HP’s Chief Executive Officer, Mark Hurd, resigned after an investigation disclosed that Hurd had a “close personal relationship” with an H-P contractor hired by the Office of the CEO and that “Mark never disclosed that.” According to HP’s General Counsel, “there were instances of compensation and reimbursement for services that were never performed, and there were “inaccurate expense reports submitted by Mark or on his behalf” that were intended to conceal the relationship. See the Wall Street Journal account of the conference call where this was announced.
Now the San Francisco Chronicle is reporting that Mr. Hurd will be receiving $50 million in severance payments. Seems a little unbelievable for a guy that filed false expense reports. Maybe it is because the HP board did not have the back bone to fire Mr. Hurd for cause or his relevant agreements did not permit it.
Its unclear to me where the $50 million number came from, but HP’s 8-K states in “connection with Mr. Hurd’s resignation from HP, HP and Mr. Hurd entered into a Separation Agreement and Release (the “Separation Agreement”) that provides Mr. Hurd, in exchange for signing a general release of claims in favor of HP, with (i) a severance payment of $12,224,693 under the HP Severance Plan for Executive Officers; (ii) an extension until September 7, 2010 of the expiration date of his outstanding options to purchase up to 775,000 shares of HP common stock that were vested as of the date of his resignation; (iii) pro-rata vesting and settlement, at the same time and on the same terms as other HP employees, of 330,177 performance-based restricted stock units granted to Mr. Hurd in January 17, 2008 based on actual HP performance during the three-year performance period ending on October 31, 2010; and (iv) settlement on December 11, 2010 of 15,853 time-based restricted stock units granted to Mr. Hurd on December 11, 2009 at a price equal to the lesser of (a) the closing price of HP’s common stock on August 6, 2010 or (b) the per share closing trading price of HP common stock on December 11, 2010. The value of both the pro-rata performance-based restricted stock units and the time-based restricted stock units to which Mr. Hurd is entitled is capped such that Mr. Hurd will not receive greater value in respect of those awards on their dates of settlement than what he would be entitled to assuming the closing price of HP’s common stock on their respective settlement dates is the same as the closing price on August 6, 2010.”
So it’s not a surprise that Congress decided to reform executive compensation through Dodd-Frank.