Hurd reaps HP
payday as investors suffer
By JORDAN ROBERTSON AP
Posted: 08/09/2010 02:50:10 PM PDT
Updated: 08/09/2010 06:06:32 PM PDT
FRANCISCO—Whatever Mark Hurd did that cost him his job as CEO of
Hewlett-Packard, the world's largest technology company, it wasn't enough to
cost him a payday that could top $40 million.
Meanwhile, with little still known about why an actress and HP contractor
threatened Hurd with a sexual-harassment lawsuit, stockholders took a $9
billion hit Monday, and HP's 300,000 workers were left to wonder about its
HP insisted that the problems it uncovered with the CEO's behavior were
limited to falsified expense reports for his dinners and other meetings with
Jodie Fisher, who helped organize HP events from 2007 to 2009 and greeted
executives at the gatherings.
Hurd has settled with Fisher for an undisclosed sum, and both parties have
said the relationship was not sexual. Hurd said an assistant prepared all of
his expenses. He has offered to reimburse HP for the errors.
The company has offered no further details and says it is focused on finding
Hurd gets $12.2 million in severance, plus stock and options that could
bring the total value of the package to more than $40 million, based on
calculations by The Associated Press using HP's stock price Friday, before
HP disclosed the resignation.
Analysts said the generous package shows Hurd was highly valued for
restoring steady results to the company, a Silicon Valley institution, after
a period of upheaval that followed the stewardship of Carly Fiorina. Fiorina,
Republican nominee for Senate in California, got a severance package worth
$21.1 million after she was ousted from HP in 2005.
"It tells you how important people think he is to HP," said Jayson Noland,
an analyst with Robert W. Baird & Co. "It gives you a sense for how valuable
a really good CEO can be."
He noted the severance is a tiny fraction of the $125 billion HP expects to
record in revenue this year.
Jeffrey Sonnenfeld, a professor at the Yale School of Management and an
expert on CEO leadership and corporate governance issues, called Hurd's pay
package a "damning indictment" of the way CEO hiring contracts are set up.
Sonnenfeld said the contracts are "overly lawyered" and make it essentially
impossible to fire executives for cause and therefore stop any severance
He said the falsified expense reports wouldn't have been considered
materially significant events that would get him fired for cause, which is
why the board allowed him to resign.
"If any employee at the firm had done what he did, they would have been
fired immediately," Sonnenfeld said. "He was allowed to resign because he
had lost the trust of the board."
Unlike regular employees, executives with the types of essentially
bulletproof contracts such as Hurd's often can't be fired for cause unless
they've committed a felony, according to Paul Hodgson, a senior research
associate at The Corporate Library, an independent corporate governance
"If he really resigned," Hodgson wondered, "then why are they paying him
severance at all?"
Fisher, 50, has appeared in racy movies with titles such as "Sheer Passion"
and "Intimate Obsession" and recently a television dating show. She was paid
up to $5,000 per event to greet people at HP events and make introductions
Neither she nor her attorney have discussed details of the harassment claim,
which led to the discovery of the questionable expense reports for dinners
Hurd had with Fisher.
The company held a webcast Monday to discuss the changes with its employees,
but it was closed to the press, and there was no immediate word on what was
said. The company's interim CEO, Cathie Lesjak, said Sunday that she did not
plan to discuss further details of Hurd's case.
Shares of HP fell about 8 percent to $42.60 on the first full day of trading
since Hurd's abrupt resignation Friday. Its market value, which was about
$67 billion when he started at HP in April 2005 and stood at about $108
billion before the announcement of Hurd's departure, dropped to about $99
Noland and other analysts say HP's stock swoon is likely temporary.
"It's just the uncertainty that this creates—you lost a great CEO," he said.
Bob Phillips, co-founder of the Spectrum Management Group investment firm in
Indianapolis, was perplexed. He did say his firm does not own HP stock
because most of HP's growth under Hurd has come from acquisitions, not its
Still, "It makes no sense," he said. "I think it's an overreaction at this
point by the market in fear there's something much more substantial coming."
Some corporate governance experts have called for an overhaul of HP's board
of directors in light of Hurd's troubles and a 2006 scandal in which
chairwoman Patricia Dunn was forced out for overseeing an investigation that
involved spying on reporters' and directors' phone records to suss out the
source of leaks to the media.
Gary Lutin, chairman of a shareholder information service called The
Shareholder Forum, said investors might question whether HP's board should
be replaced, noting that many board members stayed on through the 2006
scandal. Six of HP's current 10 board members have been directors since 2006
Silicon Valley billionaire Larry Ellison, Oracle Corp.'s CEO and a friend of
Hurd's, said the decision to oust Hurd went against the best interests of
HP's employees, shareholders, customers and partners. Oracle is one of those
In a statement issued Monday, Ellison called the action by HP's board an act
of "cowardly corporate political correctness" and the worst personnel
decision since Apple forced out Steve Jobs 25 years ago.
Sonnenfeld, the Yale professor, said, however, he believes the board made
the right decision and commended it for acting quickly.
"Hurd was a great operator for the here and now," he said, "but he had to go
because of the long-term impact on the character of HP."
Associated Press Business Writers Rachel Beck in New York and Ryan Nakashima
in Los Angeles and Technology Writer Rachel Metz in San Francisco
contributed to this report.
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