💸 Mark Hurd HP exit: $12.2M cash severance after expense probe

Nvidia's board says Jensen Huang stays in charge while it cooperates with investigators, AP reports, after Huang acknowledged an extramarital affair with a former executive of Nvidia customer Megaspeed. CNBC reports that Nvidia's independent directors have launched their own investigation. AP reports that Huang apologized to the company, that the board said it had 'no reason to believe' national security or Nvidia secrets were compromised, and that Beijing calls the spy allegation 'unsubstantiated'.

Boards have faced this kind of decision before. The best-documented precedent is Hewlett-Packard's 2010 probe of CEO Mark Hurd. It ran on outside counsel, ended in a resignation and produced a cash exit. None of it is a verdict on Huang. It is a record of what one board did, and what it cost.

The timeline

What the probe found

HP general counsel Mike Holston said Hurd filed inaccurate expense reports on numerous occasions, and he declined to give a dollar amount, PC Magazine reported. HP said the probe found no violation of its sexual-harassment policy. What it did find was a paperwork problem, and the paperwork was enough.

"As the investigation progressed, I realized 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"

Mark Hurd, in a statement quoted by PC Magazine

The Wall Street Journal reported that HP said the reports were intended to conceal what it called a 'close personal relationship' with the contractor. Reuters reported that HP called Hurd's actions trivial in financial terms but a systematic violation of its standards. The details were in dispute. According to Reuters, people close to Hurd's camp said the two were 'business acquaintances' whose meetings were above board. A source familiar with Hurd's account told Reuters the irregularities arose partly because his assistant filed the expenses, and that he offered to reimburse no more than $20,000 over two years. CNET put the reported range at $1,000 to $20,000. HP never disclosed a figure.

The New York Times reported that Hurd and the contractor both denied a romantic relationship. It also reported that the contractor settled with Hurd for an undisclosed sum.

The payout

Reuters reported that Hurd, who received nearly $100 million in compensation over the previous three years, would get a $12.2 million severance payment from HP. A New York Times survey of 2008 pay, using Equilar data, put his total at $34 million, including a $23.9 million cash bonus, the largest in the survey.

Nocera wrote in the Times that the board did not fire Hurd for cause and so handed him a large package, much of it stock options granted in earlier years. In his account the $12.2 million in cash reached Hurd 30 days after he left, and Oracle announced his hiring the next day. HP's lead independent director, Robert Ryan, said in a statement that the board recognized the value Hurd had contributed. Holston said HP had 'entered into an agreement' with Hurd related to his exit and was not pursuing legal action against him.

That last sentence aged quickly. HP sued after the Oracle announcement, and the Times reported the case settled on Sept. 20. In an SEC filing, HP said it had modified his separation agreement. Hurd gave up his rights to 330,177 performance-based restricted stock units granted on Jan. 17, 2008, and 15,853 time-based units granted on Dec. 11, 2009. The Times said he effectively waived about half the compensation owed him. Terms of the lawsuit settlement were not disclosed, though the parties said Hurd would protect HP's confidential information.

The board's critics, and its defenders

"The H.P. board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago"

Larry Ellison, Oracle chief executive, in an email to the New York Times, Aug. 9, 2010

By Ellison's account, the HP board was split 6 to 4 in preliminary talks on whether to disclose the harassment claim. He declined to name his source. An HP spokesman declined to address whether such a vote took place, saying only that the vote seeking Hurd's resignation was unanimous, the Times reported.

The Times also reported, citing a person briefed on the presentation, that public relations firm APCO warned directors of a 'firestorm' if the claim became public and even drafted a mock sensational news story. An APCO spokesman said the firm does not discuss counsel given to clients. Corporate governance expert Jeffrey Sonnenfeld told the Times the directors had 'made a courageous call.' Nocera quoted Nell Minow of the Corporate Library as saying HP 'had no other option' under its ethics policy.

The ledger so far

HP's board produced a probe, a statement, a resignation, a cash payment and a lawsuit, all within weeks, and each left a document. Nvidia's board has so far produced a statement and an investigation. In the sources read here, the review has no findings yet. MrMoney does not forecast. The Hurd file shows only how much a board's choices end up costing once they are on paper.