The Curious Case of Mark Hurd: Would you Fire a CEO Over Expenses?

Former H-P CEO Mark Hurd graced the cover of Fortune's "Most Admired Companies" issue.

* See updates below

In case you’re one of those who believe that corporate executives get handled with kid gloves for issues in the workplace that would get rank-and-file employees fired, consider the curious case of ousted Hewlett-Packard CEO Mark Hurd: What DID he lose his job for exactly (and you can vote on this yourself below)?

Was it:

A) Sexual harassment?

B) Falsifying expense reports?

C) Violating the company’s code of conduct?

D) All of the above?

E) Something else entirely?

It’s not often that a highly successful, Fortune 500 CEO gets handed his walking papers so quickly, and mysteriously, but that’s what happened to HP’s Hurd.

Henry Blodget at Business Insider made this point about the situation (as published in the San Francisco Chronicle):

HP said Hurd lied about the identity of his dinner companions in his expense reports to conceal secret dinners with his apparent crush (who both sides say he didn’t have sex with but who still sued him for sexual harassment anyway). Hurd’s people counter that Hurd’s secretary filed his expense reports and may not have known exactly who he was having dinner with (the reports are still his responsibility, obviously, but people do make mistakes). Hurd’s people also counter that Hurd’s expense reports sometimes DID list the woman as a dinner guest and that Hurd himself paid for other dinners with her where no business was discussed.

In a second allegation, HP also says Hurd had HP pay to fly the woman near to where he was staying even when she wasn’t working for HP. That woul be embezzlement if true, but Hurd’s people deny that. They say in one of these instances, an event the woman was involved in was canceled at the last minute, after she had already made the trip.

So, what happened, exactly?

Good question, but the only thing we know now is the name of the woman Hurd was involved with in some manner (Jodie Fisher, a 50-year-old marketing consultant, reality TV contestant, and former actress “in a handful of steamy films,” according to the San Jose Mercury News), and, that that the HP board “said that he Hurd didn’t violate HP’s sexual harassment policy but other irregularities were uncovered,” according to The Wall Street Journal.
So did Hurd get canned for fiddling expense reports? And if so, does the punishment fir the crime? Here’s what The Journal said:

Corporate governance experts were split on whether HP’s board acted properly in forcing Hurd’s resignation. Corporate expense offenses can be regarded as relatively minor and can typically be settled if an executive pays back the amount, some experts said.

Joseph Grundfest, a professor at Stanford University’s Law School and former member of the Securities and Exchange Commission, said HP directors also could have considered a private or public reprimand and financial penalties. “When all this comes out you’ll have directors of other companies saying we would have dealt with it differently,” he said…

At a different company, such offenses might have resulted in a reprimand or financial penalty. But HP tried to renew its reputation as a leader in corporate governance standards after the probe of the 2006 board scandal, in which private investigators hired by a former H-P chairman were accused of using false pretenses to obtain phone records of directors and reporters.

Over the ensuing years many HP employees were dismissed for violating the company’s policies, said people familiar with the matter. In some cases, people were terminated for offenses that would have been dealt with more leniently prior to Hurd’s arrival, one of these people said.”

It sounds to me that Hurd pushed some incredibly strict and inflexible standards while he was CEO at HP, and those standards turned around and bit him in the rear.

I’m all for tough standards and holding people accountable, but as we have found with three-strikes laws and term limits, sometimes there are unanticipated consequences when inflexible standards get put in place. In other words, Mark Hurd is a black-and-white kind of guy and he helped to impose black-and-white standards on Hewlett-Packard and its many employees.

Unfortunately, we live in a world with lots of shades of gray. Hard-nosed, this-is-how-it-is, no wiggle room laws and regulations may sound good in the abstract, but they don’t always work very well in reality when flawed and human real people are involved.

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Unless there is another shoe to drop in this case — and who knows? maybe there is — Mark Hurd got hung on his own petard, as they say. Yes, he has a nice package that he’s taking with him, but he leaves behind a ruined reputation and a sense that maybe, we need to remember that black-and-white standards just don’t work very well in a shades of gray world.

