Board acted 'admirably' to remove Mark Hurd
Q: In forcing out its successful chief executive, Mark Hurd, did Hewlett-Packard directors over-react to what, given his overall compensation, appears to be a modest abuse of his expense account? Or did the board under-react by allowing Hurd to resign with his full contracted severance package rather than firing him for cause?
The Hewlett-Packard board of directors responded in the only way it could have given its fiduciary role. Corporate boards have several major responsibilities:
1. Hiring and evaluating the CEO.
2. Setting strategic direction.
3. Monitoring organizational performance.
4. Ensuring acceptable levels of shareholder value.
5. Exhibiting loyalty to the institution's purpose.
From my vantage point, the board has performed its governance role admirably. This is particularly important because it expresses the character of the company and lives up to the espoused values the leaders are legally and ethically bound to uphold. In this tragedy the CEO permitted his individual self-interest to override the greater interests of HP. The Board made its decision based not on his personal failings but on his betrayal of corporate values.
The board's response to this lapse of ethical leadership sent a clear message to those remaining , dishonesty and deceit will not be acceptable at HP. Their decision to allow Hurd to resign and to keep his contracted severance package was humane. It acknowledged his record of excellence in his professional performance while conveying the unacceptability of misuse of funds. The negative public exposure, loss of a position at which he excelled and the betrayal of his spouse seems punishment enough.
When the leader of an institution violates the institution's policies and core values, they destroy trust; the glue that holds everything together. If the CEO had stayed, more questions about his truthfulness in other matters would be raised and doubt about the character of its leader would put the reputation of HP at risk. The one thing a board must preserve is the good reputation and trust in a company. A responsible board would never squander the good name of the company. In the end, the HP board chose the company's character over the CEO's competence.
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