Hurd and ethics? Nah, it's the money

HP/Hurdgate has unleashed a flood of speculation about what happened and what comes next. I wonder whether the underlying reasons were more prosaic if badly handled.
Written by Dennis Howlett, Contributor

I've hung back on the HP/Hurdgate debacle while trying to understand what really went on. It doesn't matter in the end because unless either Mark Hurd or HP disclose the whole facts, then the world at large is faced with speculation. I for one don't believe the statements we've seen to date get remotely close to telling the real story.

Hurd is unlikely to talk given the 24 month ziplock he signed up to in exchange for a multi-million dollar severance settlement. HP, despite all their PR posturing can only make things worse. Any admissions at this stage that are in the slightest bit contradictory to current statements will only send a signal that the board doesn't know what the heck it's doing. Jodie Fisher doesn't figure into this except to add salacious color.

James Farrar tries to read the ethical tea leaves and comes up with this conclusion:

So what about the all important ethical violations relating to conflict of interest, failure to maintain accurate expense reports & misuse of company assets where the board did find violations?

The truth is known only on to a few but this much is clear - the path to theoretical ethical decision runs true for us sustainability bloggers, Greek philosophers and corporate brochures. Real life tends to be messier.

Messier doesn't come close. Many of the reports focus on Mr Hurd's operational abilities during his tenure, pointing to the stock price improvement over the last few years. These in turn are counterbalanced with implied criticism over his alleged expense fiddling. Then we have Larry Ellison, CEO Oracle, hardly a paragon of virtue, offering his two cents to no less an organ than the Wall Street Journal. We see the HP stock price tumble on the new of Hurd's departure. (see illustration courtesy of Yahoo at the top of this post.) Now we're getting somewhere.

Nell Minow of the Corporate Library tries to contextualize the story by saying that HP had no choice since whatever happened has impact on the potential for future government contracts by reason of issues around 'tone at the top.' I'm sure that is well meant but is it meaningful? I don't think so.

In the audit world, the notion of 'tone at the top' has almost become farcical in the wake of continuing scandals in almost every sector impacted by the recession. If HP really thought that what amounts to a minor fiscal problem that Hurd was willing to settle through reimbursement would balloon in the manner suggested then he would have been fired. My sense is that something else is afoot.

My good friend Francine McKenna nails the 'tone at the top' issue in a post entitled: HP, Hurd, Deloitte and Tone At The Top where she quotes the NYT from 2006:

Because, after all, “boardroom Puritanism covers sex, but not greed. Where, oh where are the corporate ethics policies prohibiting chummy boards from approving eye-popping pay packages for C.E.O.’s whether or not they are doing a good job? Where are the solemn mission statements promising a workplace free of executive pillaging? Whom would you prefer: a C.E.O. who writes the occasional indelicate e-mail message? Or someone like [Bob] Nardelli, who treats shareholders with callous indifference? And which of the two executives really has worse judgment?”New York Times June, 25, 2006

Nothing much has changed and if you know anything about Silicon Valley egos, you also know that certain companies breed a culture of greed first, everything else second. But that same 'ethic' can easily come back and bite you when you least expect it.

Enter stage left Chuck House of Stamford who is quoted on SAI as saying about Hurd:

He was profane, a bully, autocratic, threatening, demeaning, vindictive, and rude. Blogs over the weekend by current employees said "Hooray, the tyrant is gone!" I couldn't contain my glee on the 11pm news -- best news for HP in a very long time!

Nothing particularly revealing there. And no, I won't give you a list of my top ten CEO a$$hats. At least not today. But here comes the crunch. In the same post, House says:

The Voice of the Workplace, HP's thirty-five year historic 'measure' of employee feelings (done every five years) showed in April an astonishing finding -- more than two-thirds of HP's employees would quit tomorrow if they had an equivalent job offer. Not a raise, not a promotion, simply an alternative. That number never used to be in double digits. Other companies in the Valley have reported an amazing rate of HP resumes being submitted; one large company saying, "we didn't know they had that many people working there".

[My emphasis added.] Now where have I heard THAT before? Oh yes. A 2009 winter survey among SAP employees found that trust between SAP employees and its then CEO Leo Apotheker had all but vanished. SAP co-founder Hasso Plattner confirmed in Der Spiegel:

It is just there is a lack of trust between the management and the employees of SAP, particularly in Germany, but also in Europe -- and I couldn't see how to close that gap. Although I did my absolute best to help Leo Apotheker, employee surveys showed that management was unable to make up for this dramatic loss of confidence.

And this is where things so often go pear shaped and where I suspect that HP missed its cue. The expenses thing 'feels' like a lame excuse. It just doesn't sit right with me, even if true. Flavoring it with sexual harassment claims makes it sound worse and so a pretty good reason for Hurd to go. But if the reality is that HP's employees have had enough then what does that mean if the economy picks up? A hemorrhaging of talent that HP could not survive.

Tech companies live and die on the quality of the talent pool they attract. The potential for such a voluntary exit must have frightened the bejeezus out of the board. Unfortunately, it seems Hurd had become so powerful that instead of assessing the situation rationally, they panicked. Once it became clear he had to go it had a dilemma. How do you tell a stock market that loves your CEO that actually, he's hated and that anytime soon the wheels are going to drop off? Pretty easy if you're thinking logically.

You agree with the CEO that his time is done, get him to help with finding a successor and then agree on an exit strategy that minimizes the side show muck raking but compensates him appropriately. Unfortunately, Silicon Valley CEO egos don't work that way very often but they can be persuaded if their stock options are in jeopardy.

What HP succeeded in doing is make a bad situation much worse with speculation rife and almost daily surfacing of titillating factoids that makes HP look inept. Now we have a CEO departure characterized as an ethical problem, sending the stock price into a tail spin that must leave HP's board looking impotent in managing someone the lifeblood of the company detested. We have speculation that Larry Ellison is calculating he might be able to pick off HP. Fair do's to Bob Warfield for that one but is that what HP and its employees really want? I don't see it. And it won't stop there. It was not one of HP board's finest days but almost logical when you look at the world only through the eyes of the stockholder yet somehow skewered by a weird view of ethics. And therein lies the real problem.

The old saying that money talks while BS walks is a good standby but it doesn't always apply. Sometimes money blinds you. As it seems to have done over some of Hurd's expenses and the board in bending over to make a messy settlement.

The real casualties have yet to be counted. My suggestion is that whomever comes in had better have a large sheaf of pink slips in his or her pocket. To be handed out to the board when the ink has barely dried on the appointment agreement.

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