Business, Hardware

Alleged Hanky Panky Ends HP CEO Tenure

On Friday, Hewlett-Packard CEO and Chairman of the Board, Mark Hurd resigned as a result of an investigation into allegations of sexual harassment against him and HP by a former company contractor. HP took the high road, saying the investigation found "no violation of HP’s sexual harassment policy, but did find violations of HP’s Standards of Business Conduct."

Whatever Hurd may have done might damage his ego, but not his wallet. He will receive a $12,224,693 severance payment in exchange for agreeing not to sue HP. That will prevent something like the litigation between Fujitsu and their ex-VP. Hurd has made nearly $100 million in total compensation over the past three years. Last year. he made $2.4 million in salary and bonus and more than $25 million in stock, options, and other incentive-based compensation. Rumors are this year? stock options for Hurd could gross more than $50 million.

Hurd had been at the HP helm for five years. He replaced Carly Fiorina who was fired by the HP Board in February, 2005. Fiorina is considered the 19th worst CEO in American business history. Hewlett-Packard family members who were ousted from the Board by Fiorina still have a lot to say about her performance at HP. Her poor reputation, however, hasn’t discouraged her from running for the position of US Senator from California attempting to replace Barbara Boxer.

Earlier this year in the San Jose Mercury News, David W. Packard said regarding Fiorina that HP had a culture admired worldwide and both his father and Bill Hewlett maintained the last thing they wanted was a company based on hire-and-fire principles that Fiorina used. Another source for the Carly Fiorina 1999 to 2005 saga is the book BackFire.

The contractor involved with Mark Hurd is named Jodie Fisher. Before joining HP, she was an actress and reality-show star. Ms. Fisher appeared in several R-rated movies as well as on the NBC reality show Age of Love in 2007 which paired older women suitors with a younger man.

Jodie Fisher had been allegedly harassed by Hurd while doing the company marketing activities. A subsequent investigation into her claims revealed that Hurd filed inaccurate expense reports to conceal her identity. The expense account issues stretched over two years and amounted to about $20,000. Any other HP salesperson would have been fired for similar misrepresentation without a severance package of $12 million.

Attorney Gloria Allred released a statement from her client, Ms Fisher, saying "was surprised and saddened that Mark Hurd lost his job over this. That was never my intention." The more interesting aspect is that Allred’s law firm has a long list of high profile settlements with large pay outs by corporations.

Hurd said in a statement, "As the investigation progressed, I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career."

Okay gang, more of the steamy is out there on Google. You can draw your own conclusions as to how the potential litigation would have been handled by the high-tech press.

HP CFO Cathie Lesjak, who has been at HP for 24 years, was appointed interim CEO. Lesjak said in an email to employees she will not be a candidate for the permanent CEO position. During this time, Lesjak will also continue to perform her duties as CFO. In the email Lesjak said of Hurd actions: "each of these constituted a violation of HP’s Standards of Business Conduct, and together they demonstrated a profound lack of judgment that significantly undermined Mark’s credibility and his ability to effectively lead HP.?

On Friday, HP also offered preliminary results for its latest quarter, including revenues of $30.7 billion, up 11 percent from the same period last year.  However, HP stock dropped more than 9 percent in after-hours trading.

Board of DirectorsWe spoke with several HP product managers, they called Mr. Hurd’s action both dumb and immature. One of them said he was a fool to have thought he could get away with it. They also pointed out that Hurd was in front of Congress in 2006 explaining the unethical behavior of then-board Chairwoman Patricia Dunn and others associated with the company. They tried to track down the source of media leaks using "re-texting" [spying on] phone records, by obtaining them under false premises.

The founder of a Silicon Valley start up said: "I think in this depressed economy, it’s terribly disappointing to see the CEO of one of the bellwether Silicon Valley companies catering to his ego and not focused on his customers, employees and investors."

Shares of HP have more than doubled since Hurd, the former CEO of NCR Corp, took over. Hurt cut costs by letting many employees go and expanding HP’s footprint in the services market with acquisitions, such as the 2008 purchase of EDS Corp for $13.9 billion and the recent acquisition of Palm for $1.2 billion.

