Mark V. Hurd, who takes over tomorrow as chief executive of troubled computer and printer maker Hewlett-Packard Co., is widely viewed as the antithesis of the celebrity chief executive, a nuts-and-bolts manager with little interest in grabbing headlines for himself.
But judging by his new employment agreement, HP's board appears to view Hurd as a superstar at least on par with the firm's formerly highflying chief executive, Carly Fiorina. The board forced Fiorina out in February for not fixing the company as quickly as it wanted.
Some of Mark V. Hurd's pay package is tied to 2005 and '06 performance targets deemed already achieved.
(David Kohl -- AP)
Highlights of Mark V. Hurd's employment agreement with Hewlett-Packard:
Signing bonus: $2 million.
Relocation benefit: $2.75 million plus a mortgage interest subsidy for four years and temporary housing for one year.
Stock grants: 1.15 million options valued by HP at $6.9 million and 400,000 restricted shares valued at $8 million.
According to the employment agreement, Hurd will receive cash, stock and perks worth at least $20 million for simply walking in the door at HP's Palo Alto, Calif., headquarters.
Paul Hodgson, senior analyst at the Corporate Library, a research organization, called Hurd's deal a prime example of the kind of "golden hello" package now commonly handed out by large public companies.
"This is exactly the same kind of contract they made for Carly when she started, and we saw what the result of that was," Hodgson said. "Hurd is getting so much up front that is absolutely unrelated to his performance."
Hurd's package includes a $2 million signing bonus, a $2.75 million cash "relocation allowance," 1.15 million stock options valued by the company at $6.9 million and 400,000 restricted HP shares worth about $8 million.
In addition to the relocation allowance, Hurd will also receive free housing for a year and a four-year "mortgage interest subsidy." There will also be "no limit on the weight of household goods" he chooses to ship to California, according to the agreement.
In addition, the contract calls for HP to reimburse Hurd for up to a 20 percent decline in the value of 850,184 shares he owns in the firm he is leaving behind, Dayton, Ohio-based NCR Corp.
In addition to the signing money, Hurd's contract calls for an annual salary of $1.4 million, an annual bonus of at least $2.8 million and as much as $8.4 million, and long-term incentive payments of between $4.2 million and $12.6 million per year. HP spokeswoman Monica Sarkar said the long-term incentive payments are not guaranteed.
In the employment agreement, HP said 450,000 of the stock options, valued at $2.7 million, and the 400,000 restricted shares were awarded "to make up for compensation forfeited from" Hurd's previous employer. HP spokeswoman Sarkar said the amounts were based on what Hurd was "leaving on the table" at NCR.
NCR spokesman Jeff Dafler declined to say how much Hurd was giving up by leaving but said the company would soon make a regulatory filing detailing the terms of Hurd's departure.
In a news conference yesterday introducing the new chief executive, HP Chairman Patricia C. Dunn said Hurd "became the unanimous choice of our board because of his strong execution skills, his proven ability to lead top-performing teams and his track record of creating shareholder value."
Dunn added, "Although NCR is smaller than HP, it is a complex global organization with multiple business segments, and there Mark built a strong leadership team, bolstered the position of NCR's product lines and improved operating efficiencies."
Lucian Bebchuk, a Harvard Law School professor and co-author of the recent book "Pay Without Performance: The Unfulfilled Promise of Executive Compensation," criticized Hurd's agreement with HP for being front-loaded with cash and including provisions under which certain performance targets for 2005 and 2006 will be deemed as already achieved.
He noted that in the section detailing the annual incentive payment, the agreement says for the second half of fiscal 2005 and the first half fiscal 2006 "all performance goals will be deemed to have been achieved at target." The long-term incentive portion of the agreement uses similar language. HP's Sarkar said these provisions were inserted as an incentive for Hurd to join the company.
"Altogether this is a package where pay is large and much less linked to performance than an initial read of the agreement might lead investors to believe," Bebchuk said.
Hewlett-Packard, of course, is far from alone in offering such a sumptuous welcome package. Honeywell chief executive David M. Cote received a golden hello valued at close to $60 million in 2002.