H-P Board to Hurd: Don't Reveal Our Secrets!

Last Updated Sep 8, 2010 6:19 PM EDT

Almost as if to prove every negative thing that has been said about the H-P board, the company filed a panicky lawsuit yesterday. The face-saving gesture -- which sadly reads more like a petulant act -- doesn't seem to have much consequence beyond threatening places where the Oracle (ORCL) and Hewlett-Packard (HPQ) cooperate. A fed up Larry Ellison made this statement yesterday: "The HP board is making it virtually impossible for Oracle and HP to continue to cooperate and work together in the IT marketplace," Ellison said.

What the suit does do is draw attention back to the curious behavior of the H-P board over the last decade. This is, after all, a famously fractious board filled with sharp elbows and brittle egos. From the outside, we don't know much about who is running H-P at the moment. Christie Lesjak is the interim CEO and Marc Andreessen did the talking points on Hurd's departure because he'll run the search for a new leader. But who pulled the trigger on this lawsuit and why?

If we ever learn the answer, it will most likely be long after we care. The suit puts the board in the position of acting like an angry teenage girl. She breaks up with her boyfriend because she thinks he's being a creep. Then, when she sees him dating a tough chick from the wrong side of town, she flies into a fit of rage. Did she really think that once she broke up with him he would explode into a million little pieces and disappear?

Had H-P's board really been the straight-laced, cloistered type, we might have some sympathy for their shock and bewilderment. But this is the successor to the board that destroyed itself over the pre-texting scandal five years ago when an investigation into corporate leaks -- itself an act of self-defeating petulance -- metastasized into an invasion of privacy. As Joe Nocera pointed out a few weeks ago , Hurd's role in the pre-texting scandal was underplayed because of the bitter enmity between former board member Tom Perkins and the outgoing chair, Patricia Dunn.

So the H-P board has become the prime example of what happens when a board takes control without having determined who is in charge and how they're going to act. At least, that's the way HBR's Justin Fox sees it:

There's been a lot of talk over the past couple of decades about giving outside board members more independence and more power, so that they could rein in those out-of-control CEOs. There's been some significant legislation along those lines, too. What there hasn't been is a lot of thought about where exactly we want to end up[...].

HP's current situation would seem to be the logical conclusion of the put-directors-in-charge movement. [...] HP has become a company where the board reigns supreme, and changes its mind a lot.

Remember, this is Hurd's own hand-picked board that supposedly lost confidence in the CEO when he made a separate, pre-emptive settlement in a sexual harassment case. What never really got covered in the story wasn't whether he had an inappropriate relationship with Jodie Fisher but what her above-board job entailed all along. Throughout the scandal Fisher was described as a marketing contractor. But the details of her job were narrated this way by the AP:
Fisher, 50, is an actress and businesswoman who helped HP organize networking events for customers and introduced executives to each other. [...] Fisher worked more than a dozen events in her two years with HP, the bulk of which occurred in her first year, according to the person with knowledge of the investigation. She was paid up to $5,000 per event. Her work dwindled in the second year because HP's marketing budget was cut [....]
How many Geishas were on the H-P payroll, do you suppose? And for how long was this a regular business practice at H-P to throw parties where charming and attractive women were employed as greeters walking customers around the room, keeping the conversation going and queuing them up for Hurd as he made his way through the room?

I'm sure there was nothing out of line here. In fact, you have to admire the fact that the marketing contractors were like Fisher, women in their 50s -- young enough to be exciting, especially if they looked like Fisher; but not so young as to be insulting -- instead of, well, let's not go there.

Maybe this is some sort of indication that H-P board has some taste and their claims to decorum are legitimate. What the lawsuit does show is that board wasn't very prepared for the fallout from their own decision-making. It doesn't seem that anyone ran through some worst-case scenarios where Hurd wound up at Dell, Oracle or even -- yes it's a stretch but we're playing counterfactual here -- IBM.

What H-P worries about is what's locked in Mark Hurd's head. But if that was so valuable to them, why did they lose confidence in him? What would have been the board's position if Hurd had teamed up with a big private equity firm and used his same level of inside knowledge to acquire companies that would essential to H-P's strategic goals?

Or, perhaps, they're upset that they paid him $40 million to quietly disappear thinking they had put such a large hole in his reputation that no one would touch him.

The lawsuit doesn't say much more than express pique that Hurd didn't tell H-P he was taking a job before it was announced in the press. The separation agreement attached as an exhibit makes no provision for clawing back Hurd's princely severance settlement now that he has gainful employment. Though Oracle's own filings show that Hurd is taking a big cut in pay to get back in the game. His base salary is $950,000 with the opportunity to earn $5 to $10 million more in bonuses.

In a perfect world, Hurd's severance would be forfeited by taking the job with Oracle, leaving Hurd looking to Ellison to make him whole or set compensation and goals that would replace the missing fortune if Hurd performed. But H-P is far from perfect.

Image via Sam's View blog