It was a tough week for Hewlett-Packard Co. shareholders in the wake of CEO Mark Hurd’s resignation. Or perhaps for all shareholders but one.
After HP said Mr. Hurd would step down because his relationship with a female contractor—and inaccurate expense reports he submitted—violated the company’s "standards of business conduct," its share price plunged roughly 10 percent. That wiped out some $9 billion in market value.
But HP’s CEO walked away with a $12.2 million severance payment, plus options and stock units that by some estimates could bring the value of his total farewell package to roughly $40 million.
The market was not alone in its swift reaction. Some company watchers, noting that Mr. Hurd had been cleared of sexual harassment allegations, accused HP of overreacting. Oracle Corp. CEO Larry Ellison said the action by HP’s board against his "close friend" was an act of "cowardly corporate political correctness."
By contrast, scores of current and former HP workers posted vitriol-soaked messages on a Wall Street Journal blog, including one who paid tribute to Jodie Fisher, the female lead in this drama: "One beast down, several more to go. Jodie will likely get about 300,000 thank you notes."
If Mr. Ellison is right, the HP board’s action was both costly and dumb. On the other hand, if the board had good reason to ask for Mr. Hurd’s resignation, why reward him with tens of millions of dollars?
Of course, this is the board-with many of the same directors-that presided over the "pretexting" scandal that was followed by Patricia Dunn’s exit as HP chairman. And before that, Carly Fiorina reportedly got more than $20 million to smooth her exit as CEO.
Business leaders can be quick to cite government as their biggest problem. All too often, though, corporate governance is marked by incompetence or worse.
HP is a legendary company and tough competitor to Xerox Corp., Eastman Kodak Co. and many others. It does many things right, but the Hurd scandal is a classic case demonstrating how business can be its own worst enemy.
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