HP CEO Mark Hurd steps down amid sexual harassment claims

August 6, 2010: 4:26 PM ET

CFO Cathie Lesjack named interim CEO

Source: HP

Big news coming out of HP (HPQ) before the weekend:  It appears that Mark Hurd, the CEO who engineered HP's comeback after Carly Fiorina's tumultuous tenure, has resigned.

In an internal email written to employees, new Interim CEO Cathie Lesjak said that the charges of sexual harassment by the outside contractor were unfounded.

The investigation did reveal, however, that Mark had engaged in other inappropriate conduct. Specifically, based on the facts that were gathered it was found that Mark had failed to disclose a close personal relationship he had with the contractor that constituted a conflict of interest, failed to maintain accurate expense reports, and misused company assets. Each of these constituted a violation of HP's Standards of Business Conduct (PDF), and together they demonstrated a profound lack of judgment that significantly undermined Mark's credibility and his ability to effectively lead HP.

Hurd, who also served as Chairman of the Board, served in the CEO role for five years, starting March 28, 2005.  HP's lead independent director, Robert Ryan, will take the chairman role. Hurd could receive up to a $53 million severance package. In 2009, Hurd made a total of $24,201,448 in salary, stock and bonuses.  In 2008, his compensation totalled $33,952,237.

Updated: According to Engadget, who listened in on the HP call:

The investigation began immediately."the contractor's attorney sent HP a letter, and the investigation began the next day." The claim was filed by a "marketing contractor who worked from fall of 2007 through the fall of 2009 -- she was never an HP employee."

Hurd submitted inaccurate expense reports to conceal his relationship with the contractor which violated HP's standards of business conduct. This happened numerous times and "HP paid the contractor's fees for services and her expenses, [but] there was a question about whether her services were actually provided." Interim CEO Cathie Lesjak said that although Mark Hurd was a "strong leader, at the end of the day, he didn't drive our initiatives -- it was the organization that supported Mark in driving those initiatives." Ouch

It is also interesting to note that Jon Rubinstein just jumped aboard the HP ship as CEO of recently purchased Palm and will likely be given at least a once-over for the new role.   We called Todd Bradley EVP, HP Personal Systems Group one of the smartest people in Tech. He'll likely also receive some internal consideration.  Both can be seen here last month at Fortune's Brainstorm Tech conference.

It took HP's board two months (February 10, 2005 to March 28, 2005) to name Hurd CEO after Fiorina resigned.

Here's a video of interim CEO Cathie Lesjak giving a talk at Cal Berkeley's Haas School of Business.

HP gave the following statement:

HP (NYSE: HPQ) today announced that Chairman, Chief Executive Officer and President Mark Hurd has decided with the Board of Directors to resign his positions effective immediately.

The Board has appointed CFO Cathie Lesjak, 51, as CEO on an interim basis. Lesjak is a 24-year veteran of the company who has served as HP's CFO and as a member of the company's Executive Council since January 2007. She oversees all company financial matters and will retain her CFO responsibilities during the interim period.

Hurd's decision was made following an investigation by outside legal counsel and the General Counsel's Office, overseen by the Board, of the facts and circumstances surrounding a claim of sexual harassment against Hurd and HP by a former contractor to HP. The investigation determined there was no violation of HP's sexual harassment policy, but did find violations of HP's Standards of Business Conduct.

A Search Committee of the Board of Directors has been created, consisting of Marc L. Andreessen, Lawrence T. Babbio, Jr., John H. Hammergren, and Joel Z. Hyatt, which will oversee the process for the identification and selection of a new CEO and Board Chair. HP's lead independent director, Robert Ryan, will continue in that position.

Hurd said: "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. After a number of discussions with members of the board, I will move aside and the board will search for new leadership. This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time. I want to stress that this in no way reflects on the operating performance or financial integrity of HP."

"The corporation is exceptionally well positioned strategically," Hurd continued. "HP has an extremely talented executive team supported by a dedicated and customer focused work force. I expect that the company will continue to be successful in the future."

Robert Ryan, lead independent director of the Board, said: "The board deliberated extensively on this matter. It 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 has worked tirelessly to improve the value of HP, and we greatly appreciate his efforts. He is leaving this company in the hands of a very talented team of executives. This departure was not related in any way to the company's operational performance or financial condition, both of which remain strong. 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."

"The scale, global reach, broad portfolio, financial strength and, very importantly, the depth and talent of the HP team are sustainable advantages that uniquely position the company for the future," said Lesjak. "I accept the position of interim CEO with the clear goal to move the company forward in executing HP's strategy for profitable growth. We have strong market momentum and our ability to execute is irrefutable as demonstrated by our Q3 preliminary results."

Lesjak has taken herself out of consideration as the permanent CEO but will serve as interim CEO until the selection process is complete. Candidates from both inside and outside the company will be considered. The selection of a new chairman will occur in conjunction with the CEO decision.

The company does not expect to make any additional structural changes or executive leadership changes in the near future.

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Seth Weintraub
Seth Weintraub

Google went from searching the Web to worming its way into nearly every facet of business and government. Seth Weintraub unveils where the company is going, who it's competing with, who it's about to compete with and how market forces push the company to veer or adhere to its Don't Be Evil motto. For 15 years, Weintraub was a global IT director for a number of companies before becoming a blogger.

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