Wednesday, March 30, 2005

The Wall Street Welcome

Hewlett Packard has a new CEO named Mark Hurd and while the level of enthusiasm is smiles all around at the Board of Directors as well as Wall Street, one wonders about the numbers.


Carly Fiorina’s exit package is still causing enough turbulence to rock all incoming boats.


Does it seem strange to you that CEO salaries are often dwarfed by the negotiated exit parachutes?  It does to me.  It seems counter-productive to offer such a huge incentive to get yourself fired. We knew about Carly’s $1.4 mil salary, but the $42 million newspaper in which her severance fish was wrapped came as a surprise.  She was there a couple years, screwed up the job and got thirty years pay for it.  Nice deal.  Tidy for everyone but the investors.


Equally, and some would say democratically, we are not privy to Mark’s getting-out-of-town money.  But precedents are set by such things and it’s hard to settle the new guy into the chair without either coming up with similar loot or making him (or her) feel neglected, out of sorts and downright crabby.  The first question on everyone’s lips, from best friends to those who didn’t make the cut, is not the signing package but the severance.


“Honey, I got the job.”
“Great, sweetie.  I knew you had it in you.  What’s the severance?”


Very important people go entirely through very important lives, doing very important things and never accumulate anything approaching a million, much less tens of millions.  And of course the exit money is an expense, which means it is deducted from what would otherwise be profit and that which is not profit cannot be used for such otherwise useful purposes as research and development, building new factories or that most pleasant of all purposes, return on investment. 


Return on investment are what Mark and Carly were hired for in the first place, by a Board that (presumably) had the best interests of their investors in mind at the time of hiring.  What then, could so abruptly turn them against their advocacy of the investor when it came time to play Good Night Ladies and dim the lights for the end of the dance? 


Hush money, probably. 


Go quietly money, without any mud-slinging and all that nasty finger-pointing that might throw a little light on how ill-advised the Board’s original insights had been.  Tipping the lady (or man) who somehow inconveniently ends up in your hotel room at four in the morning (and then gets noisy) is still the far wiser solution to calling the house dick. In the non-corporate world there are a lot of names by which this extortion is called, but none of them are severance pay.


Not to second guess the Mark Hurd choice so early in the honeymoon, or at all for that matter.  His NCR credentials are impeccable and he’s a hands-on manager type more interested in the personnel than the personal.  A good man by all counts and even the rumor of his choice put HP stock up 10%.


When Mark steps down from HP, let’s hope it’s at a retirement party rather than a gunfight at the OK Corral.  HP’s Board has seemingly done a wise thing by bringing Mark on board, but they’ve got a long way to go to vindicate the $42 million decision to get Carly to go quietly. And they've done damage to business credibility as well.


Like my old daddy said, Wall Street is made of the sheep and those who shear the sheep.