As SEC said to investigate Hurd, gray areas for HP's board
When Mark Hurd was let go from Hewlett Packard in August, the business world was left in shock. It wasn't just that HP would part ways with its much-heralded CEO, who had earned plaudits for cutting costs and boosting profits at the computer giant. Many were baffled by the offenses. The offenses--expense-account irregularities and a personal relationship with a racy contractor--were serious but not necessarily fire-able, especially for such a star CEO. Many were left wondering if there was more to the story.
And indeed, there may be. The Wall Street Journal is reporting today that the SEC is investigating a prior claim that Hurd shared inside information with the contractor, Jodie Fisher. As the same paper reported in November, the letter that Fisher and her lawyer sent to Hurd, which set off the chain of events that led to his departure, claimed more than just that Hurd sexually harassed her. She also alleged he shared information about HP's $13.9 billion acquisition of technology-consulting firm Electronic Data Systems several months before the transaction was made public. It is this claim, along with Hurd's use of corporate expenses, that the SEC is now investigating.
The inquiry may never lead to a case against Hurd, and it's unclear how far along the investigation is, the Journal reports. Hurd's spokesperson said he acted properly in every way. In addition, Fisher wrote a letter after she settled with Hurd saying that her initial claim contained inaccuracies, though she didn't identify what they were.
Who knows what Hurd told Fisher, and what his relationship with her really was. What intrigues me is the debate the board reportedly had about what to disclose from Fisher's letter, including the claim that Hurd shared details on inside deals. It's a legal gray area, the Journal reports. On the one hand, Fisher denied trading on the information in her initial letter, which means the board may not be required to report it. But Hurd's revelation, if the allegation is true, may also be a breach of fiduciary responsibility, according to legal experts.
If the legal issue is gray, what about the leadership one? The board couldn't very well say one of the reasons they let him go was because of a claim of sharing inside information; they'd need proof that it happened. (The board did disclose the sexual harassment allegations, but it said at the same time its investigation had not turned up evidence of those problems. On the inside information claim, meanwhile, the board had not yet interrogated Fisher when Hurd decided to settle with her privately.) On the other hand, this is a board that had gotten in trouble before for not reporting the real reasons behind a director's departure. If concern over the claim played any role in the board's decision, would further disclosure have been the right thing to do?
How much to release publicly is a tricky question for any leader. Making the claim public--and the Journal reports that, at some point, an agreement was made between Hurd and HP that the letter's allegations would not be--would have been a potential quagmire without proof it was true. So while it meant risking bad headlines later, as came true in November and again today, the board did the right thing in this case by initially holding back.
December 21, 2010; 11:41 AM ET |
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