mriddick
08-10-2010, 07:59 AM
Let me get this straight, the guy is caught lying, stealing and fudging expense reports to the tune of millions and his punishment is 28+ million?
Another corporate scandal, another CEO ousted and another eye-popping, multimillion-dollar severance package.
News that former Hewlett-Packard Chairman and Chief Executive Mark Hurd will get severance payments worth an estimated $28 million despite being ousted in a scandal revives a question asked after nearly every outbreak of corporate misfeasance: Why?
A rank-and-file employee let go for fudging expense accounts or otherwise violating company policy likely would be given time to clean out the desk and little more. But senior executives like Hurd play by a different set of rules, often hammered out years earlier by expensive lawyers.
“Exit packages are often negotiated on an executive's entry into the organization, at a time when he or she is still very much in a position of power as the leading candidate for the job,” said Richard Coughlan, associate professor of management at the University of Richmond's Robins School of Business.
“At that time, the compensation committee of the board of directors is probably thinking that there is little or no chance of things going south, so it might be willing to be more generous in that section of the contract," he said. “Unless the contract has been worded very carefully, the company is forced to honor the package that had been agreed to up front.”
Hurd resigned unexpectedly Friday after a company investigation of a sexual harassment claim found that he filed inaccurate expense reports to cover up what was described as a "close personal relationship" with a company contractor. Over the weekend he settled the harassment charges brought by the contractor, actress Jodie Fisher, who helped the company with marketing events from 2007 to 2009.
HP's general counsel said Hurd's actions showed a "profound lack of judgment." Yet Hurd will get a $12.2 million severance payment plus nearly 350,000 shares of HP stock worth about $16 million at Friday's closing price, according to a company filing. The company also extended the deadline for exercising options to buy up to 775,000 HP shares.
Another corporate scandal, another CEO ousted and another eye-popping, multimillion-dollar severance package.
News that former Hewlett-Packard Chairman and Chief Executive Mark Hurd will get severance payments worth an estimated $28 million despite being ousted in a scandal revives a question asked after nearly every outbreak of corporate misfeasance: Why?
A rank-and-file employee let go for fudging expense accounts or otherwise violating company policy likely would be given time to clean out the desk and little more. But senior executives like Hurd play by a different set of rules, often hammered out years earlier by expensive lawyers.
“Exit packages are often negotiated on an executive's entry into the organization, at a time when he or she is still very much in a position of power as the leading candidate for the job,” said Richard Coughlan, associate professor of management at the University of Richmond's Robins School of Business.
“At that time, the compensation committee of the board of directors is probably thinking that there is little or no chance of things going south, so it might be willing to be more generous in that section of the contract," he said. “Unless the contract has been worded very carefully, the company is forced to honor the package that had been agreed to up front.”
Hurd resigned unexpectedly Friday after a company investigation of a sexual harassment claim found that he filed inaccurate expense reports to cover up what was described as a "close personal relationship" with a company contractor. Over the weekend he settled the harassment charges brought by the contractor, actress Jodie Fisher, who helped the company with marketing events from 2007 to 2009.
HP's general counsel said Hurd's actions showed a "profound lack of judgment." Yet Hurd will get a $12.2 million severance payment plus nearly 350,000 shares of HP stock worth about $16 million at Friday's closing price, according to a company filing. The company also extended the deadline for exercising options to buy up to 775,000 HP shares.