personal relationship he had with the contractor that constituted a conflict of interest, failed to maintain accurate expense reports, and misused company assets. Each of these constituted a violation of HP's Standards of Business Conduct, and together they demonstrated a profound lack of judgment that significantly undermined Mark's credibility and his ability to effectively lead HP.

As we regularly remind all employees, each of us is expected to adhere strictly to the Standards of Business Conduct in all of our business dealings and relationships. This expectation applies with even greater force to HP's CEO and other senior executives who, given their positions, must set the highest standard for professional and personal conduct. The investigation that was conducted revealed that Mark had failed to meet this standard.

http://www.engadget.com/2010/08/06/hp-ceo-mark-hurd-resigns-over-sexual-harassment-investigation/

I'm guessing the "good ole boy" club only beleives in accountability for the peons, not for themselves??

 

[IndyColtsFan]

Silicon Valley billionaire Larry Ellison, Oracle Corp.'s CEO and a friend of Hurd's, said the decision to oust Hurd went against the best interests of HP's employees, shareholders, customers and partners. Oracle is one of those partners.

I reread this and had to laugh. If layoffs, raise freezes, pay cuts, and dropping 401k matches is in the "best interests" of your employees, Hurd was a regular Mother Teresa.

 

[Red Dawn]

Ellison sticking up for Hurd. Color me shocked.

When it comes to thievery Ellison makes Hurd look like a Schoolboy. Ellison made his early fortune selling broken software to gullible clients including the US Government.

 

[lothar]

As the career of Hewlett-Packard’s chief executive Mark V. Hurd hung in the balance, a public relations specialist convinced the company’s directors that H.P. would endure months of humiliation if accusations of sexual harassment by a company contractor against Mr. Hurd became public. But even after following the specialist’s advice, the company has not escaped criticism.

According to a person briefed on the presentation, the representative from the APCO public relations firm even wrote a mock sensational newspaper article to demonstrate what would happen if news leaked. The specialist said the company would be better served by full disclosure, even though an investigation had produced no evidence of sexual misconduct.

H.P.’s board, according to the person briefed on the presentation, took this advice, disclosing the unsupported accusations against Mr. Hurd. The company said Friday that Mr. Hurd had falsified his expense reports and that because it was enforcing the same code of ethics it would apply to any employee, he resigned.

But in ousting Mr. Hurd, the directors set off a media scrutiny they had hoped to avoid. Some in Silicon Valley said the technology giant had overreacted in ousting a chief executive who has been one of the most successful in corporate America in recent years. Other corporate governance experts think the company acted admirably.

“What the expense fraud claims do reveal is an H.P. board desperately grasping at straws in trying to publicly explain the unexplainable; how a false sexual harassment claim and some petty expense report errors led to the loss of one of Silicon Valley’s best and most respected leaders,” Lawrence J. Ellison, the chief executive of Oracle and a close friend of Mr. Hurd, said in an e-mail to The New York Times.

However, Jeffrey A. Sonnenfeld, an expert in corporate governance and senior associate dean at the Yale School of Management, said Hewlett-Packard’s directors deserved credit. The company “stands apart from other companies that have been scandalized in the headlines this year,” he said, referring to BP and several Wall Street firms. “They made a courageous call.”

He said that there have been, and continue to be, plenty of companies that would rationalize expense-report misdeeds as a gray area and figure out how to keep a successful chief in place. At such companies, he said, “there may not be a legal issue, but there is still a moral issue.”

Some management scholars said that Hewlett-Packard appeared to be putting a great deal of faith in the counsel of APCO. Others remain perplexed by the way the whole affair was handled. “There is a missing piece here because it doesn’t make sense,” said Shane Greenstein, a business professor at Northwestern University’s Kellogg School of Management.

At a presentation to the directors of H.P., the public relations specialist from APCO cited recent sexual imbroglios like the one that diminished Tiger Woods. The specialist cautioned that only 20 percent of top executives survive these types of allegations and then they usually end up leaving because of the weight of negative publicity.

He also warned that Gloria Allred, the celebrity lawyer representing Mr. Hurd’s accuser, would thrust H.P. and Mr. Hurd into a media nightmare.
An APCO spokesman said the company has a policy against discussing counsel given to clients. Based in Washington, APCO handles a range of media issues, like branding and open research. The 500-person company does not have a particularly strong reputation for crisis management or technology expertise, although it has worked for other technology giants like Microsoft and the chip maker Intel.

Now that everyone has gotten over the shock of HP CEO Mark Hurd getting ejected on an August Friday afternoon, people are looking more closely at the details.

And the details leave big questions as to what really happened.
Some, including Larry Ellison, are suggesting that Hurd was fired because HP's board was too wimpy to weather the bad publicity that would accompany a bogus sexual harassment lawsuit. And the facts certainly fit that story.

