Hewlett-Packard's board vs. Mark Hurd: The right decision?

By On Leadership
Sunday, August 15, 2010

Slade Gorton is a former U.S. senator and Washington state attorney general who also served on the 9/11 Commission.

The Hewlett-Packard directors were faced with a Hobson's choice. They had one of the most talented and successful chief executives in the country. They also had a chief executive who had misused company funds on a questionable personal relationship and in flagrant violation of an ethics code for which he was responsible. As much as they may have wished to retain him, it is impossible to see how they could have done so without severely undercutting his ability to lead and the corporation's reputation.

Disruptive as his forced resignation may have been, it was the right course of action and was taken promptly. But to have attempted to deny him his contractual severance not only would have been vindictive but would have prolonged the agony and almost certainly resulted in protracted litigation.

Michael Maccoby is an anthropologist and psychoanalyst globally recognized as an expert on leadership. He is the author of "The Leaders We Need: And What Makes Us Follow."

Hewlett-Packard was founded by leaders who built strong bonds of trust with their employees. The founders, Bill Hewlett and Dave Packard, articulated and practiced a clear philosophy they called "the HP Way." Ethics were a given, and disrespect among employees was not tolerated. To strengthen trust and loyalty, HP did not lay off employees during business downturns but instead had everyone take time off and a corresponding cut in salary. Trust and a strong value of excellence supported a collaborative culture that became a model for Silicon Valley.

The HP values have been undermined and frayed by some of the leaders who followed Bill and Dave. Mark Hurd promised to revitalize the HP Way. His actions -- hiding expenses to engage in a questionable relationship-- undermine the trust essential for a company's sustainable success.

Hurd was widely admired, especially by HP shareholders, for cutting costs and increasing revenue through acquisitions. However, HP's future depends on a leadership team that strengthens collaboration and innovation, that can articulate and practice a version of the HP Way for a global market.

Katherine Tyler Scott is managing partner of Ki ThoughtBridge, a leadership consultancy, and the author, most recently, of "Transforming Leadership: The Episcopal Church of the 21st Century." She is a board member of the International Leadership Association.

From my vantage point, the board has performed its governance role admirably. Its action was particularly important because it expressed the character of the company and showed it is living up to the espoused values the leaders are legally and ethically bound to uphold. In this tragedy, the chief executive permitted his self-interest to override the greater interests of HP. The board made its decision based not on his personal failings but on his betrayal of corporate values.

The board's response sent a clear message that dishonesty and deceit will not be accepted at HP. Its decision to allow Hurd to resign and to keep his contracted severance package was humane. It acknowledged his record of excellence in his professional performance while conveying the unacceptability of misuse of funds.

When leaders violate an institution's policies and core values, they destroy trust -- the glue that holds everything together. If Hurd had stayed, questions about his truthfulness in other matters would have been raised and doubts about the character of HP's leader would have put the reputation of the company at risk. The one thing a board must preserve is the good reputation of a company. A responsible board would never squander the good name of the company. In the end, the HP board chose the company's character over the CEO's competence.

Howard Gardner is the Hobbs Professor of Cognition and Education at the Harvard Graduate School of Education and senior director of the Harvard educational research group Project Zero.

In announcing his resignation as chief executive of Hewlett-Packard, Mark Hurd said: "There were instances in which I did not live up to the standards and principles of trust, respect, and integrity that I have espoused at HP and which have guided me throughout my career." I have no way of knowing who wrote and approved that statement, nor whether the last phrase is true. But as an observer of how difficult situations are discussed publicly, I can say that Mark Hurd's statement is an impressive model.

There is no attempt to wriggle out of the accusations, nor to spread blame ( for example, on the media). And, importantly, Hurd praises a company that, even after the death of its founders and the unhappy tenure of Carly Fiorina, still occupies a privileged niche among major international corporations. In the past, when someone said that he or she worked for HP, it meant something special. The speed and manner of Hurd's resignation increases the likelihood that working for HP will continue to mean something special. Redeeming that likelihood is the challenge for the next leadership, thousands of supporting employees and, especially, the board.

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