Hewlett-Packard, for example. It’s hard to imagine how, in the space of a decade, a group of executives and directors managed to take one of the world’s most respected and profitable companies, the very heart and soul of Silicon Valley’s innovation culture, and turn it into a real-life corporate soap opera, complete with sex, revenge, betrayal, behind-the-scenes back-stabbing, press leaks, illegal snooping and dynastic intrigue.
A decade ago, when HP’s hot new chief executive, Carly Fiorina, announced the purchase of Compaq Computer, Hewlett’s shares traded at $23. Today, after Internet growth literally exploded around the world and other tech firms’ values have soared, HP shares sell for $22, and the company has become a business school case study in inept corporate governance.
In just the past five months, HP managed to destroy $60 billion in market value for long-term shareholders. Nothing the Department of Energy has done regarding solar loan guarantees even comes close to that.
HP’s troubles began when heirs to founders Bill Hewlett and Dave Packard, along with longtime board members, started to wonder whether Fiorina’s management style was undermining the company’s famously laid-back and innovative culture. A nasty proxy battle for control of the company led to Fiorina’s departure but failed to heal the division on the board. Continuing squabbles and press leaks led to an ill-fated investigation involving purloined phone records of directors and journalists and the noisy departure of several board members.
The new chief executive, Mark Hurd, survived that scandal, but not the one involving the former soft-porn star and reality TV contestant whom he had hired as a corporate event planner. While allowing Hurd to walk away with a $35 million severance package, the board somehow failed to negotiate a noncompete agreement that would have prevented him from taking his inside knowledge to arch-rival Oracle, where he is now a top executive.
After a hurried search, the beleaguered board named Leo Apothekar as its newest chief executive, a Frenchman who had been eased out of the top job at the German software giant SAP and had no experience in the computer hardware business that provides HP with the majority of its sales and profits. This summer, Apothekar—with the board’s backing—announced a grand new strategy for HP that included moving out of low-margin personal computers, scrapping development of a tablet to compete with Apple’s iPad and buying for an inflated price a British software company nobody had ever heard of.
The reaction from customers, shareholders and employees was so negative that the company tried to walk it back, but not before directors had begun to lose confidence in their insular and sometimes arrogant chief executive.