Attention turns to HP's board

The directors are embroiled in turmoil yet again as more people question what really happened with former CEO Mark Hurd.

By Kim Peterson Aug 10, 2010 3:09PM
Hewlett-Packard (HPQ) shares are finally stabilizing after several days of upheaval related to the mysterious resignation of chief executive Mark Hurd.

But that doesn't mean the scandal is going away. Now, the spotlight is turning to the company's board, which has been acting more bizarre than Lady Gaga at a Yankees game.

Remember, this was a board that hired private investigators to spy on each other and the media. The board also forced out the last CEO, Carly Fiorina. Now, many observers are wondering if HP's board is really the problem here -- and not a CEO who may or may not have gotten into some hanky-panky with a well-endowed consultant.

Did HP's board overreact? For Larry Ellison, the answer is certainly yes. Ellison, the chief executive of Intel (INTC), jumped into the drama this week with an e-mail saying the board "just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago."

Ellison also trashed the board for "cowardly corporate political correctness," according to the San Jose Mercury News.

The official company line is that the board found expense account shenanigans while investigating a sexual harassment claim filed against Hurd by the consultant.

But both Hurd and the woman, whom he has since settled with, deny there was any sexual contact. And Hurd's camp has refuted several board allegations of expense account impropriety, according to Reuters.

Hurd even reportedly offered to pay back HP for incorrectly reported expenses, which were less than $20,000 over a two-year period.

So Hurd and the board are locked in a he-said, they-said war of words. And it comes down to this: Would the board really fire its CEO over a few thousand dollars in mislabeled expenses?

At the Business Insider, Henry Blodget thinks the board was terrified of bad publicity, particularly after the consultant hired the media-friendly Gloria Allred as her lawyer. The board gave Hurd $40 million in severance so he wouldn't sue them for wrongful termination.

At The Corporate Library, Nell Minow thinks HP had to oust Hurd to show they have strong ethics and corporate governance. Companies need to show that in order to do business with the government, she writes.

So HP is once again embroiled in turmoil. Is it a good time to jump on the weakness and buy shares? Crossing Wall Street says no, pooh-poohing the company's low-quality earnings. The Afraid to Trade blog says that $42 is the key number to watch here. Anything below that will trigger more selling and could send the stock to $40.

For now, the stock seems to have avoided that level of panic, stabilizing today at about $42.60.
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