http://www.nytimes.com/2010/08/07/business/07hewlett.html?emc=eta1
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"The mediocre teacher tells. The good teacher explains. The great teacher demonstrates."
(John C. Maxwell)
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Wait a minute! First, Carly Fiorina had to go in 2005 because she wasn't turning around HP fast enough. Then, Patricia Dunn, Non-Executive Chairwoman of HP (that's certainly a title!), had to go because she was indicted for trying to find out (using shady methods) which board members were leaking adverse opinions to the press (2006). Now, Mark Hurd, whom Patricia Dunn hired, has to go because of "fudging his expenses."
In Hurd's case, we know that, since Gloria Allred is out front shouting, that inaccurate expense reports were covering up a relationship with a woman. The woman involved was evidently an outside contractor.
There is a general consensus that Hurd created a powerhouse over the last 5 years from a great company that had tremendous potential for growth but had lost its way. His strength was his ability to reduce costs combined with strategic acquisitions (like EDS). He doubled the price of the stock and increased revenues to the point where, at $115 billion, HP is larger than IBM.
What is most interesting about this issue from a strategic point of view is that, with all of this turnover at the top of HP, HP rolls on. That's because HP has always had great talent in the middle of the organization. Great companies have great people where the work gets done. So, Hurd buys EDS and gives it to Anne Livermore who is an HP EVP with an exceptional reputation and consistently ranked in the Fortune list of the Top 50 Women in American Business. And, HP rolls on.
Hurd will be leaving with $12 million in severance.
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Actually I've read reports his severance, including stock options, is more like $40 million.
ReplyDeleteHonestly, it's such an unfortunate situation - Mark Hurd really was doing a great job, and with their recent acquisition of Palm, were poised to become the Apple of the PC world. They were even willing to say "no" to Microsoft because they made some awful tablet products - it's been a while since a computer manufacturer was able to say no to Microsoft.
ReplyDeleteHurd offered to repay the the fudged expenses, and both parties are maintaining there was no sexual relationship.
Honestly, Hurd screwed up, but it's surprising that given all the positive he did for the company they didn't let this slide. In a way though, it is good that they're not giving him special treatment. However, if I messed up on an expense report, I bet accounting would just come back and ask questions about it, and give me a chance to correct it - not fire me.
Best of luck to HP, I hope their talent in the middle is really there and that they can overcome this.
Well said Marcelo. It really is a huge blow to them.
ReplyDeletehttp://www.pcmag.com/article2/0,2817,2367513,00.asp
ReplyDeleteSource on the severance. I've seen it elsewhere too, just stumbled across this today again though.
Great observations, as always. Larry Ellison (Oracle CEO) denounced HP today for letting Hurd go! Ellison's position is that the harassment claims are utterly false (per the HP board) and that the expense report issue is forgivable and repayable. Ellison's basically saying that, in letting Hurd go, HP did not act in the best interests of employees and stockholders because Hurd was, indeed, the best person to occupy the job. As to Hurd's severance amount, I chose the conservative route by only articulating the "cash" he would get. Everybody argues stock option value and long term incentive plans. What he gets could actually end up more than $40 million.
ReplyDeleteI don't know though, I think when you have a CEO falsifying expense reports it *has* to call into question his ethics.
ReplyDeleteMaking a mistake in your personal life shouldn't matter. But submitting false information to the board that hired you shows a fairly severe lack of judgment and prudence, in my opinion. It'd make me question what else might be going on.
I know as a shareholder I'd probably have been annoyed if he'd been allowed to stay on. Recognize the stock would have taken a bath either way if this got out.
His record aside from this is apparently stellar, but this is a situation where I think anyway that zero tolerance is warranted.
Two sides to the argument I guess.
Craig: What's interesting to me is that Larry Ellison takes the side that Hurd should have stayed. Ethics are black and white: Hurd goes (my position). But, Ellison sees "gray", maybe because of claims that Hurd didn't realize what he was signing or submitting, or because it was "small change" and repayable. I don't know. But Ellison is as big as you get in that industry and he's taken a position against the HP board's decision. That's interesting, whether or not one agrees with him.
ReplyDeleteJust an addendum: details are starting to come about about the situation with Hurd, the board's decision, etc. But, in the background, some management decisions that any effective CEO "should have" made but didn't include the report yesterday on the Dow Jones Newswires that the U.S. Department of Justice has asked HP to provide a "trove" of internal records as part of an international investigation into allegations that HP executives paid "bribes" in Russia. German prosecutors have not let up on this case. The potential for this kind of problem exists for any company doing business in Russia. So, why is HP doing business in Russia? Oxy, probably the best oil finder in the world (and the best positioned in Russia for at least half a century), got out of Russia in 2007. What percentage of HP's profits come from Russia? Please. Just a small example of Hurd being asleep at the switch. My guess, Larry Ellison would have gotten HP out of Russia.
ReplyDelete