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Sustaining Lesson from HP vs. Mark Hurd: Perception Can Get You Fired

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Perhaps the title of this should be "The Drama That Never Ends," but at the end of last week, the real reason why Mark Hurd was likely fired was finally made public. Apparently, it was the perception that he leaked confidential information on the EDS purchase. His public defense that he was simply too smart to do something so stupid wasn't believed any more than it would have been if you or I had used the same defense. And it was clear that his handpicked and historically loyal board was unwilling to risk their own careers on a story that apparently none of them believed.


We should all see ourselves in Mark Hurd and avoid the appearance of evil. In this world of vendor incentives, gifts, parties, affair opportunities, promises of employment and, yes, insider trading, we should all consider the related risks and conclude that they exceed the benefits. Let's talk about that today.


Background


I think we finally have the full story and, while I had fun over the weekend speculating about which one of the players was leaking the information and why (which ranged from Jodie Fisher wanting a reality TV show to Safra Catz wanting her rival to lead Oracle gone), I've been convinced that HP simply wanted to end the leaks by making everything public. I had some long chats on LinkedIn with Tim Negris who used to work closely with Larry and he made some compelling arguments as to why Larry wouldn't leak this information himself, and his belief that Safra Catz simply didn't have the needed information to shoot at Mark Hurd this way. Negris' position, which I think is valid, is that Ray Lane wants to move past this ordeal, and, by releasing the entire story, removes the chance that the EDS disclosure will leak and reopen the scandal in the future.


Now the story (now in detail on the WSJ), which is far more credible than what was initially disclosed about the falsification of some expense reports, is that Hurd was fired because the board believed he leaked information on the EDS acquisition and tried to cover it up. The key word is "believed" because Hurd, by paying off Jodie Fisher, got her to change her story and leave the state so the board couldn't interview her. Put yourself in their position: You have an employee that says he didn't do anything, but effectively places the evidence out of your reach, but not that of the SEC. The evidence-in this case Jodie Fisher's interview-would either confirm or deny what actually happened. Would you conclude he was guilty or innocent?


The bigger problem for the board is that if they didn't do something, and the SEC did investigate and conclude that Hurd did leak the information, there is substantial documentation in terms of meeting notes and e-mails that would suggest the board believed the same thing and effectively helped with the cover up. That kind of thing would eliminate them from not only further serving on the HP board, but also from serving on any board for a public company or any executive position in a public company. In addition, there could be criminal charges that could result in jail time if there were actual trades made on this information. Recall that this recently happened with an IBM executive who was an ex-financial officer for the company. He was fired and now faces criminal charges.


No one is going to risk their entire future on someone who they believe is lying (there's that word again) to them. You wouldn't, I wouldn't and given that Larry Ellison left the Apple board after Steve Jobs' (remember this?) option scandal, I'd argue that Ellison wouldn't either. While this wasn't fully disclosed until years later, the key event happened in 2001. Ellison left in 2002 and probably about the time the Apple board was having a coronary. So why is he so pissed?

 


Larry Ellison's Risk


Larry Ellison has a history of dating employees, which makes any sexual harassment action against Larry an almost sure-thing regardless of whether he did it or not. Now, let's assume the young lady also alleged that he leaked information on the acquisition of one of several companies while he was romancing her. If Larry claimed he was innocent, would his board really believe him, given his history? Would you? And if you didn't believe he wasn't having an affair, would you also not believe that he didn't leak information on an acquisition? Now, if you didn't believe either, and documented your deliberations with other board members as the HP board did-and boards typically do-wouldn't you have the same risks the HP board did and be motivated to fire Larry? Larry already had one really close call and he survived it but he might not survive the next. He got really upset with a Fortune writer who forgot to point out that he had won the case and the woman had gone to jail. The original story, which implies that affairs with employees are a kind of rite of passage for CEOs, dovetails with my own beliefs about bad practices in Silicon Valley with regard to sex with a subordinate.


Realize that Larry doesn't even have to do anything wrong; his background has set up a situation where if he spends an extended period of time unsupervised with a woman he could get fired if that woman gets a little greedy and actually thinks out the scam ahead of time. In fact, he could be blackmailed for the rest of his life against this threat and there are people that are this cunning.


His letters to The New York Times, his hiring of Hurd and his attacks on HP are likely all tied back to his very real concern that if his board believes the same way HP's board does, it is only a matter of time before he gets shot like Hurd did. It may never actually happen, but worrying about it likely keeps Larry up nights. It would me. It may be too late for Larry to undo his history, but it isn't too late for us to learn from his mistakes.


Wrapping Up: Sustaining Lesson


People who don't understand marketing often don't understand that reality really doesn't matter in situations like this, only perception matters. Even in a trial, the jury and judge work off of the perception of the tried event created in the court room. If you create the perception that you committed a crime, like Hurd did through his actions, it doesn't matter that you did or didn't actually do it. In the eyes of those that count, you are guilty. Hurd was fired because he didn't maintain the perception of innocence and Ellison doesn't even have what Hurd had in that regard.


So the lesson here for the rest of us is to avoid activities that make us look bad. Using company funds for questionable activities, accepting gifts from contractors and hanging out with subordinates of the opposite sex in romantic places, regardless of whether they can be justified, look bad and can end a career. The risk is simply not worth it. If guys like Mark Hurd and Larry Ellison can be put at risk, you can as well.


"Avoid the appearance of evil" was advice from my grandmother, and even though it was a misquote, I still think it is good advice to live by.

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