Larry Ellison is Wrong – HP Board’s Decision was Correct

That Ain’t Right

Whenever I agree with Larry Ellison, I reconsider my position to make sure I’m thinking clearly.  This time, as I reconsidered and dug a little deeper, I decided that I didn’t agree with him after all.  Larry is wrong.

Ellison, the Founder and CEO of Oracle Corporation, is notoriously direct, confrontational, and controversial.  He frequently makes outrageous claims about the software industry in general and about his competitors.  Earlier this week, Ellison attacked the decision by Hewlett Packard’s board of directors to demand the resignation of Mark Hurd, CEO of HP.

The Hurd story has been reported broadly over the past week.  In short, following an inquiry into sexual harassment allegations against Hurd, the HP board found no evidence of sexual misconduct, but did find that he had filed incorrect expense reports.  The improper expense reports were (at least partially) to conceal his relationship with the woman involved (who was not an HP employee, but instead was a consultant hired by the company).

In typical Ellison fashion, his critique was blunt and unequivocal.  “The HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago,” said Ellison in an email to the New York Times.  He added that, “In losing Mark Hurd, the HP board failed to act in the best interest of HP’s employees, shareholders, customers and partners,” pointing out that the board’s inquiry had concluded that the allegations of sexual harassment were false.

Ellison is, if nothing else, consistent.  Earlier this year, Oracle’s president, Charles Phillips (who is married), admitted to having an affair for more than eight years with another woman.  That affair became public in January 2010 when billboards highlighting the relationship were displayed in New York, Atlanta, and San Francisco.   Although the revelations were embarrassing for Phillips (who stated at the time that the affair had ended in 2008), there was no apparent lasting impact at Oracle.  Phillips remains in the same position he had when the story broke in January, with his role unchanged.

Ellison clearly values results above everything.  He places business performance at the top of the list for evaluating business people.  He is satisfied with Phillips’ leadership at Oracle.  Similarly, he makes it clear that he believes HP’s board (along with its employees and customers) should be satisfied with Hurd’s performance.

Ellison is right that Hurd has done a remarkable job in turning HP around.  As a business leader, he’s done well for the company.  He’s also right that Hurd’s behavior, regarding the possibility of harassment, was investigated and the board concluded that the allegations weren’t true.

There’s more to it than that, of course.  The expense account improprieties are (by all accounts) real and significant and deceptive.  That clearly destroys some level of trust between Hurd and the board and between Hurd and his subordinates at HP.  It’s wrong.

In addition, Hurd is a married man.  Regardless of whether you believe Hurd’s claims that there was no sexual relationship with this woman, there clearly was a pattern of deception.  Hurd’s marital commitments might not matter to Ellison (who has been married four times himself).  But they matter a lot to me.  That deception is also wrong.

Finally, there’s a concept that might seem quaint and outdated in today’s business world, especially to hard drivers like Ellison: The HP Way.  Bill Hewlett and Dave Packard, the founders of Hewlett Packard, professed a management strategy and style that permeated the company throughout its first six decades.  Packard outlined their core values in the book The HP Way: How Bill Hewlett and I Built Our Company, explaining their commitment to openness, honesty, and flexibility throughout the organization.  The HP Way was a core foundation of values they had established (and adhered to) in running the company from its founding in 1938.  They formalized The HP Way in a written set of core objectives distributed to division managers in 1957 (just a year before the company went public).  Bill and Dave were respected (and eventually revered) for creating a work environment that emphasized trust and valued integrity, while still pursuing profitability.

I worked briefly for HP back in the late 80s.  My wife had joined HP as a summer intern following her junior year in college and she joined as a full-time software developer a year later.  I can assert, from close, first-hand experience that The HP Way was real, genuine, and immensely valuable.  I have a number of close friends who’ve spent all or most of their careers at HP, including a few approaching their 30th anniversaries.

Mark Hurd and his predecessor, Carly Fiorina, completely transformed the company culture.  Their focus was to maximize growth and profitability at the expense of virtually everything else.  If necessary, the long-term company values espoused by Bill and Dave would be sacrificed in favor of financial objectives.  To the dismay of most long-time employees, The HP Way virtually disappeared as a guiding force and, fairly or not, Fiorina and Hurd were blamed for the change.

Hurd’s recent actions confirm, on a personal level, his antipathy to The HP Way.  He hasn’t acted with integrity.  He has violated the trust of his employees and the board of directors.  In his own words, Hurd “…did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP… .”  He deserved to lose his job.

Maybe, with this change, the HP board is taking the first step to try to restore The HP Way.

I hope so.  I think Bill and Dave would like that.

For now, I’ll leave you with this thought:

Business leaders need to act with integrity.  Always.

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