HP Chief Executive Hurd Resigns Over Doctored Expense Reports
Violations of vendors code of business conduct uncovered in sexual harassment investigation. CFO Lesjak appointed interim CEO. Company also releases preliminary Q3 financial results showing 11 percent revenue uptick and 12 percent per share earnings bump.
Hewlett-Packard Co. said that Mark Hurd, its chairman and chief executive, has resigned after an inquiry into sexual harassment charges against him turned up, according to an HP official, numerous instances of doctored expense reports intended to cover up a close, personal relationship with a former marketing contractor.
HP immediately appointed Cathie Lesjak, its current chief financial officer and 24-year veteran of the company, to the interim chief executive post. Lesjak, in a statement, said that she does not want to be considered for the permanent position but will serve in an interim capacity until a new chairman and chief executive is appointed.
HPs board of directors asked for and received Hurds resignation following a week-long investigation prompted by the contractors sexual harassment charges against the chief executive. The contractor, who has not been identified publicly, worked for Hurds office from 2007 - 2009.
Hurds resignation is in no way related to HPs operational or financial performance, said Michael Holston, HP executive vice president and general counsel in a conference call.
Rather, it was the result of his professional and personal behavior that compromised his ability to lead the company, Holston said.
HP said that even though its inquiry into the sexual harassment charges against Hurd found no policy violations, it did uncover inappropriate actions on his part that breached the vendors code of business conduct.
Holston said that HPs investigation of the matter, conducted by outside counsel and HPs office of general counsel, and overseen by the board, revealed numerous instances in which the contractor received compensation and/or expense reimbursement where there was not a legitimate business purpose.
Holston said that HP also learned that Hurd filed, or had filed on his behalf, a number of inaccurate expense reports that had the effect of concealing his relationship with the contractor.
He said that Hurd demonstrated a profound lack of judgment in concealing his relationship with the contractor from the board.
Hurd: Resigning painful but continuing to lead HP would be difficult
Hurd said in a statement that 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.
He said that he believed his conduct in the matter had compromised his ability to continue as an effective leader at HP, and that his resignation was the only decision the board and I could make at this time.
Robert Ryan, lead independent director of HPs board said that the vendor recognizes the considerable value that Mark has contributed to HP over the past five years in establishing us as a leader in the industry.
He said that the board recognizes that this change in leadership is unexpected news for everyone associated with HP, but we have strong leaders driving our businesses, and strong teams of employees driving performance.
In a memo to HP employees, Lesjak said, As we regularly remind all employees, each of us is expected to adhere strictly to the Standards of Business Conduct in all of our business dealings and relationships. This expectation applies with even greater force to HPs CEO and other senior executives who, given their positions, must set the highest standards for professional and personal conduct. The investigation that was conducted revealed that Mark had failed to meet this standard.
HP said that its search committee for a new chairman and chief executive is comprised of Marc L. Andreessen, Lawrence T. Babbio, Jr., John H. Hammergren, and Joel Z. Hyatt. Ryan will continue as lead independent director.
The vendor said that it does not anticipate any additional structural or executive leadership changes in the near future.
Vendor releases preliminary Q3 results, Q4 outlook
HP said that for its third fiscal quarter 2010, it expects to post about $30.7 billion in revenue, an 11 percent bump year-over-year, and per share earnings of $.75, a 12 percent increase over the similar period last year.
For its fourth fiscal quarter 2010, the vendor projected revenue of $32.5 billion to $32.7 billion and per share earnings in a range of $1.03 to $1.05.
For the full year, HP said it expects revenue in a range from $125.3 billion to $125.5 billion with earnings per share about $3.62 to $3.64.
The vendor said that it will release final results for Q3 2010 on August 19, 2010.
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