All This over Misfiled T&E Reports? Really?
Late in the day on Friday, August 7, word came that Hewlett-Packard's board of directors had sought—and received—the resignation of the company's CEO Mark Hurd. As you've undoubtedly read, Mr. Hurd was shown the door after it came to light that he had been wining and dining an HP contractor on the company's dime, and reportedly falsifying expense reports. Some have been skeptical the resignation came from bogus expense reports. Chins have wagged about the possibility of other "activities" between the CEO and the contractor, who has since been identified as Jodie Fisher. I'm not sure that Mr. Hurd and Ms. Fisher shared more than a meal, but I am skeptical all this furor is over a couple of expense reports.
Ms. Fisher has maintained that nothing of a sexual nature ever actually transpired, but alleges Mr. Hurd made inappropriate advances. Through her attorney, Ms. Fisher contacted the HP board and accused Mr. Hurd of sexual harassment. She claimed she feared losing future HP contracts by rebuffing Mr. Hurd's untoward advances. The board found Mr. Hurd had not violated HP's sexual harassment policy but had exercised poor judgment and filed inaccurate expense reports, so he was asked to step down.
Mr. Hurd becomes the second CEO in turn to be given the boot by HP's directors. He took the corner office after the board dismissed his high-profile predecessor, Carleton (Carly) Fiorina, in 2005. She came to the company as it sought to transform itself from a geeky high-tech firm to a hip computer company run by a celebrity CEO with lots of star power and panache. Battles with the board were to be the hallmark of the Fiorina era. They fought over various internal matters as well as external deals, like HP's failed attempt to acquire PricewaterhouseCooper's consulting business in 2000. It was Ms. Fiorina's successful Compaq acquisition that, at least in part, led to her departure. Well, that and plummeting share prices.
Like Ms. Fiorina, Mr. Hurd came from outside of HP and proved to be a dynamic leader. Although I never heard about any acrimony between Mr. Hurd and the board, it was clear he was disliked by the troops. Really disliked. On message boards and blogs frequented by HPers, Mr. Hurd was assigned the scatological nickname "Mark Turd"—or simply "MT." The unpopularity stemmed from his focus on cost cutting. Mr. Hurd eliminated ten of thousands of jobs and initiated unpopular programs like forced unpaid days. While HP employees were more than a little bitter, Wall Street and HP investors appeared to love Mr. Hurd, and share prices skyrocketed while he was boss.
Mr. Hurd initiated his share of big deals for HP, including the acquisition of 3com, EDS, and Palm. He grew revenue from $80 billion in fiscal year 2004 to $114 billion last year and share prices more than doubled. A chart featured on the Business Insider website on August 10 illustrated how operating profits in HP's business units grew during the Hurd years, from just under $1.5 billion in January 2005 to over $3.75 billion last January. According to an August 7 article in The Wall Street Journal, HP's market cap reached $108 billion on Mr. Hurd's watch, up from $46 billion in March 2005 before he was announced as CEO.
Many changes were implemented in HP's Imaging and Print Group while Mr. Hurd was CEO, including its overall restructuring in 2008. The company has strengthened and expanded its imaging products along with its place in the market. I've blogged in the past how HP has become one of the fastest growing companies in terms of revenue in the MPS market. Although the 2007 acquisitions of MacDermid ColorSpan and NUR Macroprinter seem like small beer compared to the EDS acquisition, the deals provided HP with a broad inkjet patent portfolio and made it arguably today's strongest inkjet OEM. During Mr. Hurd's tenure, HP also managed to further strengthen its Canon alliance and last year announced it would market higher-end Canon copiers, a deal the firm has sought for at least a decade. IPG was not spared Mr. Hurd's cost-cutting cleaver, however. Thousands lost their jobs, including those at the Vancouver inkjet plant, which was shuttered a couple years ago.
With so many accomplishments, I'm skeptical that the board would have forced Mr. Hurd to resign over some inaccurate expense reports. Perhaps the board seized an opportunity to shore up morale at HP. According to the Business Insider website, the director of Stanford University's Industry Affiliate research program, Chuck House, characterized Mr. Hurd as a "thug" and said he was "profane, a bully, autocratic, threatening, demeaning, vindictive, and rude." The article said an internal HP report, published in April, found that "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." I know a number of HP executives have left since he was elevated to CEO, including some key senior managers within IPG.
It may turn out that morale was not a factor in the board's move. Perhaps Mr. Hurd's dalliances were not so innocent—or infrequent. Or perhaps Mr. Hurd was involved in more nefarious activity. Presumably, we'll find out in time. Until then, I remain skeptical that a CEO like Mark Hurd lost his job because of mistakes found on a couple of expense reports. I suspect it has more to do with rancor in the ranks and further erosion of the firm's cherished "HP way."
Posted on 08/18/2010