March, 2005

My God, what a novice I proved myself to be yesterday (The Wall Street Welcome), suggesting that the golden parachutes of departing CEO’s were out of hand. How naïve to think that the new and improved Boards of Directors would even wait to see if the new chief fits their preconception of what he must be. It’s absolutely obvious.

The first thing he must be is financially overwhelmed.

Parachuting in as well as out of the corner suite has become the norm, the standard set by Honeywell and now confirmed by Hewlett Packard. The Old-Boy-Club gets younger every day, but it has its marching orders and the CEO who sits on multiple boards is busy setting precedents, making sure that when it’s his turn to jump ship, he’ll parachute both ways as well.

And we let them persist in this vast circle-jerk that has come to call itself corporate governance, without so much as a whimper. The financial pages of this or that newspaper are bowed in awe rather than outraged and thus the circle closes. No one gives a shit . . . let the last greedy sonofabitch turn out the lights.

In case you missed it, Mark Hurd’s contract to run Hewlett Packard includes

• A $2 million signing bonus
• $2.75 million to relocate, approximately $1,000 per mile from east to west coast.
• One million, one hundred fifty thousand HP shares under option
• 400,000 HP (restricted) shares outright
• Reimbursement for any sag his parting might cause in his already-owned 850,000 shares of NCR
• Annual salary $700/hr, $1.4 million.
• Guaranteed annual bonus, an extra $1,400/hr, $2.8 million, could go to $4,100/hr, $8.4 million. Hell of an hourly wage, huh?
• Long term incentives of $4-12 million a year.

Incentives for what? $5,000 an hour isn’t enough to keep motivated?

It wasn’t for Carly Fiorina, who got so full of herself that she forgot to run the company.

Much of this stock option compensation is to make up for what Hurd left at the table at NCR, so now corporate boards have widened the mandate to include not only what’s offered, but what’s to be paid to get kicked out as well as the worth of what’s left behind. Can ‘what he would have been worth had he become Bill Gates’ be far behind?

Somewhere down the chain of command (and not very far down) at Hewlett Packard is a trustworthy, hard working, intelligent guy (or gal) who would have made an outstanding CEO and whose dreams and faith in the company are now thoroughly trashed. In this Disneyesque scenario corporate boards create, is there any reason to work in the best interests of the company? The overwhelming message is that reward comes to those who work in the best interests of self, who put self above all else, keep the curriculum vitae out there all the time and leverage, network and ass-kiss their way to stardom.

If you can make a contribution to the company at the same time, so much the better, but that’s a way-down-the-line priority. The successful executive takes the current job with his eye on the next. He rakes in the chips, squeezes the quarterly profit, maximizes the short-term stock price and moves on, baby. HP was a mere stepping-stone for Carly and she’s never looked back, having become the hottest property in the babe-CEO category.

It’s a short-term disastrous way to run a corporation, but a hell of a way to leverage a career.

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