Oracle announced that Hurd, the former Hewlett-Packard CEO, would be joining the software maker as a co-president. The news sent Oracle’s share up 5%, adding about $6 billion to its market value. ... Hurd’s transgressions at H-P, while stupid, concerned ethics, not business savvy. By hiring Hurd, Oracle seems to be saying, “so what,” to Hurd’s ethical lapse, writes Daniel Indiviglio over at the Atlantic.
“Perhaps the lesson here is that business ethics only matter when they jeopardize business. Of course, sometimes these go hand-in-hand. A perfect example is Arthur Andresen. With an auditing firm, integrity is everything. If you lose that, you have no business, as the firm quickly found out. But in other businesses, where the profit motive is less connected to good ethics, that’s not the case. Then, so long as poor decisions don’t compromise profit, they will eventually be forgotten.”
I suppose the initial question ought to be whether Hurd's conduct was really all that unethical. The Economist's Schumpter column asked:
Why exactly is Mr Hurd leaving? Ms Fisher says that the two never had sex and that her complaint against him—about which she remains tight-lipped—was settled without a lawsuit. The board’s charge sheet on Mr Hurd focuses on dodgy expense claims. It is all rather confusing. If his ethical lapses were serious, then why is he being given a golden parachute of $12.2m? And if they weren’t serious, then why is the company getting rid of a star chief executive? Larry Ellison, Oracle’s chief executive, calls it “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago”.
Damned good questions. Golden parachutes typically can be canceled for cause. If Hurd's ethical lapses were serious, why didn't the board at least try to cancel them for good cause? As far as Oracle was concerned, in any case, the economics doubtless trumped any ethical:
Mr Hurd deserved his money more than most other chief executives. The company’s share price doubled on his watch. HP sped past IBM to become the world’s largest information-technology company by revenues. It also became the first IT company to have sales of more than $100 billion. Mr Hurd restored HP to its former glory as the world’s biggest maker of personal computers. He prepared the ground for further growth by putting together a succession of multibillion-dollar deals, snapping up Electronic Data Systems (EDS), 3Com and Palm. And he did all this while squeezing costs. ...
Mr Hurd had put all the pieces into place for a huge corporate transformation. His purchase of EDS had turned HP into the second-biggest provider of IT consulting and services, trailing only IBM. His purchase of 3Com had positioned HP to compete with Cisco in network hardware. His purchase of Palm positioned HP to compete with Apple’s iPad. But the various pieces still had to be put together: in particular, Palm was a long way from providing HP with the muscle to take on Apple.
In any case, Ashby Jones reports that HP is going to court to try blocking Hurd from joining oracle:
On Monday, H-P sued Hurd in California Superior Court in Santa Clara, Calif. Click here for the complaint. The gist of the claim claim: that in the course of his duties with Oracle, Hurd will inevitably disclose H-P’s trade secrets and confidential information, in violation of his severance agreement.“Mark Hurd agreed to and signed agreements designed to protect H-P’s trade secrets and confidential information,” an H-P spokeswoman said. “H-P intends to enforce those agreements. ”Reads the complaint:Despite being paid millions in cash, stock and stock-options in exchange for Hurd’s agreements to protect HP’s trade secrets and confidential information . . . following his departure . . . from HP, HP is informed and believes and thereon alleges that Hurd has put HP’s most valuable trade secrets and confidential information in peril.The suit alleges breach of contract and threatened misappropriation of trade secrets.
Count me a skeptic. Courts are often reluctant to let trade secret law impose prior restraints on free movement of labor. If HP had wanted to put restraints on Hurd's post-HP employment, it could have done so in the employment agreement. Given that courts construe those agreements narrowly so as to prevent unreasonable restraint of trade, moreover, HP should not get by a legal back door what it did mot bargain for in the first instance. If Hurd reveals trad secrets or other protected information, HP can always sue him ex post.
