HP CEO Violates Company Code of Conduct

Numerous reports state that the board’s decision to ask Hurd to resign was based solely on the lack of judgment he had demonstrated in violating the company’s code of conduct.

Posted by Joe Gerard in Code of Conduct, Human Resources on August 10th, 2010

On Friday, HP CEO Mark Hurd was asked by the company’s board of directors to submit his resignation. As reported in the TechCrunch Article “HP CEO Mark Hurd Resigns, This Looks Messy,” the outcome of an investigation into sexual harassment allegations against Hurd “concluded that there was no sexual harassment violation, however it did find that Hurd violated HP’s ‘Standards of Business Conduct.‘” When news broke about his departure, Hurd claimed he himself hadn’t lived up to his own standards regarding integrity and respect. Therefore, if he wasn’t able to live up to these standards himself, what message does that send to the rest of the employees at HP?

This case is another example of how the unethical acts of a single individual lead to consequences that must be paid for by an entire organization.
Numerous reports state that the board’s decision to ask Hurd to resign was based solely on the lack of judgment he had demonstrated in violating the company’s code of conduct. This case is another example of how the unethical acts of a single individual lead to consequences that must be paid for by an entire organization. However, hopefully HP can use this event as an opportunity to rebuild and focus on ethics and compliance throughout the company.

Investigation Findings

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An investigation was launched at the end of June as a response to allegations of sexual harassment that had been filed against Hurd. The woman who brought forward the complaint was a marketing consultant hired by HP for certain projects, but was never an employee at HP. During the investigation, investigators came across inaccurately documented expenses that were claimed to have been paid to the marketing consultant for her services. Falsifying the use of company funds violates HP’s Standards of Business Conduct, therefore, resulting in the demand for Hurd’s resignation. I give the board at HP a lot of credit for holding Hurd accountable for his actions and not accepting his offer to simply pay the company back the sum of the expenses he falsely claimed.

Hurd’s resignation raised many questions about the financial future of the company, as Hurd’s time at HP was marked with the success of increasing the company’s performance and value. However, in a press release issued by HP, they focus on the issue of the company’s financial sustainability, assuring investors and the public that the decision to ask Hurd to leave was due to the fact that his actions deemed him unfit to continue as the company’s leader.

The Wall Street Journal published an article, “Text of H-P Memo From Interim CEO,” which features the memo sent to all HP staff by interim CEO and HP CFO Cathie Lesjak, regarding Hurd’s departure:

“This is to advise you that Mark Hurd, Chairman and CEO of HP, has resigned from the company effective immediately. Mark’s resignation was submitted at the request of the company’s Board of Directors as a result of inappropriate behavior in which he engaged that violated HP’s Standards of Business Conduct and undermined his ability to continue to lead the company.”

Consequences

Anytime a company’s CEO falls under investigation, the entire company pays the price. Many begin to question the credibility of a company whose leader demonstrates unethical acts and the inability to make responsible decisions. HP has already started suffering the consequences of their former CEO’s unethical decisions. The New York Times article, “Boss’s Stumble May Also Trip Hewlett-Packard,” stated:

“But turning the page on the scandal will not be easy. While Ms. Lesjak maintained that investors remained confident in the company, H.P.’s share price tumbled 10 percent on Friday as word of Mr. Hurd’s departure rippled through Wall Street.”

As of yesterday, HP stocks have rebounded. However, it’s still too early to determine the full impact of Hurd’s actions on HP.

Opportunities

Unfortunately, it usually takes an event such as this for a company to learn from its mistakes and make positive changes within the workplace. A New York Times article, “Division of Roles Could Help H.P,” suggests that this event has opened up the opportunity for HP to divide the roles of Chairman and CEO. There is no word on whether or not HP plans on splitting up the job, however, it might be a wise decision to make based on some of the situations the company has found itself in recently. The division of these two roles has been gaining in popularity amongst corporate America, and is already common in many other countries.

The division of roles aids in increasing the accountability of those at the top. While some feel the division of roles leads to confusion over who is in charge, I feel that the separation of duties puts a system of checks in place on the CEO, making it difficult to get away with unethical acts, such as falsifying expense reports. For some companies, managing both the board of directors and the company can strain the CEO, creating an imbalance in the attention given to either side. When the CEO and chairman roles are divided between to two different individuals, there is someone present who can question the CEO on their decisions, rather than the CEO simply reporting to themselves.

In the blog post, “The FCPA – Tone at the Top and in the Middle,” by Thomas Fox, Fox raises a very good point about the importance of the tone at the top in relation to the HP case. The tone at the top sets the stage for the overall direction and culture within an organization. HP must carefully select a new CEO who will successfully lead the company with integrity and uphold their ethical commitments in order to avoid future blemishes to the company’s reputation.


Joe Gerard
Joe Gerard

CEO, i-Sight

Spend my days showing off the i-Sight investigative case management software and finding ways to help clients improve their investigations. Usually working with corporate security, HR & employee relations, compliance and legal teams.

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