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HP CEO Mark Hurd allowed to resign: No severance?

Mark Hurd was supposed to be the boring one. The one who returned the grandfather of Silicon Valley companies to its humble and honest origins. The anti-Carly. The operations whiz. The one who could reassure investors amid an embarrassing corporate espionage saga.

Instead, Hurd is ironically compounding Hewlett Packard's extended leadership drama with an episode that may have the biggest impact on employees yet.

The details of his departure read more like the cover of a tabloid than a corporate business story: There is the "marketing contractor" who claimed to have been sexually harassed by Hurd (the claims have been settled) but has been, by turns, the vice president of a commercial real estate firm, the star of several erotic movies, and the first woman eliminated from a reality TV show about older women who date younger men. (No, I am not making this up.) Then there's the fact that this actress, Jodie Fisher, was apparently paid $1,000 to $10,000 per "C.E.O. executive summit" event, The New York Times is reporting, in part to "introduce [Hurd] to customers and keep him company."

And of course, there's Hurd himself, who vowed in 2006 "that this company will regain not just its reputation as a model citizen with the highest ethical standards ... we will regain our pride." Tough words from a CEO who has now been asked to step down for violating HP's standards of business conduct.

But of all the stunning details, few are likely to have more of a lasting impact on morale at HP than the pay package he is going to walk away with. Hurd, who made $24 million in 2009 and was among the country's highest paid and most successful CEOs, will depart the company with at least $ 28 million in cash and in HP stock, in addition to other benefits. Even if expense account irregularities seem like a minor infraction for ousting such a successful CEO--and to some experts, it does--that's quite a handsome sum for someone who violated an ethical conduct code he personally promoted.

The board may claim that they were obligated to pay Hurd due to his employment contract, and could not fire him for cause because it was written so narrowly. But employees burned by years of cost-cutting are unlikely to care. HP workers have faced multiple rounds of layoffs in recent years. Their 401(k) contributions have been capped and made discretionary. On top of all that, Hurd exacted 2.5% to 15% salary cuts from all of HP's employees during the recession, a bold and controversial move in management circles that a few companies have only recently dared to do.

The board, of course, could not keep Hurd from making what HP's general counsel Michael Holston called his "profound lack of judgment." But if it wanted a boring CEO, one who would help restore the company's stability and pride, why not start by setting up less sensational severance?

Hurd may have been just another CEO (and there are far too many) who let ethics slip in the face of power. But if HP's board wants to boost integrity in the C-suite at HP, and ensure pride and strong morale among its employees, it has a big role to play, too. It should start with the next chief's pay package.

By Jena McGregor

 |  August 8, 2010; 10:26 PM ET |  Category:  Bad leadership , CEO watch Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: Weekend reads, The judgment edition | Next: Mark Hurd's departure leaves successor in doubt


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I don't understand why they didn't just show him the door and let him sue. or at least settle for far less, and then take their chances in court. Certainly the costs of a lawsuit wouldn't be any worse than this settlement, and would have sent the right message to employees and the next CEO they hire. Sold my stock.

Posted by: rayman3 | August 11, 2010 8:50 AM

I think his large severance is an outrage!

Posted by: washpost-kabu | August 9, 2010 5:39 PM

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