Lawrence J. Ellison, the chief executive of Oracle, ridiculed Hewlett-Packard’s directors for forcing the resignation of the H.P. chief executive, Mark V. Hurd.
We all owe a debt of gratitude to Ellison, for his attempt to defend a fellow CEO and friend is an abject lesson in why large corporations have to be watched carefully. Too many of them are run by those like Mr. Hurd, who believe that making his company lots of money entitle him to break rules and cut corners in ways that their companies tells their subordinates are violation of company policy and business ethics. And far too many board members of big corporations are like Mr. Ellison, not only excusing this attitude, but endorsing it.
Hurd stepped down Friday after a confusing series of events that left a lot of questions unanswered. A sexual harassment complaint filed by an H.P. employee was found to be groundless by an internal investigation, but the company was apparently worried about what dirty laundry a lawsuit might reveal. The company concluded, according to its public statement, that Hurd had filed inaccurate expense reports that concealed an inappropriate relationship with Jodie Fisher, an attractive, D-list schlock movie actress whom Hurd had put on the Hewlett- Packard payroll.
The San Francisco Chronicle attempted to piece together what really happened between Hurd, Fisher, and his company, and concluded that this was the most likely scenario:
“1. Mark Hurd spent some quality time with Jodie Fisher, some of which was on the company’s dime. He developed a crush on her or she developed a crush on him, and the feeling was, initially, mutual.”
“2. Someone–Mark or Jodie–wanted the quality time to progress to a full-blown love affair. For whatever reason–perhaps because the lust was, at some point, unrequited–it did not.”
“3. Jodie Fisher stopped getting consulting assignments from HP and stopped having quality time with Mark. This likely happened either because 1) Mark fell out of lust and didn’t want to wreck his marriage or 2) because Mark had realized he wasn’t going to get lucky and moved on or 3) because Jodie Fisher suddenly felt uncomfortable in Mark’s presence.”
“4. Sometime thereafter, Jodie Fisher concluded that “sexual harassment” had occurred.”
“5. Jodie threatened to sue Mark for sexual harassment.”
“6. HP’s board freaked.”
“7. HP’s board investigated the sexual harassment claim and found… nothing. But…”
“8. HP’s board was still terrified of the bad publicity that would ensue when Fisher’s attorney, Gloria “Pit Bull” Allred, went on all the talk shows raving about what a horrible sex predator their CEO was and how he had demanded an innocent single mother do all sorts of heinous things and then fired her when she didn’t.”
“9. HP’s board, thankfully, found some inaccuracies in Mark’s expense reports, which they realized they could use to oust him–and, thereby, conveniently, avoid the bad publicity above.”
“10. HP’s board concluded that the inaccuracies did NOT constitute obvious proof of fraud or embezzlement and that it was worth $40 million in severance not to have Mark Hurd sue the company for wrongful termination. And they therefore demanded his resignation instead of firing him.”
This seems to be a pretty good guess as to what happened. So, in summary, Hurd, a married man and the CEO who succeeded two consecutive Hewlett-Packard CEO’s who resigned in the midst of ethics complaints, was pursuing a relationship with a “consultant” of dubious skills who also reported to him. Some of the courtship took place during company time, and involved company expenses, which Hurd may have tried to disguise in his expense reports. Is this sufficient reason for the company’s board to get rid of him?
Of course it is.
Hurd was paid to lead Hewlett-Packard to profits and superior performance, while serving as the ultimate exemplar of ethical conduct for a company that had been battered by a series of scandals. His name is on the company’s “Standards of Business Conduct,” its ethics code. Here is the letter, signed by Hurd, that introduces the booklet, which is given to all employees. The italics are mine:
Dear Hewlett-Packard colleagues:
We want to be a company known for its ethical leadership—a company where
employees are proud to work, a company with which customers, business partners,
and suppliers want to do business. Our shared values are as relevant today as they
have ever been and continue to form the cornerstone of our ethical standards. Our
Standards of Business Conduct (SBC) applies these core values to the realities of
day-to-day business life at HP.
We know that actions speak louder than words. We must make decisions and
behave in ways that we can be proud of, that reflect our commitment to doing the
right thing. Every employee, along with our customers and partners, expects HP to
stand for integrity in everything we do.
Today, we are a global company committed to being a responsible corporate citizen
in every country and community in which we do business. Let us commit together, as
individuals and as a company, to build trust in everything we do by living our values
and conducting business consistent with the high ethical standards embodied within
our S(tandards of) B(usiness) C(onduct).
Chairman and CEO
Did Hurd’s own conduct meet his stated standards for the company by any reasonable analysis? Absolutely not. He abused his power. He created a conflict of interest for himself. He used his own personal desires, rather than the best interests of his company, to govern employment decisions. He showed a lack of integrity. Given all of this, is it possible for Mark Hurd to lead his employees, to be respected, and to demonstrate that the ideals he extols on the Standards of Business Conduct are more than just words designed to give the S.E.C. a warm, fuzzy feeling of security? Is it possible for the board, colleagues, or subordinates to trust him?
No. His credibility is shot. He is a fraud. For Hewlett Packard to keep him in its top leadership position would send one message and one message only: we don’t care about ethics and values, really, as long as you keep the profits high. Once that message is sent, a company’s conduct can flow nowhere but down.
To all of which Lawrence Ellison says, in effect, “So what?” In an e-mail he sent to The New York Times, Ellison claimed that what H.P.’s board had done to Hurd was a grave mistake, saying..
“The H.P. board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them.”
In losing Mark Hurd, the H.P. board failed to act in the best interest of H.P.’s employees, shareholders, customers and partners.”
How could Ellison write this? Easy: he doesn’t really believe that putting integrity and ethics over profitability is good business. Truth be told, most business executives don’t. That leaves only one alternative: subjugating ethics to profits, and a leader like Hurd is just the guy to do it. Unfortunately, once he shows that he’s willing to break the rules and risk his company’s reputation to try to snag a movie actress mistress, his real alignment of priorities becomes evident to all. Leaders who think like him may well be able to rake in profits and high stock prices for a while, but they can’t credibly claim to believe in Standards of Business Practice, because, in fact, they do not. They also have a distressing tendency to end up in jail or in charge of broke and desperate companies needing government bail-outs, because they don’t know when to stop breaking the rules, and because they tend to accumulate subordinates who are even more ruthless and unethical than they are.
Mark Hurd is one of those leaders. So is Lawrence Ellison, since he sees no good reason for a company to let a leader like Hurd go. Most corporate boards are stacked with people like Ellison, friends of the cynical CEO they are supposed to oversee, and sharing his dishonest, “do as I say, not as I do” approach to ethics. It is only when one of those cynical CEO’s gets exposed in a two-bit scandal, like Hurd, that the ethical rot in the corporate suite is exposed.
Ellison thinks it shouldn’t matter that Hurd ignored the integrity and conduct standards he is supposed to enforce, as long as he keeps the stock prices high. This is important information for the board of Ellison’s company, H.P. rival Oracle, to know. Now that it is clear what Ellison’s commitment to ethics is, they can count on a scandal of their own, sooner or later.
The responsible thing for Oracle to do is to fire Ellison.