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Hewlett took PR firm's advice in CEO case

Hewlett took PR firm's advice in CEO case

By Ashlee Vance and Matt Richtel, New York Times | Updated: 5 June 2012 02:26 IST

Highlights

As the career of Hewlett-Packard’s chief executive Mark V. Hurd hung in the balance, a public relations specialist convinced the company’s directors that HP would endure months of humiliation if accusations of sexual harassment by a company contractor

As the career of Hewlett-Packard's chief executive Mark V. Hurd hung in the balance, a public relations specialist convinced the company's directors that HP would endure months of humiliation if accusations of sexual harassment by a company contractor against Mr. Hurd became public.

But even after following the specialist's advice, the company has not escaped criticism.

According to a person briefed on the presentation, the representative from the APCO public relations firm even wrote a mock sensational newspaper article to demonstrate what would happen if news leaked. The specialist said the company would be better served by full disclosure, even though an investigation had produced no evidence of sexual misconduct.

HP's board, according to the person briefed on the presentation, took this advice, disclosing the unsupported accusations against Mr. Hurd. The company said Friday that Mr. Hurd had falsified his expense reports and that because it was enforcing the same code of ethics it would apply to any employee, he resigned.

But in ousting Mr. Hurd, the directors set off a media scrutiny they had hoped to avoid. Some in Silicon Valley said the technology giant had overreacted in ousting a chief executive who has been one of the most successful in corporate America in recent years. Other corporate governance experts think the company acted admirably.

"What the expense fraud claims do reveal is an HP board desperately grasping at straws in trying to publicly explain the unexplainable; how a false sexual harassment claim and some petty expense report errors led to the loss of one of Silicon Valley's best and most respected leaders," Lawrence J. Ellison, the chief executive of Oracle and a close friend of Mr. Hurd, said in an e-mail to The New York Times.

However, Jeffrey A. Sonnenfeld, an expert in corporate governance and senior associate dean at the Yale School of Management, said Hewlett-Packard's directors deserved credit. The company "stands apart from other companies that have been scandalized in the headlines this year," he said, referring to BP and several Wall Street firms. "They made a courageous call."

He said that there have been, and continue to be, plenty of companies that would rationalize expense-report misdeeds as a gray area and figure out how to keep a successful chief in place. At such companies, he said, "there may not be a legal issue, but there is still a moral issue."

Some management scholars said that Hewlett-Packard appeared to be putting a great deal of faith in the counsel of APCO. Others remain perplexed by the way the whole affair was handled. "There is a missing piece here because it doesn't make sense," said Shane Greenstein, a business professor at Northwestern University's Kellogg School of Management.

At a presentation to the directors of HP, the public relations specialist from APCO cited recent sexual imbroglios like the one that diminished Tiger Woods. The specialist cautioned that only 20 percent of top executives survive these types of allegations and then they usually end up leaving because of the weight of negative publicity.

He also warned that Gloria Allred, the celebrity lawyer representing Mr. Hurd's accuser, would thrust HP and Mr. Hurd into a media nightmare.

An APCO spokesman said the company has a policy against discussing counsel given to clients. Based in Washington, APCO handles a range of media issues, like branding and open research. The 500-person company does not have a particularly strong reputation for crisis management or technology expertise, although it has worked for other technology giants like Microsoft and the chip maker Intel.

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Further reading: HP, HP CEO, Hewlett-Packard, Mark V Hurd

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