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In Cutting Off Hurd, Is HP Spiting Its Face?

Our Wolfe's Den columnist wonders whether Hewlett-Packard's board isn't taking the easy way out--and potentially reducing future shareholder value--by forcing CEO Mark Hurd to resign.

Alexander Wolfe

August 6, 2010

4 Min Read

Whatever Hewlett-Packard's employees are feeling in the wake of the sudden resignation of CEO Mark Hurd, I suspect that the company's shareholders are thinking differently. Hey, I'm not defending Hurd for violating HP's standards of business conduct, but if the board's first responsibility is preserving shareholder value, isn't there a better way of handling things than a zero-tolerance kicking out the door of the guy who cleaned up Carly Fiorina's mess?

HP is going through a very delicate time right now, what with two major acquisitions -- 3Com and Palm -- still being integrated into the company. Hurd, who righted a listing corporate ship when he replaced Fiorina in March, 2005, is a proven leader who would've successfully seen those through.

But what of my point about the investigation, which "found that there was no violation of HP's sexual harassment policy, but did find violation [by Hurd] of HP's standards of business conduct"? Probably HP's board was thinking they want no part of any impropriety whatsoever, what with some sordid events in HP's recent past that they'd rather forget.

These include the HP journalist spying scandal of 2006, in which then-chairwoman Patricia Dunn--later cleared of all allegations--was implicated in the Watergate-like "pretexting" of some CNET reporters. (HP was chasing down an internal leak and in doing so attempted to gain access to reporters' call logs.)

OK, so what of Hurd's "he didn't harass, but he did violate standards" resignation before he was pushed? (I wonder what kind of parachute he gets in a case like this?) There are clear precedents for stepping down for fooling around on the job. The most notable recent case was Boeing CEO Harry Stonecipher, who was ousted over an affair with an employee.

There's a little HP-connected trivia in that case. Boeing's non-executive chairman at the time was the late Lew Platt, who was chairman and CEO of HP in the 1990s. Of Stonecipher, Platt told The Washington Post: "It's not the fact that he was having an affair" that caused him to be fired..."But as we explored the circumstances surrounding the affair, we just thought there were some issues of poor judgment that . . . impaired his ability to lead going forward."

Perhaps it's similarly poor judgment in Hurd's case, though again he was supposedly cleared on the harassment angle. However, the business-practices violations are that he reportedly filed false expense reports on multiple occasions.

That's a very serious charge. But, again, my point here is: Isn't HP's board cutting off its nose--which it's hoping to keep squeaky clean--to spite its face?

When you weigh everything together, is the board really doing the right thing for the shareholders? Can't some infractions be best handled another way, like with a suspension or admonition, or partial loss of stock options?

Possibly the board is more afraid of shareholder lawsuits now, if they don't move Hurd out, than they are of getting dinged for a non-quantifiable--and impossible to prove--failure to increase shareholder value further down the road because they get an inferior CEO as a successor.

As I alluded to at the outset--and let's just say it plainly--many HP employees are undoubtedly cheering today. Hurd was not beloved, and plainly didn't care to be. I well remember his first press conference, where he was prodded by reporters to put a cap on the turmoil of the Fiorina years by giving HP's employees a verbal pat on the back. He was also egged on to state that there would be no upcoming layoffs. He refused to do either.

I thought it was cold and callous, given that HP had (prior to Carly, anyway) a very collegial and supportive culture. But I also took it as a sign that Hurd would succeed, reviving in spectacular fashion HP's then-sagging numbers. And he did.

Will his successor be as able to run HP as adeptly? It's on the board to get somebody who can.

What's your take? Let me know, by leaving a comment below or e-mailing me directly at [email protected].

Follow me on Twitter: (@awolfe58)

Alex Wolfe is editor-in-chief of InformationWeek.com.

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Alexander Wolfe


Alexander Wolfe is a former editor for InformationWeek.

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