<%@ LANGUAGE=VBScript %> <% Set asplObj=Server.CreateObject("ASPL.Login") asplObj.Protect Set asplObj=Nothing %> Analysis of HP CEO's resignation (Aug 7)

Annex Bulletin 2010-10                            August 7, 2010

A partially OPEN edition



Do As I Say Not As I Do - Analysis of HP CEO Mark Hurd's demise


A Mixed Bag of Goodies - Analysis of IBM second quarter business results



Updated 8/09/10, 2:00PM HIT, adds "Monday, Monday:" HP Stock Drops 8%

Hewlett-Packard CEO Mark Hurd Ousted amid Sexual Harassment Charges

Do As I Say, Not As I Do

HP's "Humpty-Dumpty" Who Could "Walk on Water" Could Not Walk His Talk

HAIKU, Maui, Aug 7 True leaders lead by example.   Up until 4PM Eastern time on "Hiroshima Day" (Friday, Aug 6), anyone in the IT industry and on Wall Street would have counted HP's CEO Mark Hurd among such leaders.  And then, suddenly, without notice or warning, after the markets closed on Friday, HP's "Humpty-Dumpty had a great fall."  Like Jack, who "broke his crown" and crashed down the hill (in "Jack and Jill"), Hurd's pristine image went up in a puff like a nuclear cloud.  A CEO who could "walk on water" as far as Wall Street was concerned, could not walk his talk.

And "all the King's horses and all the King's men couldn't put Humpty together again."  The celebrated CEO's public image disintegrated faster that Dorian Gray's picture (which took on the look of his sins, while the hero of the famous Oscar Wilde's novel continued to appear young and beautiful).

It turned out that "do as I say not as I do" was Mark Hurd's modus operandi.

We'll spare you the repetitive details about Hurd's sexual and moral transgressions in this editorial.  Since Friday afternoon, enough ink has already been spilled in the global media on the subject of the Hurd's ouster that you would have to have been vacationing on another planet to have missed it.  Just in case, if you're curious, you can click here for a PDF with links to some of the news stories about.  And while you're at it, you can also check out the stories about IBM's and Satyam's fallen heroes (see Triple Trouble Hits Armonk, Oct 2009 and When You Catch a Tiger by the Tail..., Jan 2009).

Why Do Heroes Fall?

We will prefer to stick to the high ground and ruminate about why people in top corporate or government positions time and time again abuse the trust that their position implies.  At HP alone, three top executives have been forced to resign in the last five years.  First, Carly Fiorina, then Pat Dunn, and now Mark Hurd.  The three are as different as night and day as were the circumstances of their demises.  Yet they all bit the dust the same way, face down - when their better judgment got the better of them.

As a result, the HP CEO position is not only the largest, but also possibly the hottest seat in the industry.  We don't envy the guy or the gal who succeeds Hurd.  He/she had better come equipped with some heat-resistant garbs, like the NASA astronauts suits. 

Hm... that's an idea.  Maybe that's where the HP Board should start its recruiting process?  After all, the astronauts know that what goes up must come down.  They are used to bumpy rides.  They are not afraid of taking risks.  They don't get dizzy when spun around the way some companies spin their bad news.   And they know how to guide their spaceships through stormy weather into a safe landing.

And these are not bad qualities to consider for a wish list of an ideal IT CEO, are they? Lord Acton

But back to our initial question: Why do heroes fall?  Because they start to believe that they can walk on water.  Because they think they are above it all.  Because "power corrupts, and absolute power corrupts absolutely," Lord Acton (right, 1834-1902) noted more than a century-and-a-half ago.

"Great men are almost always bad men," he added cynically.

Well, now Acton can add another corporate scalp to his collection of "Humpty-Dumpties." 

Regrettably, so can we.  Check out a weird way in which Mark Hurd clammed up in May 2009 when we pressed him for details about HP's accounting practices in some of its services business results (Suddenly, All Lines Point South,  May 2009).   His behavior made us suspect that perhaps Hurd had something to hide.   We said in a sub-title to that report, "HP Now Also Seems to Be Resorting to 'Financial Engineering' to Try to Cover Up Shortfalls in Operational Success." 

Also check out an earlier story about John Joyce, IBM's master "financial engineer" from Lou Gerstner's era in the 1990s joining the HP Board (see HP Stock Down on Board News, May 2007).  At the height of his accounting alchemy, Joyce produced what we called "A Grand Slam Dunk of Bunk" (Jan 18, 2002).

