HP CEO Mark Hurd Resigns Following Harassment Investigation

Aug 7th, 2010 | By technologynews | Category: Technology

Hewlett-Packard announced the afternoon of Aug. 6 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.”

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 realized 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 recognizes 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 recognizes 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.

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.”

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