Could This Be the Worst Board in History?
Ever see the movie Groundhog Day? Bill Murray's character keeps reliving the same day, making the same mistakes over and over again, until he finally gets it right. It's hilarious.
Well, HP's board of directors seems to be stuck in the same situation. The only difference is this is real life. And it really isn't funny, even though noted writer James B. Stewart called HP "a laughingstock in Silicon Valley" in a recent N.Y. Times article.
When legendary venture capitalist and former HP director Tom Perkins says, "[HP] has got to be the worst board in the history of business," he's definitely not kidding. For HP's shareholders and employees, this story's definitely more of a tragedy than a comedy.
If you think I'm being overly dramatic, think again. Stewart and Perkins may both be right. Sure, HP's board includes a host of accomplished luminaries like entrepreneur and VC Marc Andreessen. That's why the board's chronic failure to hire and keep a competent CEO has been such a mystery. Until now.
Explaining the Unexplainable
Stewart's article goes a long way to explaining the unexplainable - how a bunch of really smart and successful people could together act so incompetently:
Interviews with several current and former directors and people close to them involved in the search that resulted in the hiring of [CEO Leo] Apotheker reveal a board that, while composed of many accomplished individuals, as a group was rife with animosities, suspicion, distrust, personal ambitions and jockeying for power that rendered it nearly dysfunctional.
Nearly dysfunctional? If you Google the word dysfunctional, I bet you'll find a group photo of HP's board.
As the story goes, two thirds of HP's board voted for Apotheker without even meeting the guy. One board member admits this was highly unusual, but offers this as an excuse, "we were just too exhausted from all the infighting."
The infighting in question was about whether or not to fire the previous CEO, Mark Hurd - who "pulled off one of the great rescue missions in American corporate history, refocusing the strife-ridden company and leading it to five years of revenue gains and a stock that soared 130 percent," according to Stewart, and I completely agree.
Of course, then came the sex scandal, albeit the most boring sex scandal in history since there was no sex involved. And although the accuser's claim of harassment was found to be baseless, the board fired Hurd anyway, an act that Oracle CEO Larry Ellison called "the worst personnel decision since the idiots on the Apple board fired Steve Jobs."
The board was apparently so fractured over that debacle that it couldn't pull itself together to do an effective job of hiring Hurd's replacement. That's how HP ended up with Apotheker - who one director called "the best of a very unattractive group" - despite the fact that he had just been fired by SAP for reasons many directors can't quite recall.
You just can't make this stuff up.
It's Deja Vu All Over Again
We all know what happened next: Apotheker made a real mess of things, launching WebOS and an iPad-killer tablet and then pulling the plug a few months later. Then he announced the company may be getting out of the hardware business to become a second rate software firm.
Let's recap: The board hired Carly Fiorina, then fired Fiorina; hired Hurd, then fired Hurd; hired Apotheker, then fired Apotheker. But wait. Just before firing the guy, the board did approve his loony strategy shift. Chairman Ray Lane even went on the road with Apotheker to explain to investors why they just didn't get it.
But the board didn't just fire Apotheker and begin a search to right its horrendous wrong. Nope. Instead, it's deja vu all over again when the board turns around and appoints one of its own directors the new CEO, pretty much on the spot.
That, of course, would be Meg Whitman, the former eBay CEO with absolutely no enterprise, IT, hardware, software, complex supply chain, or turnaround experience. And don't even think for a minute that HP isn't a turnaround. It wasn't before the board fired Hurd, hired Apotheker, and approved his crazy remake of the company. But it sure as heck is a turnaround now.
And what does Lane - now executive chairman, which means he has even more power - have to say about all that? According to the Wall Street Journal's live blog of the HP conference call about the whole Apotheker / Whitman affair, Lane said that Whitman was the obvious choice from the beginning of the process.
Um, what process? Wasn't he just selling the new strategy with Apotheker a couple of weeks ago?
Lane is also apparently sick of criticisms of the HP board, according to the report, "This was not the board that fired Mark Hurd," he said.
First of all, if my math is right, it's exactly two thirds of the board that fired Mark Hurd. Also, just shy of half the current board voted for Apotheker without ever having met him. I'll tell you what Lane should be sick of: the $50 billion of market cap the board's actions have cost shareholders.
Boards Like This Give Corporate America a Bad Name
So, in light of all these revelations, here's what I'm thinking:
I'm always hearing people complain about corporate America, how all the executives and directors are making megabucks and employees get the shaft. How all the big banks and institutional investors have all the clout and individual investors get the short end of the stick.
While I've written my fair share about the dysfunctions of our system of corporate governance and how CEO pay and exit packages are, in some cases, out of control, I've mostly been a staunch supporter of corporate America and free market capitalism. I refuse to give voice to those who claim the whole system stinks and want to throw the baby out with the dirty bathwater.
After all, I often say, everyone make mistakes. Well, here's the thing.
The job of a board of directors - its fiduciary duty - is to act in the interests of the company and do its best to make good decisions. Nowhere is that duty more important than in choosing the company's CEO.
So, when the board of one of America's biggest public companies consistently demonstrates its ineptitude at its primary function - and arrogant in its denial of that ineptitude - I can sort of see where all those naysayers are coming from.
Never mind that HP has become the laughing stock of Silicon Valley, or the effect all this has had on the company's 300,000+ employees and who knows how many shareholders. It's boards like this that give corporate America a bad name. And for America, in its current economic state, the timing couldn't be worse.
It is tragic, after all.
Image tiarescott via Flickr
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