UPDATE No. 6: Now HP shareholders have gotten involved. A shareholder has sued the HP Board claiming that “disclosures surrounding his (Mark Hurd’s) resignation led to a drop” in the price of HP stock.

UPDATE No. 5: From my friend Mark Lacter over at LAObserved.com, a lot of HP employees are happy to see Mark Hurd go, with some referring to him as a “thug” and “Mark Turd.”

UPDATE No. 4: Still more speculation on the REAL reason why Mark Hurd got fired, this time from Gawker-owned website Valleywag. They sketch out some possible scenarios that seem to make make sense given all we know (and given what HP is saying).

UPDATE No. 3: More from the San Jose Mercury News — and they have been all over this story — and columnist Scott Herhold on the vague reasons for Hurd’s departure and a little speculation on the motivations of Jodie Fisher. Writes Herhold:

A piece of this story — maybe not a crucial one — remains a pebble in my shoe. And that is Fisher’s statement when she came forward Sunday.

“I was surprised and saddened that Mark Hurd lost his job over this,” she said in a prepared statement. “That was never my intention.”

The problem with those words is that Fisher, 50, hired Los Angeles attorney Gloria Allred, perhaps the most aggressive attorney on sexual harassment charges in the U.S.

For Fisher to say that she was surprised Hurd lost his job was like saying, “Gee, all I did was release my crocodile into your pool. I’m shocked, shocked he bit off your leg.”

In other words, Jodie Fisher is either naive, or she is — how shall I say it? — about as candid as Baghdad Bob.”

UPDATE No.2: Oracle CEO Larry Ellison has come to the defense of his friend Mark Hurd, saying the HP Board “just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.” According to the San Jose Mercury News:

Ellison also lambasted the board for “cowardly corporate political correctness” when it revealed a sexual harassment allegation against Hurd even though its own investigation determined the claim was unfounded…

Since the board pushed Hurd out, Ellison noted, stockholders have lost “$10 billion … and my guess (is) it’s going to cost them a lot more…

(And) Ellison disputed the expense account allegations against Hurd.

“Mark Hurd, like most other CEOs, does not fill out his own expense reports, so even if errors were made, Mark didn’t make them.”

UPDATE: The latest on all this, including the impact of Hurd’s departure on HP’s stock price, in the 60-Second BizBreak blog in the San Jose Mercury News.


John Hollon is Editor-at-Large at ERE Media and was the founding Editor of TLNT.com. A longtime newspaper, magazine, and business journal editor, John has deep roots in the talent management space. He's the former Editor of Workforce Management magazine and workforce.com, served as Editor of RecruitingDaily, and was Vice President for Content at HR technology firm Checkster. An award-winning journalist, John has written extensively about HR, talent management, leadership, and smart business practices, including for the popular Fistful of Talent blog. Contact him at johnhollon@ere.net, connect with him on LinkedIn, or follow him on Twitter @johnhollon.

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10 Comments on “The Curious Case of Mark Hurd: Would you Fire a CEO Over Expenses?

  1. My money is on the shoe(s) yet to come. Somewhere in the HP headquarters the is a carpet that is straining to hide the rest of the story that has been swept under it. It can’t last forever.

    The rest of the story will come out. People can’t keep anything secret for very long.

    Rick Sturm
    Founder and CEO
    Enterprise Management Associates, Inc.
    Boulder, CO

  2. John,

    You and I are of two entirely different minds on this case. Where you're seeing “black and white doesn't work in a gray world,” I'm seeing, “It's refreshing to see a large corporation enforce their cultural values in such a visible way.”

    Far too often corporate values get thrown out the window when people make the numbers. That doesn't seem to be the case here.

    Thoughts?

    Chris

  3. Chris — While I agree that it IS refreshing to see the CEO held to the same standards as the rank-and-file (and Lord knows that doesn't happen very often), I just question whether the standards are too harsh and don't allow for something less than the death penalty (getting fired).