Hurd followed in the footsteps of Fiorina by firing employees and closing research facilities, including HP’s Cambridge Research Laboratory and the Advanced Software Research (ASR) team on the west coast. That firing sent ASR’s leader Alan Kay looking for another home.

Kay is a legendary Silicon Valley technologist and founder of Xerox’s PARC [Palo Alto Research Center]. Kay once said, "The best way to predict the future is to invent it.? He was instrumental in the development of the windowing GUI and modern object-oriented programming. He envisioned a laptop computer long before the first ones rolled out and his Smalltalk programming language was a predecessor to Sun Microsystems’ Java. Kay now heads a non-profit, Viewpoints Research Institute.

We spoke wit
h futurist Paul Saffo about last Friday’s tectonic shift at HP. Paul has over two decades experience exploring the dynamics of large-scale, long-term change. He teaches at Stanford University and is a Visiting Scholar in the Stanford Media X research network. He was the founding chairman of the Samsung Science Board.

Saffo said in 2006 about HP’s spying scandal: "the point of the ‘HP Way’ was character and service to others. That’s what makes this story so sad; this wasn’t just another company. HP was once a company that stood for something.” Saffo’s views on Friday’s announcement were in line with our contact at the start up. Both said it’s unfortunate that the HP board can’t seem to find a CEO that fits for HP.

The HP's WayThat is a sad commentary when you read David Packard’s book The HP Way: How Bill Hewlett and I Built Our Company. A more up to date overview of HP’s history is Chuck House’s The HP Phenomenon: Innovation and Business Transformation. House leads the reader through the steps that took Hewlett and Packard’s $539 start up in a Palo Alto garage to a $139 billion leader of the PC industry. House is teaching at Stanford and is in charge of Media X which is Stanford’s catalyst for industry and academic research partnerships on the impact of information and technology on society.

Mark Hurd’s resignation shows one of the fundamental problems for a public corporation when the CEO is also the Chairman of the Board. The result is often a lack of strong oversight by the Chairman of the Board regarding the performance of the CEO and management team. At Hewlett-Packard, this allowed the sole person who should have been responsible for setting the ethical standard for the company to allow his personal self-indulgence to jeopardize the publicly traded share price. During Hurd’s five years in office, HP sales have go up 185 percent. On Friday HP’s shares closed at $46.32. As news spread, after hours trading saw the shares slide to $41.85 [a 9.71 percent loss].

Our Silicon Valley contact whose start up company functions under the watchful eye and direction of a Board of Directors, put it this way: "If I were an investor in HP, I would demand better results from the Board. But how could you get results if the Chairman of the Board is chasing after somebody’s skirt?? You can measure an executive team, but how can you measure a board??" They continued: "there are two types of board members, significant share holders and professional board members. HP’s Board chased off the HP family members who still own 15 percent of the company. So who really cares about the ethics of the company? Nothing is personal any longer in their Board Room…?

The HP Way has slid to the bottom of the pile and been replaced by a bureaucratic-like lack of personal integrity and personal responsibility. CBS News says "Hurd Scandal the Latest Episode in HP’s Peyton Place Annals". A pretty devastating comment for the employees and their families. We can just hear that dinner table conversation, "Daddy, what is Peyton Place??

So who will replace Mark Hurd? Other publications have lists of ten or more names including Jon Rubinstein former CEO of Palm and now head of Palm USA at HP. Based on Rubinstein’s track record of failed leadership and his so-so success with the Palm product, we think it would be a mistake to put him in charge of HP.

We think a good choice from within HP is Ann Livermore, executive VP of HP’s enterprise business. She was passed over in favor of Carly Fiorina and everybody now knows that was a giant mistake by the HP Board. Livermore oversees a business with $54 billion in annual revenue. Her area of responsibility includes storage, servers, software, and services. If Livermore wants the job, she would be a strong candidate.

Our first choice is Pat Gelsinger, president and chief operating officer at EMC. Gelsinger, a long-time Intel executive, has the experience to make a jump to HP work for everybody. We are sure that Mike Magee over at TechEye would jump back to calling him, ‘Kicking Pat’. We say, come on Pat take the leap. HP needs a real executive who is both an engineer and a proven leader.

If HP’s friends, employees, and family continue to talk to BSN, we will continue to tell you their story.