HP Boss Quits Amid Sexual Harassment Claims

Hewlett-Packard announced the afternoon of 6 Aug. that HP chairman, chief executive officer and president Mark Hurd has decided after consultation with the Board of Directors to resign his positions effective immediately.

Hurd resigned in the face of sexual harassment issues relating to his relationship with a former contractor hired by the Office of the CEO under Hurd’s reign. In a conference call on the matter, Michael Holston, executive vice president and general counsel of HP, said the HP board took exception not simply to Hurd’s “close personal relationship” with the outside contractor but his “pattern” of filing fuzzy expense reports that indicated an “intent to conceal” what was going on.

“It wasn’t the dollar amount,” Holston said, “it was the systematic pattern” of questionable expenses and financial reporting that could be taken as part of Hurd’s attempts to cover his dalliances. “This had to do with integrity and credibility,” Holston added. “This was a painful decision for everyone involved, but a necessary decision,” said Marc Andreessen, director of HP’s board. “Mark’s conduct undermined the standard we expect of our employees.”

Sexual Harassment

Hurd’s decision was made following an investigation by outside legal counsel and the General Counsel’s Office, overseen by the HP Board, of the facts and circumstances surrounding a claim of sexual harassment against Hurd and HP by a former contractor to HP. The investigation determined there was no violation of HP’s sexual harassment policy, but did find violations of HP’s Standards of Business Conduct.

In a statement, Hurd said: “As the investigation progressed, I realised there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career. After a number of discussions with members of the board, I will move aside and the board will search for new leadership. This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time. I want to stress that this in no way reflects on the operating performance or financial integrity of HP.”

Meanwhile, the HP Board has appointed Chief Financial Officer Cathie Lesjak, 51, as CEO on an interim basis. Lesjak is a 24-year veteran of the company who has served as HP’s CFO and as a member of the company’s Executive Council since January 2007. She oversees all company financial matters and will retain her CFO responsibilities during the interim period. During the conference call, Lesjak acknowledged that she does not want the CEO position on a permanent basis.

Thus, Andreessen said a search committee of the Board of Directors has been created, consisting of Marc Andreessen, Lawrence Babbio, Jr., John Hammergren and Joel Hyatt, which will oversee the process for the identification and selection of a new CEO and board chair. HP’s lead independent director, Robert Ryan, will continue in that position.

Andreessen said candidates from both inside and outside the company will be considered. The selection of a new chairman will occur in conjunction with the CEO decision.

In a statement, Ryan said: “The board deliberated extensively on this matter. It recognises the considerable value that Mark has contributed to HP over the past five years in establishing us as a leader in the industry. He has worked tirelessly to improve the value of HP, and we greatly appreciate his efforts. He is leaving this company in the hands of a very talented team of executives. This departure was not related in any way to the company’s operational performance or financial condition, both of which remain strong. The board recognises that this change in leadership is unexpected news for everyone associated with HP, but we have strong leaders driving our businesses, and strong teams of employees driving performance.”
The company immediately began to distance itself from Hurd and move on. “This company is not about any one person,” Andreessen said.

Hurd Didn’t Drive Initiatives

And asked how the company would continue projects Hurd championed, Lesjak said, “Mark was a strong leader, but at the end of the day he didn’t drive the initiatives…” Instead, it was HP’s board and top management team that did so, she said.
Moreover, “The scale, global reach, broad portfolio, financial strength and, very importantly, the depth and talent of the HP team are sustainable advantages that uniquely position the company for the future,” Lesjak said in a statement. “I accept the position of interim CEO with the clear goal to move the company forward in executing HP’s strategy for profitable growth. We have strong market momentum and our ability to execute is irrefutable as demonstrated by our Q3 preliminary results.”
In his statement resigning from the company, Hurd added: “The corporation is exceptionally well-positioned strategically. HP has an extremely talented executive team supported by a dedicated and customer-focused workforce. I expect that the company will continue to be successful in the future.”

Ezra Gottheil, senior analyst at Technology Business Research, said of the Hurd departure: “Following the sudden resignation of CEO and President Mark Hurd on Friday, Hewlett-Packard remains in a position of strength. Under Hurd’s guidance, the company controlled costs through the recession, allowing it to maintain operating margins of at least 8 percent throughout three consecutive quarters (1Q09-3Q09) of revenues that decreased year-to-year. These results were particularly impressive considering HP was digesting the $13.9 billion acquisition of EDS, a merger that gives HP a strong services arm. HP also overcame its historical reserve in consumer marketing with the very successful ‘PC is Personal Again’ campaign. Its increasing global PC market share has helped the company weather recovery-generated component shortages.”