    Now, maybe there is another shoe to drop that will allow this situation to make more sense (as Rick Sturm's comment indicates), but is this the kind of incident that causes a Fortune 500 company to lose its CEO and see shareholder value take a dive as a result?

    Do you see the infraction here that warrants the death penalty of losing a job? There are many ways that Hurd could have been punished and held accountable without resorting to that. But, does HP policy allow it? If I am a shareholder, I may be wondering about that today.

    Back to you,

    John

  4. There probably is more. It does seem extreme to cost shareholders millions in a golden parachute, and they'll probably use a search firm with a huge new package for someone else etc. for expense reports. I think Rick's 'carpet theory' is correct.

  5. I'm not sure that the case is so “curious,” nor am I sure that the “hoisted by his own petard” is quite the right way to think about it. In a post on the firing by Ben Heineman that appears on the web site of the Atlantic, he writes the following:

    “But for a CEO seeking to lead a company through word and deed–including a commitment to honest accounts, fair dealing and employee adherence to legal and ethical standards—lying to the company itself on a financial issue, even if a relatively small one, violates a standard that cannot be breached.”

    To me a more relevant question is why didn't he pay the questionable expenses out of his own pocket? It's not as if the guy was living paycheck to paycheck. At a minimum, based on what's been reported to date, it appears to be a rather startling case of poor judgment. Assuming that HP's board was working off of real facts (as opposed to rumors), then it seems to me that they acted as a board of directors should act.

    David Janus

  6. If there's such a thing as the corporate double entendre, this has got to be it (from the NYT), interim CEO says: “Disciplined execution has become part of H.P.’s DNA.” They executed, all right.

  7. I have to agree with Chris on this one. While the overall financial impact of things as outlined in what has been made public, the fact that the CEO is in a position of having his ethics questioned is enough for HP's board to take the action that they did. The decision is justified on several fronts:

    1. HP has undertaken a series of actions to address concerns over their corporate ethics after a spying scandal happened under previous leadership. This requires HP to “raise the bar” so to speak on the expectations of their leaders

    2. A CEO is the most visible person in an organization and as such should be a model citizen, held to a standard to which some may feel is unreasonably high. If Hurd had his expenses questioned, what other financial “irregularities” might have been happening under his leadership? The Board has a fiduciary duty protect the interests of the shareholders, and in this case they've done exactly that. While overall market valuation may have taken a dip, this move may have been necessary to preserve hundreds of millions (or even billions) of dollars in shareholder equity in the long run.

    3. Regardless of the specific circumstances, Mr. Hurd demonstrated poor judgment on several fronts including maintaining a questionable relationship with a contractor resulting in a perceived conflict of interest. While all parties deny that the relationship was of a sexual nature, there is a dark cloud hanging over this one.

    If you can't count on senior leadership to exemplify the attributes of a model citizen how can you even begin to hold others lower in the organization to a higher standard?

  8. I've been adding updates to this story (click and go to the bottom) and you should take a look. They are very interesting and continue to add more to this debate over Hurd's departure.

  9. This story is great reading. In addition, any reminder of Bagdhad Bob is awesome:

    Actual Quotes From the Iraqi Information Minister
    (aka 'Baghdad Bob')

    “There are no American infidels in Baghdad. Never!”

    “My feelings – as usual – we will slaughter them all”

    “Our initial assessment is that they will all die”

    “I blame Al-Jazeera – they are marketing for the Americans!”

    “God will roast their stomachs in hell at the hands of Iraqis.”

    'We have destroyed 2 tanks, fighter planes, 2 helicopters and their shovels – We have driven them back.”

    “Surrender or be burned in their tanks.”

    “No I am not scared and neither should you be!”

    “We have them surrounded in their tanks”

    Britain “is not worth an old shoe.”

    Of U.S. troops: “They are most welcome. We will butcher them.”

    “We will welcome them with bullets and shoes.”

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