UNDER SIEGE from the fallout of ex-CEO Mark Hurd's sudden departure, HP's board of directors is being sued by investors.
The suit alleges that HP's board violated its fiduciary duty when Hurd tendered his resignation and bailed out with a golden parachute said to be worth about $28 million. It seeks changes to corporate governance at the venerable Silicon Valley company and to reclaim Hurd's severance pay. On top of all that, the lawsuit seeks punitive damages. It should be noted that any money recovered would be returned to HP's coffers.
Apparently the board failed to notify shareholders that an investigation into sexual harassment allegations, which eventually cleared Hurd of any wrongdoing, was taking place. This, according to the plaintiffs, broke HP's own corporate governance code.
Given that the firm's stock price tanked upon news of Hurd's abrupt departure and reports that a severance package worth tens of millions of dollars was handed to him to get him to leave quietly, shareholders are likely to scrutinise the board's actions closer than ever. The Wall Street Journal reports that seven out of the 10 directors on the board were appointed after Hurd took over as CEO in 2005.
Currently HP is on the lookout for a replacement CEO, with interim leader CFO Cathie Lesjak at the helm. Lesjak has also been named in the suit, though it won't dent her chances of keeping the top job because she has already declared herself out of the running.
The board might have hoped that by now the dust would have settled on Hurd's inglorious exit. However, following reports that his head of internal communications, Caprice Fimbres McIlvaine, followed Hurd out the door, interest has not waned. Now the board must conduct its search for a new CEO under the added pressure of facing a shareholder lawsuit. µ
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