Northern Exposure

How the Mighty Have Fallen (Again)

by Katherine Pollock

Recently, we learned of a scandal out of the United States that cost a top CEO his job. On August 6, Mark Hurd, the chair, CEO, and president of Hewlett Packard for the past five years, “resigned” under intense pressure from the board.

Mark HurdWhile it was an allegation of sexual harassment that set the wheels of this resignation in motion, it turned out to be a relatively modest item that caused his demise: the fudging of expense reports. The story as reported by the media has application in Canada and reminds us that employees’ conduct at work can have unintended consequences.

Sexual harassment complaint
As the media reported, a complaint of sexual harassment was made against Hurd on June 28, 2010, by an HP contractor, Jodie Fisher. She had been retained to assist in organizing CEO/executive summit meetings where top HP customers were wooed. Hurd would attend these meetings with Fisher as his guide. He would then unwind after a day’s hard work, and Fisher would be his dinner companion.

As soon as the complaint was received by Hurd on June 28, he passed it along to HP’s general counsel, who in turn immediately notified the board. The board appointed an independent investigator. At the conclusion of the investigation, the board concluded that Fisher’s sexual harassment complaint against Hurd was unfounded.

Unintended consequences
This wasn’t the end of the matter, though. Reports indicate that the sexual harassment investigation uncovered that Hurd had submitted expenses that misstated who he was dining with after these customer meetings. The expenses indicated that Hurd either ate alone or with someone other than Fisher when in fact he had been dining with Fisher.

The total of the misstated expenses was $20,000 — but the amount involved wasn’t the key point. What caused the board consternation was that Hurd had fudged his expenses and had sought to hide his relationship with Fisher.  It’s been reported that the board felt that Hurd had broken the trust between him and the board and so he had to leave.

Hurd’s resignation
At the end of the day, Hurd agreed that he had formed a “close personal relationship” with Fisher. Both he and Fisher have denied an affair, but Hurd apparently has paid Fisher a sum of money to settle her claim against him. He also stated upon his resignation that there were instances in which he didn’t live up to the standards and principles of trust, respect, and integrity that he had espoused at HP. It would be difficult for him to continue as an effective leader.

As a result of his resignation, Hurd will be paid more than $12 million in severance, and he will receive over 330,000 restricted shares worth over $16 million. (See severance agreement) In the meantime, HP’s stock lost 10 percent of its value in large part it seems because Hurd was such a respected and capable president and the market worried that his resignation would be a huge loss to HP. Hurd is only 53 years old, and his deal with HP that we have reviewed doesn’t include a noncompete. So we can expect him to bounce back in the business world some time soon.

The moral of the story may be this: The mighty may fall, but sometimes the landing is not too shabby. This morality tale also reminds us, wherever we work and whether in the United States or Canada, that the way employees behave at work can have lasting and sometimes unintended consequences for executives, those who bring complaints, and employers.