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Bill George

Harvard Business School Professor, former Medtronic CEO

Despite H.P.’s Efforts, Spectacle of a Chief Goes On

Originally Posted in the New York Times By ASHLEE VANCE

SAN FRANCISCO — Even after a former actress in erotic films had accused Hewlett-Packard’s chief executive, Mark V. Hurd, of sexual harassment, the company’s board stood behind him.

The directors had often talked with him about taking the world’s biggest technology company back to its roots as an innovator after the big-ticket acquisitions of 3Com and Palm. They doubted that Mr. Hurd, ever meticulous and boastful of his integrity, could commit such unscrupulous acts, according to people with knowledge of the board’s thinking.

But when he settled the woman’s harassment complaint in a late-night meeting before the board’s investigators had a chance to speak with her, the directors deemed his behavior just too troubling.

H.P.’s board rushed out Mr. Hurd’s resignation the next day, on Aug. 6. What has followed is a stream of leaks from both sides resulting in a very public imbroglio. The drama between staid H.P. and equally staid Mr. Hurd continues in a fashion quite unlike executive departures of its kind.

The company has uncovered communications between Mr. Hurd and Jodie Fisher, the occasional H.P. contractor who accused him of sexual harassment, that seemed cordial, even after a last meeting in a hotel room in Boise, Idaho, a person with knowledge of Mr. Hurd’s e-mails said.

But the board was increasingly troubled that Mr. Hurd had been so willing to put Ms. Fisher, whose job was to introduce Mr. Hurd to customers at H.P. marketing gatherings, in front of top customers at upscale company events. Nor could they fathom how Mr. Hurd could authorize more than $75,000 in payments and expenses, including first-class travel and stays in luxury hotels, for Ms. Fisher when the company’s employees traveled under more austere conditions, according to several people with knowledge of the expenses.

Mr. Hurd has been portrayed as engaging in increasingly questionable behavior as H.P. examined his relationship with Ms. Fisher. The directors could not grasp how he could defend having a close personal relationship with an expensive contractor and play down her background in sexually charged films like “Intimate Obsession” and “Body of Influence 2.” She also posed partly nude in Playboy while in college in the early 1980s.

Simply put, he lost the board’s trust, said people with knowledge of the board’s thinking.

A person close to Mr. Hurd counters that H.P. officials are trumping up a version of events in conversations with reporters.

“Mark Hurd is shocked and enraged by allegations from an H.P. board source that by settling an unfounded sexual harassment claim he was impeding the board from learning the truth,” said this person close to Mr. Hurd.

Mr. Hurd had been encouraged by the directors to settle the claims for weeks, the person said.

People close to Mr. Hurd have argued that certain board members overreacted to the sexual harassment charges and the possible negative publicity if word of them leaked.

Company officials, meanwhile, have publicly stated that Mr. Hurd’s behavior ran far afoul of company policy. In particular, Mr. Hurd has been accused of trying to hide an inappropriate relationship with Ms. Fisher by altering his expense reports.

An H.P. spokeswoman, Christina Schneider, declined to comment on the matter.

Regardless, the company is getting exactly what it had hoped to avoid. It hired Kent Jarrell, a crisis management expert from the public relations firm APCO Worldwide, soon after the board received the harassment complaint at the end of June. Mr. Jarrell wrote a mock news story for the board, saying it could expect headlines about H.P.’s having a soft-core pornography star working its events, people with knowledge of Mr. Jarrell’s work said.

“This history here is important,” said Scott Stern, a business professor at the Sloan School of Management at M.I.T.

Federal regulators are keeping a close eye on the H.P. board’s behavior after a scandal several years ago when factions of H.P.’s board spied on other members of the board, journalists and employees in an attempt to stop leaks. “This is a very proud company with a great history,” Mr. Stern said. “The fact is that you could understand that the board would be trigger-shy about public controversy.”

Mr. Hurd, according to those close to him, found it baffling that the company would disclose the sexual harassment case after a company investigation turned up no wrongdoing.

The accusations linking Mr. Hurd to improper spending resonate because he had built up a culture of severe financial accountability at H.P. A former H.P. executive said that Mr. Hurd’s meetings were known internally as “rectal exams” because of the fierce questioning.

“If you put up a slide with lower financial forecasts, he would spot it right away,” the executive said, requesting anonymity because he still deals with H.P. “Then, he would demand that you fix the situation.”

Stories abound of Mr. Hurd’s slicing into marketing costs and making employees fight for every dollar in the budget (although Mr. Hurd often found marketing money to sponsor tennis events, uniting his love of the sport with H.P.).

It’s this history that made Mr. Hurd’s recent behavior stand out to the board.

The situation was made worse after H.P. discovered that Mr. Hurd had viewed some of Ms. Fisher’s racy acting on his work computer, signaling that he was aware of her past.

Mr. Hurd has told people that he did a brief Google search of Ms. Fisher in April or May of 2009, nearly two years after she started contract work for H.P.

Lawrence J. Ellison, the chief executive of Oracle, called H.P.’s board cowardly in an e-mail to The New York Times. And plenty of pundits went on to say that H.P. should not have let Mr. Hurd go simply because he left Ms. Fisher’s name off some expense report filings.

A number of outsiders have complimented H.P.’s board for its decisive action, noting that the company’s board has operated under a microscope because of past transgressions.

William W. George, a professor of management practices at the Harvard Business School, said H.P. had made the right decision and that Mr. Hurd needed to move on. “I think once it’s settled, you need to walk away,” Mr. George said. “If he comes to grips with this, he is going to come back and have great leadership roles.”