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Why did HP give Mark Hurd a $37 million severance package?
By Lauren | August 10, 2010
When former CEO Mark Hurd resigned from Hewlett-Packard Co. last week, he joined a lengthy list of top business executives who have stepped down after being accused of personal ethical lapses. Of course, this isn’t HP’s only recent scandal. HP suffered considerable public embarrassment just a few years ago when its chairwoman, Patricia Dunn, left the company after wiretapping conversations of an HP Board of Directors member. Ironically, it was Hurd who, after settling the wiretapping case with the California attorney general, publicly announced that he was “committed to ensuring that HP regains its standing as a global leader in corporate ethics and responsibility.”
Oh, really?
News reports allege that Hurd’s demise came out of a “personal relationship” that he had with former actress and marketing consultant Jodie Fisher. At one point, Fisher filed a sexual harassment suit against Hurd, which he settled for an undisclosed amount. However, when HP investigated Fisher’s claims it found that Hurd had not violated the company’s sexual harassment policy. Hurd’s forced resignation was based on the company’s determination that Hurd had falsified about $20,000 in expense reports, allegedly to conceal whatever relationship he had with Fisher, and that Fisher had received at least some compensation for work she hadn’t actually performed.
The trouble with HP’s story is that it doesn’t hold water. If Hurd really lied on his expense reports and overpaid an underperforming contractor, shouldn’t he have been fired outright? And should he really be leaving with a severance package worth $37 million or more? On the other hand, if he’s being allowed to resign and take all that money with him, how credible are the claims against him? Fisher was quoted just this morning expressing surprise and regret that Hurd lost his job over his alleged sexual misconduct, and both deny ever having had an affair. Did whatever happened between Fisher and Hurd really warrant his ouster, or was something else going on?
Some commentators have suggested that Fisher’s sexual harassment suit against Hurd was bogus, and that HP’s Board of Directors just didn’t have the guts to defend him. (Remember, Hurd was exonerated by the company’s internal investigation.) Hurd’s lavishly-funded departure may, in fact, be the outcome of a carefully-negotiated compromise. But if HP’s Board thinks this is the best way to prevent future scandals at the company, it needs to think again. Hurd’s ambiguous departure sends a blatantly mixed message to other HP employees. Maybe it’s not okay to violate the company’s code of ethics but, if you’re high enough up the corporate ladder, you can do so and still get paid to go away. On the other hand, if you don’t violate the company’s code of ethics but someone else uses you to put the company in an awkward position, the company won’t defend your honor, but it will pay you off. Neither position is calculated to encourage ethical behavior on the part of HP’s other employees.
It may be a while before we find out why Hurd really resigned, if we ever do, but one thing is clear. If HP wants its employees to act ethically, it needs to set clear expectations, support employees whom it believes to be ethical, and fire even the highest-level employees when they are not. Anything else is just begging for future scandals.
Topics: Business Ethics, Corporate Governance, Professional Ethics, Risk Management, Social Ethics, business communications, corporate responsibility, ethics |
August 13th, 2010 at 10:44 am
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