As of yesterday afternoon, HP was (mostly) sticking by its guns:
Hurd was ousted, the company told us, because HP found:

"numerous instances where [Hurd's love interest, Jodie Fisher] received compensation and/or expense reimbursement where there was not a legitimate business purpose, as well as numerous instances where inaccurate expense reports were submitted by Mark or on his behalf that intended to or had the effect of concealing Mark's personal relationship with the contractor."
​

And that sounds awful. In starker terms, HP says that Hurd embezzled company money to pay his companion and defrauded the company to hide his own behavior. If Hurd really did those things, he should have been instantly sacked for cause, with no severance whatsoever.
But he wasn't.

Instead, he was allowed to resign. And he will walk away with something on the order of $40 million in severance to ease his pain. CEOs who steal money and defraud their companies do not get severance payments--they get fired. So it seems as though HP's evidence to back up its findings is hardly conclusive.

What's more, Hurd's people have basically denied both of HP's allegations above. Specifically, they say they are aware of only one instance in which Jodie Fisher's expenses were paid for on a trip that did not involve working--and they say that this happened because the event Fisher was supposed to be running was canceled at the last minute. They also suggest that Hurd's inaccurate expense reports contained merely small and inadvertant mistakes -- omissions of names, incorrect attendees at dinners, etc. -- and that some of the expense reports DID list Jodie Fisher's name.

Lastly, HP's story has changed slightly since Friday afternoon. The language above, which the company gave us yesterday, includes some qualifying language that raises the possibility that Hurd was not intending to deceive HP with his expense reports ("inaccurate expense reports were submitted by Mark or on his behalf that intended or had the effect of concealing Mark's personal relationship with the contractor."

The expense reports "had the effect of concealing" Mark's relationship with Jodie Fisher -- which did not involve embezzlement, which both sides have said wasn't a sexual relationship and which, HP concluded, did not violate HP's sexual harassment policy? That sounds pretty thin.

And that last bit is the real kicker: Hurd was sued by Jodie Fisher for sexual harassment, but HP's investigation found no evidence that HP's sexual harassment policy had been violated. This suggests that Jodie Fisher's lawsuit was bogus--or, at least, that there was no evidence to back it up.
Lastly, The New York Times revealed this morning that, before Hurd was ousted, HP's PR firm terrified the board with scare-stories about how the sexual harassment lawsuit (true or false) would torment the company with awful PR for months. And given the attorney behind the lawsuit, attack dog Gloria Allred, this would not have been hard to believe.

So why was Hurd ousted, exactly? And why was he allowed to resign instead of being canned?

Based on the evidence that has been released to date, the most likely scenario seems like the following:
1. Mark Hurd spent some quality time with Jodie Fisher, some of which was on the company's dime. He developed a crush on her or she developed a crush on him, and the feeling was, initially, mutual.

2. Someone--Mark or Jodie--wanted the quality time to progress to a full-blown love affair. For whatever reason--perhaps because the lust was, at some point, unrequited--it did not.

3. Jodie Fisher stopped getting consulting assignments from HP and stopped having quality time with Mark. This likely happened either because 1) Mark decided a quick romp the relationship wasn't worth risking his job and/or wrecking his marriage over or 2) because Mark had realized he wasn't going to get lucky and moved on or 3) because Jodie Fisher suddenly felt uncomfortable in Mark's presence.

4. Sometime thereafter, Jodie Fisher concluded that "sexual harassment" had occurred. (Because her love was unrequited and she was obsessed and disappointed? Because Mark demanded consulting services that she didn't want to provide? As yet, we don't know.)

5. Jodie threatened to sue Mark for sexual harassment.

6. HP's board freaked.

7. HP's board investigated the sexual harassment claim and found... nothing. But...

8. HP's board was still terrified of the bad publicity that would ensue when Fisher's attorney, Gloria "Pit Bull" Allred, went on all the talk shows raving about what a horrible sex predator their CEO was and how he had demanded an innocent single mother do all sorts of heinous things and then fired her when she didn't.

9. HP's board, thankfully, found some inaccuracies in Mark's expense reports, which they realized they could use to oust him--and, thereby, conveniently, avoid the bad publicity above.

10. HP's board concluded that the inaccuracies did NOT constitute obvious proof of fraud or embezzlement and that it was worth $40 million in severance not to have Mark Hurd sue the company for wrongful termination. And they therefore demanded his resignation instead of firing him.

That, in our opinion, is the most likely story of what happened here.
Now, none of this is to say that Hurd wasn't a reckless idiot. Any dynastically wealthy CEO who lingers over long intimate dinners with subordinates is rolling the dice, no matter where the relationship goes. If Hurd didn't get that at the time (which he should have), he surely does now.

Interesting analysis, if true. Also notice that HP's story has changed from Friday as well.
If true, this may lend credence to Larry Ellison's comment that the action by HP's board an act of "cowardly corporate political correctness"
Similar to the way the Obama administration acted to that Agriculture department worker without examining the evidence...
or why Wall St. firms rush to pay settlement to the SEC/New York Attorney General without admitting guilt which thereby minimizes public backlash and allows them to go about their merry ways in making money.

