I was intrigued to learn this week that Hewlett-Packard had sued to prevent its former CEO, Mark Hurd, from joining Oracle Corp. as co-president. You may recall that a few weeks ago I commented that I thought HP had done the right thing by parting ways with Mr. Hurd after he violated the company’s standard of business conduct. The company had a policy and enforced it, despite the success Mr. Hurd had in leading the organization.
But now HP wants to prevent Mr. Hurd from joining its rival, Oracle. It alleges that Mr. Hurd’s hiring is a breach of his exit agreement and that it will ultimately lead to a transfer of its trade secrets to Oracle, which happens to be a competitor.
If you recall, Mr. Hurd reportedly received something in the neighborhood of $35 million on his way out HP’s door. And while I’m not privy to the agreements Mr. Hurd signed, I’m sure that kind of money comes with strings attached. But it should be noted that the agreements that Mr. Hurd signed did not include a noncompete clause. What they did include were restrictions that prevent him from disclosing sensitive information about his former employer.
So what do we make of this situation? Here’s my take.
What did HP’s board think was going to happen? Mr. Hurd publicly and quickly gets cut loose from the top job at a high-profile, Fortune 100 company. His track record of success at HP was impressive — more than doubling its market cap in his five years on the job. Did the board members think this guy wouldn’t be coveted by other companies? Did they really believe that competitors wouldn’t be salivating to get their hands on such an accomplished industry executive?
Sure, Mr. Hurd has 40 million reasons to sit on a beach on some tropical island, but you have to give him credit for his desire to get right back in the game. Plus, Oracle’s paying him a base salary of $950,000, with a bonus worth up to $10 million this year alone. Why wouldn’t he go back to work if he can command that kind of money?
So HP’s argument is that Mr. Hurd knows a lot about its business and that his hiring will lead to a transfer of its trade secrets to a competitor. Well, duh. Of course he knows a lot about your business. He very successfully led it for five years. You knew that when you let him go. Will his hiring by Oracle lead to his transferring HP’s trade secrets to them? Maybe, but it’s going to be hard to prove that his mere hiring by Oracle has resulted in the transfer of those secrets.
I say HP’s board did what it had to do when it terminated Mr. Hurd. I’m certain it was a difficult decision because he had been so successful in leading HP and because the board had to know that Mr. Hurd would be an attractive hire for many tech companies — especially their biggest competitors. But Mr. Hurd has a right to work and use his industry knowledge and experience to be gainfully employed. He did not sign a noncompete. If he divulges HP’s trade secrets to Oracle, then HP will have a case, but trying to prevent him from working for a competitor because he might do something in the future doesn’t fly with me. Innocent until proven guilty, I say.
Of Athletes and Executives
This whole situation makes me think about the similarities between how top executives and professional athletes are treated. I’ve made no secret that I’m a Green Bay Packers fan. When Brett Favre retired and then unretired the first time (or was it the second?), the Packers told him it was time for the team to move on and that it was going with Aaron Rogers. In his exit agreement, the Packers specifically said he could not leave and go play for divisional rival Minnesota Vikings. Of course, Favre used the New York Jets for a year, retired again, and then unretired and joined the Vikings. There’s a way around everything.
Or how about this sports employer/employee story from my other rooting interest, the Chicago Cubs? Before the 1992 season, the Cubs were negotiating with pitcher Greg Maddux on a contract extension. Maddux was entering the final year of his contract and wanted to stay in Chicago. The Cubs offered a five-year, $25 million deal, and Maddux agreed to the deal with one caveat — he wanted a no-trade clause. He wanted to make sure he stayed in Chicago. The Cubs balked. Maddux came back on a Monday and said he would agree to the deal without the no-trade clause. After a few weeks without an acceptance by the Cubs organization, Maddux wrote a personal letter to the CEO of the Tribune Company, which owned the Cubs. In his letter, which was delivered on a Monday, he gave the Cubs until 5 p.m. on Friday of that week to agree to the deal. The CEO, who later admitted he was posturing, waited until five minutes after 5 p.m. on Friday to call Maddux.
Maddux responded by saying that, instead, he would test the free-agent market at the end of the season. That year, Maddux won 20 games — more than a quarter of the total for the Cubs that season — and captured the first of four consecutive Cy Young Awards for being the best pitcher in the National League. The only problem is that the last three awards were won while Maddux was pitching for the Atlanta Braves. You see, at the end of the 1992 season, the Cubs offered Maddux $27.5 million for five years and were still outbid by two other teams. Maddux, feeling betrayed by Cubs management for their handling of the negotiations, opted to leave Chicago.
My point is that when you’re a top executive at a major company or a professional athlete, there is a lot of money at stake and even more ego that goes into the equation. When you peel back the layers, HP’s board did what it felt it had to do when it let Mr. Hurd go. That move comes with consequences, which in this case include watching him move on to a competitor.
I’m sure the Packers don’t like facing Favre on Sunday afternoons, watching him step onto the field in that ugly purple uniform. Nor did the Cubs like seeing Maddux take the mound for the Braves when they played Atlanta. But when you choose to let someone move on, that’s the chance you take. HP needs to accept this fact.