Oracle's Ellison: HP's Board Made Worst Mistake Since Apple Fired Jobs

Last Updated Aug 10, 2010 12:27 PM EDT

HP CEO Mark HurdLast Friday, PG-Rated Silicon Valley was rocked by what, on the surface, promised to be an R-Rated scandal. Mark Hurd, CEO of HP and the man credited with waking up the sleeping IT giant, suddenly resigned amid charges of sexual harassment by a contractor and "violating the company's standards of business conduct" by its board of directors.

The story had scandal written all over it because it included, 1) a sexual harassment charge by an unnamed "marketing contractor" the company had hired for corporate events, and 2) expense reports that were ostensibly falsified to hide some sort of relationship between Hurd - a married man - and the contractor.

But what appeared to be a juicy scandal about a CEO and a mistress is now transforming, right before our eyes, into a corporate governance train-wreck about a board of directors that at best, exercised poor judgment that will harm HP and its shareholders far worse than anything Hurd may have done, and, at worst, is chronically dysfunctional and needs to be overhauled.

I have to admit, there were holes in the story right from the beginning. An independent investigation overseen by the board found the harassment claim to be baseless. So what does the board do? It ousts its brilliant, charismatic CEO who turned around the company because he fudged some expense reports? It just didn't pass the smell test. And folks close to Hurd disputed most of the board's claims.

Then the contractor, represented by infamous attorney to "women who happen to be wronged by wealthy men" Gloria Allred, says in a statement that she and Hurd didn't have a sexual relationship. Well, then what the heck was Hurd covering up? The woman - 50 year-old actress and single mom Jodie Fisher - then comes forward and says she never meant for Hurd to lose his job. Uh-huh.

At this point, my mind is reeling from all the gaps in the story that just don't seem to make sense -- until Oracle CEO Larry Ellison jumps into the fray. Ellison, who isn't shy about his opinion and doesn't suffer fools, sent an email to the New York Times stating the following:
The H-P Board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadn't come back and saved them. H-P had a long list of failed CEOs until they hired Mark who has spent the last five years doing a brilliant job reviving H-P to its former greatness.

In losing Mark Hurd, the H-P board failed to act in the best interest of H-P's employees, shareholders, customers and partners.
Ellison and other Times sources present an entirely different view of what really happened, a view that actually makes sense to me. According to Ellison, after the board's investigation cleared Hurd of the sexual harassment claim, it still, for reasons beyond me, began debating whether to disclose the charge.

Initially split 6 to 4 on the decision, the board finally listened to, of all things, the advice of a PR firm over Hurd's strong objection and decided to make the unsupported charges public. Apparently, that was a show-stopper for Hurd, leaving only one way to go forward. Hurd would have to go. And here we are.

Here's the full text of Ellison's email.

What do I think? I think the board screwed up big-time. In an attempt to avoid a media firestorm by disclosing unsupported claims, it lost a great CEO and still ended up with a media firestorm. I think it exercised poor judgment and what Ellison calls "cowardly corporate political correctness," harming HP and its shareholders in a way that makes anything Hurd may have done seem trivial.

So, what can we conclude from all this? Two things:
  1. HP's board has now royally screwed up three times over the past decade. First, it hired the wrong CEO for the job, Carly Fiorina. Many fault Fiorina for failing to turn HP around, but the board wanted a rock-star CEO and that's what it got. Then the chairman who ousted Fiorina, Patricia Dunn, tried to plug media leaks by spying on the board and was herself forced to resign. Now this.
  2. There's something chronically wrong with HP's board. While I don't expect institutional shareholders like Vanguard, FMR, and the like to do anything different from their usual status quo - meaning nothing- I still have a feeling that this is not over. Ellison didn't send that email just to help his friend; he sent it because he's outraged. And I expect others with a stake in the game will be outraged as well.
Image of Mark Hurd Courtesy HP; Image of Larry Ellison CC 2.0 Via Flickr, Courtesy Colin McDonald

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