The whole thing is based on calculated risk for the individual/corporations involved(in this case HP want's people to think they're being moral in what they did, similarly to Obama Administration rushing to fire that Agriculture department worker due to an irrational fear of racism backlash). Political correctness really is run amok in this country.

I know I myself have fired employees I wanted to get rid off based on stupid lame reasons and technicalities.

For example, one of my employees last year asked me "Are family members eligible for employee discounts?" I answered "No." She rung up the family member at regular price without any discounts and I gave her the pink slip an hour later.
Why? Because you're not supposed to ring up family members. Duh.

 

[lothar]

HP's story has now changed from "falsified" expense reports to "inaccurate" expense reports.

"falsified" means intent to defraud/embezzlement which are serious charges...In which case, he should be fired.

"inaccurate" could mean anything from the above to forgetting to put a persons name to simply even putting the wrong date on an expense report...In this case he could be fired on a "technicality" here by simply having the wrong date on an expense report or being off by a day or two.

I am now supporting the NYT story and the analysis I posted above as what happened. The company was trying to avoid a media relations disaster and nothing more.
Looks like they still didn't avoid this though since this is still in the news.

 

[IndyColtsFan]

HP's story has now changed from "falsified" expense reports to "inaccurate" expense reports.

"falsified" means intent to defraud/embezzlement which are serious charges...In which case, he should be fired.

"inaccurate" could mean anything from the above to forgetting to put a persons name to simply even putting the wrong date on an expense report...In this case he could be fired on a "technicality" here by simply having the wrong date on an expense report or being off by a day or two.

I am now supporting the NYT story and the analysis I posted above as what happened. The company was trying to avoid a media relations disaster and nothing more.
Looks like they still didn't avoid this though since this is still in the news.

Wow, just wow. They can't even get their story straight.

 

[Craig234]

Craig should just put that in his signature to save himself from typing his wall of text posts, since they all invariably boil down to the statements above.

Didn't even finish reading the above drivel, but your comments on the issues are usually better than the type of idiocy above. You embarrass yourself on this.

 

[IndyColtsFan]

Didn't even finish reading the above drivel, but your comments on the issues are usually better than the type of idiocy above. You embarrass yourself on this.

Actually, I think many people thought it was pretty darn humorous. :awe:

 

[lothar]

Wow, just wow. They can't even get their story straight.

Everything seems to be coming out "drip, drip, drip".
One has to look beyond the money...This whole thing didn't make any sense which was why I had my doubts.

If he really was guilty of "falsifying"(as they initially claimed on Friday) expense reports, he wouldn't be getting any severance, period.

They wanted to get rid of him to prevent a possible media relations disaster from a sexual harassment suit(regardless of how true or false the actual harassment claim was) by making him resign on a technicality(assuming HP's changed claim of "inaccuracies" is the correct reason now)
This whole thing reeks exactly like "the Obama Admin firing of that Agriculture department lady", the HP board trying almost anything to avoid a Republican style "Clinton witch hunt" on their executive/company by the media, or "Rahm Emmanuel offering Sestak a job to quit"(except in this case, Hurd did the complete opposite of Sestak by taking the money and quit as they wanted.)

Only difference here was that the CEO had enough leverage to negotiate his exit.
Given how good he was at running the company, don't be surprised if you find him at IBM, Oracle, etc... within a year(unless it's specifically stated in the severance package he received that he shouldn't work for an HP competitor company until after "X" amount of years) earning millions.

 

[nobodyknows]

It could be as simple as she broke up with him, he canceled their contract, she sues for sexual harrassment.

 

[lothar]

It could be as simple as she broke up with him, he canceled their contract, she sues for sexual harassment, HP Board of Directors pay CEO $40 million severance to avoid possible media fallout.

Fixed.
Yup.

 

[nobodyknows]

Quote:
Originally Posted by nobodyknows
It could be as simple as she broke up with him, he canceled their contract, she sues for sexual harassment, HP Board of Directors pay CEO $40 million severance to avoid possible media fallout.

Fixed.
Yup.

But they're getting media fallout anyway so they should have just fired his ass with no severance pay.

 

[Lanyap]

HP's story has now changed from "falsified" expense reports to "inaccurate" expense reports.

"falsified" means intent to defraud/embezzlement which are serious charges...In which case, he should be fired.

"inaccurate" could mean anything from the above to forgetting to put a persons name to simply even putting the wrong date on an expense report...In this case he could be fired on a "technicality" here by simply having the wrong date on an expense report or being off by a day or two.

I am now supporting the NYT story and the analysis I posted above as what happened. The company was trying to avoid a media relations disaster and nothing more.
Looks like they still didn't avoid this though since this is still in the news.

As a very experienced, highly rated, long term EDS/HP employee who was laid off last year through no fault of my own I can truly say I am enjoying this giant fuckup.