Expert Perspective By Grahall’s OmniMedia Editorial Board
Not surprisingly, plenty of media attention was focused on the fact that Mark Hurd, once CEO of H-P, didn’t last long in the unemployment line. Hurd has landed himself a new position as Co-President of Oracle, sharing the job with Safra Catz and reporting to CEO Larry Ellison. Three articles published in the Wall Street Journal on this subject particularly caught the attention of the Grahall Editorial Board. Ben Worthen and Joann S. Lublin write (in their article At Oracle, Hurd Lands in Rare Situation: Having a Boss for First Time in Years Means the Former Hewlett-Packard Chief’s Relationship With CEO Ellison is Crucial): “How Messrs. Hurd and Ellison click is crucial as Oracle tries to expand beyond its core business of selling software and takes on tech conglomerates… in hardware…. So far, the outlook appears positive, said people who have worked with the executives. Messrs. Hurd and Ellison are friends. And while the two have very different management styles, those styles seem compatible, said these people.”
That’s good, since cooperation at the top of the food chain in any organization is critical for the company to quickly and effectively embrace opportunities and resolve issues. In fact, some companies find that cooperation and coordination in these roles is so important that the CEO and President are in fact the same person. For companies who separate these roles, the President position is often looked at as a grooming spot for the future CEO. This may not be the motivation at Oracle, where Ellison is truly the top dog and senior executives are expected to stay out of the spotlight. In fact, as Worthen and Lublin write, “Safra Catz, Oracle’s other co-president, has endured for years as a top deputy partly because she, shuns the spotlight—unlike Mr. Ellison—and is widely thought not to want the CEO job.” Catz’s previous co-president, Charles Phillips, abruptly resigned from Oracle when Hurd’s appointment was announced.
Perhaps Phillips found Hurd’s arrival as further limiting his chance for advancement. It is not likely that Phillips was turned off by any moral questions relating to Hurd since Phillips himself was very publically called out early this year for an eight-plus-year affair.
Hurd’s “August departure from [H-P happened] in the wake of a probe that turned up violations of H-P’s code-of-business conduct. Oracle CEO Larry Ellison came out as one of Hurd’s biggest backers after his breakup with H-P,” writes Jodi Xi in her September 8, 2010 article for the Wall Street Journal Oracle to Pay Mark Hurd $950,000 a Year.
And certainly Ellison has no compunction or concern about Hurd’s ethics. As the Washington Post journalists Kirstin Downey Grimsley and Jay Mathews wrote in a September 1998 article Executives’ Privilege? In Boardroom, Sex Seldom Leads to Censure: “Sexual involvement with a subordinate can add to an executive’s mystique. One of the most envied men in Silicon Valley is Larry Ellison, 54, chief executive of Oracle Corp., one of the richest men in California. He’s the thrice-married Lothario of the pocket-protector set, frequently attending business events with a beautiful young subordinate on his arm. Some of his relationships have been with recent Stanford University alumnae in their first real jobs.”
Lublin and Worthen wonder if “…Hurd may have to adjust to Oracle’s culture. While Oracle is known for a cowboy atmosphere that accommodates sharp personalities, H-P is considered the tech industry’s buttoned-up elder statesman, where employees take yearly classes in correct business conduct.”
We’d guess that Hurd missed a few of those H-P business conduct classes.
But then business is business and it is the CEO and Board’s responsibility to enhance shareholder value, which is most easily measured by stock price. As Dennis K. Berman writes in his September 7, 2010 article for the Wall Street Journal Is Mark Hurd Worth $6.8 billion?: The announcement of Hurd’s appointment “pushed Oracle shares up 5.76%, on a day when the overall market was down about 1%… If you believe that the stock move was directly tied to Hurd, that means his hiring was worth about $6.76 billion overall.” To H-P Hurd was apparently worth even more. The $100 billion dollar company saw its stock fall about 10% when Hurd’s deaparture was announced on August 6, 2010. The stock has yet to recover to the pre-announcement price of $46.30 per share.
And Hurd isn’t doing too badly himself. As Xi writes “Oracle Corp. said it will pay Mark Hurd, its new co-president, an annual base salary of $950,000 and [he will] be eligible for up to a $10 million bonus in the current fiscal year…. Hurd will also be granted a stock option to purchase 10 million shares soon after he begins his job and will be able to get options to buy 5 million more each year for the next five, so long as Hurd remains employed by Oracle.” Xi continues: “The compensation package from Oracle comes as Hurd could receive a potential $35 million severance from H-P as part of his departure. His total compensation at H-P last fiscal year was $30.3 million.” (Oracle to Pay Mark Hurd $950,000 a Year).
We certainly hope that Oracle used an experienced consultant to draft the employment contract with Mr. Hurd with some particular focus on severance for cause. Even a “cowboy cultured company” shouldn’t pay severance if they terminate someone for unethical behavior. Maybe we are being cynical. Perhaps Hurd has repented and won’t behave badly again, or perhaps he has learned enough not to get caught next time., Or maybe Oracle’s policies around business ethics are impossible to violate.
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