Weekly Walk of Shame: Mark Hurd

This Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled up this week. If something's bugging you, too, go ahead and unload in the comments section below.

Today's subject: Late Friday, Hewlett-Packard's (NYSE: HPQ  ) board of directors announced that CEO Mark Hurd had stepped aside. The man who led a renaissance for the computer maker following Carly Fiorina's disastrous reign succumbed to a scandal allegedly involving illicit payments to a consultant.

But the situation may actually be even worse than that. According to an HP press release, the consultant in question levied charges of sexual harassment against Hurd. The company later disputed that description, but admitted that Hurd violated HP's conduct policy.

In a subsequent conference call with analysts, HP general counsel Michael Holston added color to the story, saying that the contractor received compensation or expense reimbursements "where there was not a legitimate business purpose."

Put bluntly, Hurd approved payments for reasons having nothing to do with creating value for shareholders. Do business offenses get any more serious than that? I can't see how.

Why you should be indignant: To be fair, MSNBC reports that Hurd wasn't involved in a sexual affair, and that the payments amounted to less than $20,000 in total. Still, Hurd betrayed shareholders, plain and simple.

You get the sense he knows it, too. In a statement, Hurd says he didn't "live up to the standards and principles or trust, respect, and integrity" he expected from employees he managed at HP. 

Nowhere does he mention sex, nor should he have. To do so would be to attempt the worst sort of Jedi mind trick. Mark Hurd isn't Bill Clinton. He's Angelo Mozilo without the tan. 

Too harsh a comparison, you say? Hurd's $20,000 misappropriation (allegedly executed by his assistant) is admittedly nothing compared to the $44 million Mozilo got when Bank of America (NYSE: BAC  ) bailed out ... I mean bought ... Countrywide. Each man stuck shareholders with a bill they didn't deserve. Is Hurd really so different?

I'm no better than Hurd, and I'm not about to sit in judgment of him or anyone else. But in approving illicit payments -- tacitly or otherwise -- Hurd failed as a steward of shareholders' money. Yet he offers no apology. Why aren't we angrier about this?

"Annoyed" is no longer good enough. We need you-wouldn't-like-me-when-I'm-angry rage, and lots of it, right now. Until shareholders get motivated enough to fire board members via proxy campaigns, executives will continue to treat corporate capital like a piggy bank.

What now? My friend and colleague Rick Munarriz thinks Hurd will be fine. In the wake of this scandal, he believes that another company will land a talented leader for what amounts to peanuts.

He's probably right. Hurd has a track record, and plenty of companies need strong leadership. Here at the Fool, we've wondered aloud whether Goldman Sachs (NYSE: GS  ) or Microsoft (Nasdaq: MSFT  ) would benefit from a change at the top. There's also Clearwire (Nasdaq: CLWR  ) , which is suffering from an identity crisis, and Research In Motion (Nasdaq: RIMM  ) , which is lagging in smartphone innovation. Both could benefit from a CEO transplant.

Yet the likely demand for Hurd's services doesn't change the simple truth that he mistreated not only a contractor and HP's employees, but also the owners of his company.

Shareholders deserve an apology.

Motley Fool Options has recommended a diagonal call position in Microsoft, which is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He had no positions in the stocks mentioned at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy doesn't know what it would do for a Klondike Bar, but thanks for asking.


Read/Post Comments (6) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 12, 2010, at 1:25 PM, spielermann wrote:

    Why are you not up in arms of his behavior much earlier than this? Check the SEC filings. It is obvious he was never concerned about shareholder wealth creation as his ultimate goal. Corporate Governace and shareholder protection must improve! Look how many executive perks he received. Grossing up his salary almost $75K for meals for him and his family. That is close to $250K in meals for him and his family, paid for by shareholders (who spends like that???). That is just one of the crimes... read the filings for more... Raises and pay increases during recessions for executives, lowest employee morale ever (2/3 of employees would leave for similar job and similar pay)... no shareholder wealth creation at all since 2008? What has he done in the last 2.5 years- not perform as well as IBM... Not to mention he came to HP saying would have a succession plan- yet in 5 years never put one in place? Only top hires from outside the company? Acquisitions of "old" worn out companies? Say, how did that Mercury Interactive acquistition actually do? Only 2% real organic growth in his tenure? 4 out of 5 business units revenues and profits down more than 15% from the 2008 peak? How is he held up as a great CEO? How much of his frist 2.5 year success was all due to Carly's strategy finally working, and his fear based management working short-term (long-term not sustainable)?? I contend the facts were there a lot earlier than his resignation...

  • Report this Comment On August 12, 2010, at 1:26 PM, teryflwr4u wrote:

    This entire situation "smells" of deceit. The sexual harrassment allegations have been proven false. Mr. Hurd's executive assistant processed his expense report. $20,000 is nothing for the company to absorb. There is much more here than meets the eye. Mr Hurd doubled the share value for HP after Carly Fiorina left the company in a mess. Could this really be leading to something political that involves Carly Fiorina now that she is running for the office of Ca. Senator? Who knows? Deceit runs deep in these companies. The HP Board of Directors certainly over reacted to the entire situation. And why, because they feared they would have to deal with the media delving into the allegation. What a bunch of "Woos's"

  • Report this Comment On August 12, 2010, at 3:38 PM, lution wrote:

    Actually, the bigger indignation should be the amount of money the company is going to have to pay him in cash & options as he's walking out the door. So the man steals from the company and he's still entitled to how many millions??? Where can I sign up. Get real board. If its bad enough for him to have to resign, its also time to get those clawbacks into these @!##$@ parachutes that are more like free money for screwing up. Too bad the shareholders and other employees can't get the same deal.

  • Report this Comment On August 12, 2010, at 4:36 PM, miteycasey wrote:

    Hurd approved payments for reasons having nothing to do with creating value for shareholders. Do business offenses get any more serious than that? I can't see how.

    Seriously??? Just look how some CEOs are paid and that's much more serious.

  • Report this Comment On August 12, 2010, at 6:00 PM, spielermann wrote:

    C- executive contracts are so legally established as to nearly make it impossible for a company to remove the executive for cause. Another problem with governance these days. I think what really played out is that the Board mistrusted Hurd since he got off clean on the spy-gate situation even though he was more complicit in its activities- and the board was tired of his terror reign and bully approach to management- specially when he took over the chairman position. This provided the cause, and why it didn't go down cleaner- and why Hurd said in his statement it became apparent that the working relationship was compromised and not in HPs long-term interest- more to the story for sure, which I'm sure the lawsuits will bring out. Board needs to go too... too many still there from the 2006 spygate.

  • Report this Comment On August 12, 2010, at 10:01 PM, 2ersei wrote:

    The biggest mistake the Board could have done.

    We shareholders will pay the price. Nothing but a group of hypocrites. When Bill Clinton committed perjury to protect himself and "this woman", he was excused on account that it was just on account of a romance.

    Hurd was the best CEO since Messrs. Hewlett and Packard. His acquisitions show showed wise planning and a solid vision.

    I own many shares of HP, acquired over 35 years and have followed its known details and analysis of many reliable analysts daily, knowing quite a bit about HP. I myself happen to be a security analyst and economist, if this means anything here.

    Just wonder how many of these commentators before me own HP shares.

    On the next proxy, I shall reject each and all directors.

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