Oswald Letter

Did HP’s Board Make the Right Call?

When a colleague suggested I write about Hewlett Packard’s firing of CEO Mark Hurd, I wasn’t sure there was anything of value to say about this situation. But on further reflection I think there is a clear lesson in all of this.

Mark HurdYou might recall that on August 6, Hurd resigned under pressure from HP’s board. According to a company statement, a woman who had romantic ties to Mr. Hurd, who is married, “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.”

Furthermore, the woman, Jodie Fisher, accused Hurd of sexual harassment. An investigation by outside counsel found that this had not taken place.

What to do if you are on HP’s board? It seems pretty straightforward to me. The guy lied on his expense reports, effectively embezzling company money to pay his girlfriend. What’s more, his actions invited a sexual harassment lawsuit on the company. And even though counsel found that no harassment had occurred, he put the company in a position to defend the claim, costing it additional money. Finally, the negative publicity that came as a result of his actions was damaging to HP.

Oh yeah, HP has a standard of business conduct that tells employees, “Before I make a decision, I consider how it would look in a news story.”

Ouch! Do you think Hurd’s actions really lived up to that standard? Only if he thought his story was going to be on a daytime soap!

So Hurd should clearly be out. It’s an open-and-shut case.

Hold on one minute. Did I mention that under Hurd’s leadership, HP’s market capitalization had more than doubled? Just to put that into perspective, the company’s value increased by about $50 billion over the last five years.

So now put yourself in the shoes of an HP investor. This guy had doubled the value of your investment despite the worst economic downturn of your lifetime. How many investments do you have that have done that? So the guy fibbed about $20,000. He made investors $50 billion. That’s with a “b.”

Does your opinion of what should have happened to Hurd change?

Mine doesn’t and here’s why. The company had a code-of-conduct policy in place. And if the policy calls for termination if someone breaks it, then that is what must be done — regardless of who it is. If you’re going to have a rule, you must enforce it. If you’re not willing to enforce your rule in every instance, then don’t have the rule.

If HP’s board had made an exception for Mr. Hurd, then what good would the policy have been? We realize we have a policy against this type of behavior, but this guy is so good we’re going to ignore it. What about others who lost their jobs for violating the policy? How would they feel after discovering that the company really does make exceptions for the right person? My guess is they would be knocking on HP’s door with their lawyer in tow.

I commend HP’s board members for letting Mr. Hurd go. They put the policy in place, and when it was time to enforce it, they did. I’m sure the decision wasn’t easy. When you have a person who has been that successful in leading your company, you hate to see them go. But they did it anyway.

And if you’re feeling the least bit bad for Mr. Hurd, don’t. He’s reportedly walking away with about $40 million. That’s NOT with a “b” but it’s certainly more than enough to keep food on Mr. Hurd’s table. And it might give Mrs. Hurd food for thought.