Now we can see that the HP CEO was no stranger to unusual accounting practices*, either.

Maybe Entire HP Board Should Resign?

What's even more bizarre is how the HP Board decided to sever the company's relationship with its chairman and CEO.   You'd think that they would try to punish the culprit and thus wash off the dirt from the company's image?  Well, think again.  This is Corporate America.  These people are used to being "kicked upstairs" as a form of punishment.

Hurd did not even get a slap on the wrist.  Instead, he received a $12 million severance payment and enough stock awards and options to ride into the sunset with about $28 million, according to USA TODAY and some other media reports.

The former HP CEO reportedly even admitted some of his wrong-doings, and paid off his female accuser in a private settlement.  The amount was not disclosed.  But HP insider sources told the media that HP's money was not used to settle the affair.

Really?  And where do you suppose Hurd's money came from?  These sources don't think that $28 million would be more than enough money for Hurd to walk away laughing all the way to the bank - after (evidently unsuccessfully) trying to buy this woman's silence?

Given how easily America's Boards seem to be willing to part with shareholders' money to keep the stench from corporate boardrooms from reaching the street, is there any wonder that we have so many "bad great men," as Lord Acton might have put it? 

Perhaps it is time for all HP Board members to acknowledge their lapses in judgment and resign collectively.   For, they have failed to protect the HP shareholders' best interests.  Which is their fiduciary duty one and the only raison d'etre (reason for being). 

Three strikes and you're out works in baseball.  Why not in Corporate America  Fiorina, Dunn, Hurd... How many more embarrassing strikes against the HP Board will it take?

Happy bargain hunting!

Bob Djurdjevic

*NOTE: Hurd had reportedly falsified some of his expense claims related to dinners with the female contractor who has accused him of sexual harassment.  Insider sources told reporters that HP's money was not used in Hurd's settlement with her.

Hurd Accuser's Identity Revealed

HAIKU, MAUI, Aug 8 - Meanwhile, the identity of the woman who accused Hurd of sexual harassment was revealed on Sunday.  She is one Jodie Fisher, a 50-year old actress, "who appeared in a number of steamy movies, including 'Sheer Passion' and 'Intimate Obsession'," according to the Aug 9 edition of the New York Times.  Fisher was under contract with HP "to work at high-level customer and executive summit events held around the country and abroad."

Hm... the world's largest computer company in the world using a sexy actress to work "high level... customer and executive events?"  Not exactly typical IT marketing style in our 40-year experience around the industry and with HP in particular.

We also find it unusual that an alleged victim of sexual harassment would choose to make her identity public.  Why "step forward" into the limelight so quickly and eagerly if she was really traumatized?  Was Fisher maybe hoping that Hurd's prominence might rub off on her make her an overnight celebrity?

Fisher has also reportedly appeared in numerous TV shows and films.  Among her most recent work was on the NBC television reality show, "Age of Love."  She was one of 13 women competing for the heart of a tennis star, Mark Philippoussis.  Fisher was the first one eliminated, the Times said. 

Guess it was the wrong Mark.  But she found the right mark in Mark Hurd. 

So maybe there is more than one victim in this sordid play.

"Monday, Monday...": HP Stock Drops 8% on Hurd News

Monday Monday, can't trust that day,

Monday Monday, sometimes it just turns out that way

Oh Monday morning, you gave me no warning of what was to be

Oh Monday Monday, how could you leave and not take me.


Every other day, every other day,

Every other day of the week is fine, yeah

But whenever Monday comes, but whenever Monday comes

You can find me cryin' all of the time.


(Excerpt from The Mama's and the Papa's hit song)

HAIKU, MAUI, Aug 9 - Jodie Fisher, Mark Hurd's sexual harassment accuser, is Wall Street's new $8.4 billion "Wonder Woman" in the making.  For, she was the cause of Mark Hurd's resignation as HP chairman and CEO.  And that's how much money HP shareholders lost on another sad "Monday, Monday," the first regular trading day after the news of the HP scandal broke on Friday evening. 

"Ouch!", if you're an HP shareholder. 

"Way to go, girl!" if you're Fisher, now basking in media limelight.  Not a bad "feat" for an erstwhile "softporn" actress, as some of the media reports portrayed the Hurd accuser.  She never enjoyed this kind of spotlight when she was in Hollywood.

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Volume XXVI, Annex Bulletin 2010-10
August 7, 2010

Bob Djurdjevic, Editor
e-mail: annex@djurdjevic.com

(c) Copyright 2010 by Annex Research, Inc. All rights reserved.
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