Monday, September 21, 2015

HP and Corporate Scandal?

Amy Chozick and Quentin Hardy, front-page story for today's NY Times, claim: Mrs. Fiorina’s political rivals have also highlighted that she ushered in a period of corporate scandal, including public clashes with members of the Hewlett family. Fired in 2005, she left with more than $42 million in severance, stock options and pension.

What kind of reporting is this?  
1. A public clash with the Hewlett family had no corporate scandal associated with it--a lot of bad blood and anger, yes, but not scandal.  Yes, a forced-shift by Deutsche Bank share votes helped the final vote in the Compaq deal, but it was fully investigated and HP exonerated.
2. Leaving with $42 million severance sounds egregious, and was largess, but Hurd got more severance from the same company when fired for sexual dalliance / reputation besmirching. And Ellison, Hurd's new benefactor, collected $706 million the same year as Carly's firing.  These were days of insane payouts--not defending Fiorina on this one, but it was hardly abnormal or 'scandal.' 
3. The biggest scandal in Silicon Valley in the Fiorina era was back-dated stock options--ways that Steve Jobs and many other CEOs larded their nests.  But HP assiduously avoided this gambit, even with its purported architect as the long-standing HP chief counsel:  
Here's a passage from THE HP PHENOMENON (Stanford, 2009, p. 478):

When Fiorina was being excoriated for excessive pay, it was not yet known that greed was being coupled to systematic graft at nearly two hundred Silicon Valley companies, with widespread stock option back- dating to ensure huge gains. Several Pulitzer Prize–winning Wall Street Journal stories in 2005 and 2006 reported the stunning extent of these practices occurring in 19972002. One analyst reported that 23 percent of some 38,500 option grants had been manipulated, with estimated total net worth “improvements” approaching $100 billion.22 Subsequently, HP’s chief corporate counsel, prominent lawyer Larry Sonsini of the firm Wilson Sonsini Goodrich and Rosati, came under fire for his firm’s seeming complicity in the practice.
March 29, 2007, san francisco, california: “Options Morass Deepens at Wilson Sonsini,” wrote Justin Scheck for The Recorder, the San Francisco Bar Association newspaper:
Wilson Sonsini Goodrich an; Rosati has spent the past year trying to back away from the metastasizing stock option backdating mess, but an internal e-mail now in regulators’ hands is making it difficult. In a 2004 message, Wilson Sonsini lawyer Roger Stern asks his partner to dig up a document from the time when a client was “using the time machine to pick low strike prices.”
Across a swath of companies at which Sonsini had a leadership role, options were misdated on his watch by executives or lawyers close to him, by company officials consulting with Sonsini’s firm, and—in the high-profile Pixar case—by Sonsini himself. Prominent among those companies are Brocade, Juniper Net- works, Apple, and Pixar, as well as KLA. Complicating matters is the fact that, according to SEC records, Sonsini and his firm may have profited immensely from stock awards by companies that admit to rampant options improprieties.23
Fiorina vehemently noted in mid-2007 that Hewlett-Packard had as- siduously avoided any such illicit activity, even as it became the Silicon Valley norm; moreover, in sharp contrast to many others, notably including archrival Dell Computers, no earnings misfilings have ever emerged from the company where Packard set the ethical standard. Pretexting, although hard to defend, did not seem nearly as reprehensible as these offences (and Hurd, not Fiorina, started the pre-texting scandal).  

Re Hurd's scandal-laden HP career, see The Big Lie: Spying, Scandal, and Ethical Collapse at Hewlett Packard, by Anthony Bianco, 2010.   Fiorina's contributions to Hurd's shenanigans don't feature in the book.

So, my conclusion is that Hardy and friend were over-reaching--Fiorina DID NOT participate in any of the visible scandals of the day, while her actions that they describe as scandalous weren't.

One might, however, reach a different conclusion if you follow the Iran story (see my 9/14/15 post re

 "Carly revisited")

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