Costly fall from grace of HP's ethical house cleaner

News of Mark Hurd’s resignation from Hewlett Packard wiped $10m off the value of the company

THIS PAST week’s resignation of Hewlett Packard chief executive and chairman Mark Hurd was a shocker, for many reasons.

For the company itself and for shareholders, it is certainly a catastrophic situation, as evidenced by the fact that news of his resignation wiped $10 billion off the value of the company.

No wonder: Hurd is the chief executive who turned around HP’s lacklustre fortunes when he stepped into the head role in 2005.

At the time, following the departure of Carly Fiorina, the company was a sprawling mess, full of multiple divisions and subdivisions and a confusing product line. In addition, the company was trying to absorb its recent massive purchase of computer maker Compaq.

And, embarrassingly, the company, once famed for the ethical “HP way” business approach of its two founders, Bill Hewlett and David Packard, was suffering from a series of boardroom scandals that involved deeply questionable (and illegal) spying on some board members and journalists, where hired detectives had obtained phone call and e-mail data among other activities.

The scandal even drew US congressional attention, with Hurd himself summoned before an investigative congressional committee.

Hurd, a business disciplinarian with a brutal eye for cutting costs and streamlining businesses, came in, slashed 15,000 jobs, tightened divisions and research, and is largely credited with putting HP on to a roll that saw it surpass IBM in the technology league tables in the past year. The shareholders have loved him.

So how in the world did this admired business figure fall from grace? Good question. The exact circumstances are murky, to say the least, though keeping bloggers and gossip sites busy.

There seems to have been an accusation of sexual harassment from a woman hired as a contractor by HP, who worked closely with Hurd on some projects. That she has a background in acting in a few racy films has added, shall we say, interest.

However, the board investigated the charges and dismissed them, and a settlement was made out of court between Hurd and the woman. The woman states there was no relationship between them, and the exact nature of her charges also aren’t clear. But there were numerous expense claims made by Hurd relating to the woman that the board found unacceptable.These expenses are said to be the reason behind the resignation.

All of this sits ill with the reputation of the man who came in as the austere, ethical housecleaner at HP, the man whose own arrival at the company was framed by senior-level corporate scandal.

Ironically, it was Hurd who brought in a new senior management position of chief ethics officer at HP, in the wake of the boardroom scandals.

In his 2006 congressional testimony, Hurd acknowledged that if Hewlett and Packard were alive today, they would have been “appalled” and “embarrassed” by the scandal.

Hurd said: “What is really hardest for me to explain is this: HP is a company that has consistently earned recognition for our adherence to standards of ethics, privacy and corporate responsibility. And yet these practices that we have taken such pride in have recently been violated by people inside the company and by people outside the company whom we hired.”

He apologised, and concluded with a pledge “that HP will take whatever steps necessary to make sure nothing like this ever happens again”.

Later that same year, I interviewed Hurd on his visit to Ireland – the first public interview he had done since the earlier scandals.

He told me he had asked HP employees to “stay focused” as the scandals emerged, though he added he didn’t feel the boardroom issues affected jobs or customers.

I asked him about the values of Hewlett and Packard and whether they still mattered at HP, given all that had been happening and the damage to HP’s reputation. He said their legacy was important to the company, and to him.

“The values of the company are fairly timeless. I like them. They’re ones we embrace. But make no doubt about it – when things weren’t right at HP, [Hewlett and Packard] fixed them.

“Bill and David got things done. It’s not that tough things don’t get done, but that they get done in the right way.”

All the right statements. But what ironic reading this makes now.