The letter from Gloria Allred on Mark Hurd's alleged inappropriate relationship and firing of Jodie Fisher has now become public. At reading, the interpretations of the letter written by Gloria Allred and the responses from Oracle's and Hurd's attorneys provide insight into how cases are presented, but really little insight into the core problem. Was Fisher hired to be Hurd's lover or was Fisher using sexual harassment laws to blackmail Hurd? Hurd lost his job and Fisher did receive a settlement, but then Hurd got about $40M in severance and a high-paying job at Oracle, suggesting that only the HP stockholders were really hurt by all of this. Though, I expect Hurd's relationship with his wife is more interesting now.
In the end, there were four key mistakes made: in Fisher's hiring, in Hurd's dealings with Fisher, in the handling of the event by Hurd and his attorneys, and by the HP board.
Since some of these apply broadly, let's take each in turn.
Separation of Duties
Separation of duties is one of the fundamental rules that must be enforced to protect a company's assets. It basically states that the person creating an expense isn't the same person who authorizes it. That makes it far more difficult for an individual to use company funds for personal expenses. Part of this rule, if properly implemented, also suggests that the person authorizing the expense be a peer or a superior to the person incurring it. This is to prevent a boss from ordering a subordinate to approve an illicit expense.
With CEOs, this rule is very difficult to enforce and typically the CFO approves the CEO's expenses as agent for the board, but given the CFO also reports to the CEO, this can result in problems. Oracle, for instance, has had trouble retaining CFOs and the level of executive perks could suggest problems, particularly if Oracle's revenue is improperly reported or falls dramatically, resulting in stockholder actions. Given Oracle is where Hurd ended up, the combination could eventually prove toxic.
In the case of Fisher, it appears that Hurd handpicked her and that she wasn't really qualified for the job. This looks like self-dealing and a violation of separation of duties. And Fisher could have as easily been Hurd's wife, child or sibling - all of which would have likely been just as problematic from a governance and appropriate expense standpoint. What should have happened is Hurd should have defined the requisition, HR should have reviewed and enhanced this requisition for accuracy, both internal and external candidates should have been reviewed by Hurd, HR, and whoever was in charge of the executive events and the most capable candidate selected.
Regardless of any intent, an approach where Hurd, or any manager, handpicks and approves an external hire does not adequately protect company assets, and it opens the manager to likely successful claims of self-dealing as Allred showcased.