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Did Hewlett-Packard overreact on Hurd's Fishergate?

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Comment After its tumultuous time under president and chief executive Carly Fiorina followed by the journalist spying scandal that cost chairman Patricia Dunn her job, you can't blame Hewlett-Packard's board for being a little jumpy about a sex scandal and padded expenses.

Or maybe you can, especially if cutting the cord on CEO, president and chairman Mark Hurd totally screws up HP's business, or becomes the catch-all excuse for a whole lot of things going wrong that were going to go wrong no matter who was in charge of the company.

When Hurd came into HP in 2005, what he did was figure out where the company could fire lots of employees without totally screwing up - something HP needed in the wake of digesting PC and server maker Compaq in 2002.

If Hurd did not, according to HP's investigation, sexually harass HP contractor Jodie Fisher what he really did was pad his expenses. This is a bad thing, to be sure, and one that does not endear trust on the part of the board of directors, shareholders, and employees.

But look at what Intel has gotten away with for a decade of anticompetitive behavior with the Federal Trade Commission or Dell (the man) and Dell (the company) got away with when they did not disclose the nature of the funny money from Intel that propped up Dell's business. Neither had to admit any wrongdoing, and there was plenty of evidence that there was wrongdoing.

Instead of nuking Hurd and upsetting HP's business, perhaps the smarter thing to do would have been to bust Hurd back down to the CEO rank and bring in another HPer from down below to be the designated president of the company and the clear next in line.

The board could have appointed a new chairman - perhaps pulling someone from its existing board of directors - and taken away some of Hurd's power as well. This would have been less disruptive and would not have cost as much as the $40m to $50m in payouts that Hurd will be due with his golden handshake.

And before we get all high and mighty about the HP founding fathers, William Hewlett and David Packard, let me just say this. Packard grew up in Colorado and was an avid skier all his life. And in the early 1960s when HP was expanding outside of Silicon Gulch, the very first place HP looked to build its new factory was back in Colorado.

The company settled in Loveland, home of HP's wonderful calculators, and its disk drive business, sold off in 1996, was located in Boise, Idaho. Good skiing in both places. And the Packards were just like the Watson family at IBM, who put a chip plant in Burlington, Vermont, in the early 1960s to be near a ski lodge they started.

Is that fudging the expenses? You're damned right it is.

Who knows what really went on between Hurd and the HP board? For all we know, there are larger forces at work. There's plenty of chatter that HP needed someone with more pizzazz in the CEO position, that the cost cutting was making HP employees very unhappy as was the exorbitant compensation for the top brass while employees took paycuts during the economic downturn.

There may be other issues about the direction of HP - particularly with the EDS, Palm, and 3Com acquisitions - that weighed in on the decision to let Hurd go.

Large IT companies have two problems. First, they pay their top people too much - indeed, they feel they have to so their competitors don't nick their top execs. The other problem is they are too eager to give one person all three top jobs, abdicating responsibility for the board by and large.

A board of directors (herded by the chairman) is supposed to be separate from the strategic planning for the company (CEO), which is supposed to be separate from the day-to-day operations of the company (president). Giving all three jobs to the same person simplifies the decision making process, but it runs the risk of turning executives into tyrants, too. And sometimes, the taste of such power can be, well, overpowering.

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