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Silicon Valley's memory seems curiously short. Mark Hurd recently resigned from his CEO spot at Hewlett-Packard (NYSE: HPQ ) amid allegations of inappropriate and unethical conduct. With startling speed, his friend Larry Ellison at Oracle (Nasdaq: ORCL ) hooked him up with a new gig. Hurd's ascension to the co-president spot at Oracle has already sparked lawsuit threats from his former employer. Funny, he doesn't look like Helen of Troy to me.
The swiftness with which disgraced executives like Hurd easily land new, high-paying jobs just makes shareholder-funded golden parachutes seem even more inane. While there may be no rest for the wicked, it seems they don't face any forced retirement, either.
Friends in high places
Hurd's departure from Hewlett-Packard resulted from expense-report inaccuracies and a self-admitted "ethical lapse" at HP.
Regardless, Hurd still received a severance package reportedly worth around $40 million, all told. Now, even before the metaphorical ink is dry on his scandal-laden headlines, he's landing at Oracle. Thoughtful and prudent investors ought to be outraged at the audacity of all this.
Oracle's Ellison emailed a vehement defense of Hurd, accusing Hewlett-Packard's board of "the worst personnel decision since the idiots on the Apple (Nasdaq: AAPL ) Board fired Steve Jobs many years ago." Apparently Ellison feels really, really supportive of his friend's talents, given Hurd's brand-new role at Oracle. But to me, Ellison's decision feels too much like corporate America closing ranks to protect one of its own.
Incidentally, Ellison recently topped a Wall Street Journal list as the highest-paid CEO of the decade. Therefore, it's no surprise Hurd will likely make out similarly well in his new position. He'll receive $950,000 annually, with the possibility of a bonus between $5 million and $10 million for fiscal 2011.
Hewlett-Packard has fired back with a lawsuit over Hurd's knowledge of confidential information. Oracle's rebuttal that this is a "vindictive" move on HP's part is turning this whole situation into a sideshow. (OK, maybe Hurd's not Helen of Troy. Maybe he's the Trojan Horse.)
The Hurd mentality
With a prestigious new job and a cushy salary to match, why does Hurd even need his lavish goodbye package from Hewlett-Packard? His fat payday already seemed like salt in shareholders' wounds, but now the sting has intensified.
Advocates of golden parachutes often argue that these parting gifts protect CEOs from financial ruin if things go wrong, and therefore give them the security to take necessary risks in their jobs. Maybe that makes sense in theory, but in reality, CEOs rarely end up jobless, broke, and out in the cold, even if they exhibited poor conduct or work performance.
To cite just a few infamous examples, Home Depot's (NYSE: HD ) Bob Nardelli ended up at Chrysler, despite great controversy about performance during his tenure as the retailer's CEO. Stan O'Neal ended up on the board at Alcoa (NYSE: AA ) shortly after his departure as head of Merrill Lynch, even though his disastrous bet on subprime mortgages cost Merrill billions in write-offs, and eventually its independence as well. For all intents and purposes, these folks failed at a job, collected lucrative golden parachutes, and then quickly secured new gigs elsewhere.
Such outcomes aren't uncommon; it's far more unusual to see a chief executive forgo a golden parachute, or a company ban them. PNC Financial (NYSE: PNC ) shareholders did recently passed an advisory vote to trim the size of golden parachutes. Perhaps more stockholders are finally realizing just how much this practice insults and injures their investments.
Do shame or disgrace ever register in corporate America? I'm all for forgiveness, but the swiftness with which new employers have embraced disastrous chieftains like Hurd just seems like a lack of decent judgment. Too many companies seem to assume that if executives are "talented" or "respected" enough, they're exempt from regular rules of conduct. That's bad news for investors and our economy alike.
However highly Larry Ellison thinks of Mark Hurd, Oracle shareholders may not be getting a very good deal when all is said and done.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.