Former Hewlett-Packard Co. Chief
Executive Mark Hurd may be in line to receive up to $40 million in severance
pay despite his admitted lapse in ethical rules, according to a media report.
Citing executive pay experts who combed
over Hurd’s employment agreements, the Financial Times of London reported over
the weekend that Hurd’s airtight contract with Hewlett-Packard didn’t include specific circumstances in
which the company would fire him “for cause,” which would have
enabled it to avoid paying severance.
Nell Minow, a U.S. corporate governance
expert, told the newspaper that contracts of most chief executives include
breaches of a company’s ethical code of behavior as grounds for firing, among
Hurd will get a severance payment of
$12.2 million, according to an H-P filing. He also stands to walk away with
more, including the right to sell his vested stock options during the company’s
next trading window, which opens Aug. 23 and closes Sept. 7. Hurd is also
entitled to performance-based restricted shares granted to him in January 2008
and time-based restricted shares handed out in December 2009.
All told, the package could be worth as
much as $40 million, the Financial Times reported.
In a statement made when he stepped down
on Aug. 6, Hurd said, “… 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 H-P and which have guided me throughout my career.”
The H-P board promoted Chief Financial
Officer Cathie Lesjak, to interim chief executive while it looks for a
permanent replacement. See: H-P’s Hurd resigns.
If Hewlett-Packard’s board attempted to
fire Hurd for cause, it could have set up a difficult legal fight over his
severance pay, experts told the Financial Times.
“The squishier the definition (of
cause), the harder it is to prove cause,” Charles Elson, of the University
of Delaware, told the newspaper.
New York Times columnist Joe Nocera
reported Saturday that Hurd’s resignation appeared to be a “head
scratcher” at first glance, because he had been wowing Wall Street as a
turnaround expert and cost-cutter. His severance package could be worth up to
$40 million or even $50 million, Nocera said.
Hurd’s apparent problems with his
expense reports provided a reason to force him to resign, but the real reason
was that the board didn’t trust him and employees didn’t like him because of his
cuts in research and development and other reasons, Nocera reported.