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HP The Almighty Buck Technology

HP Spent Over $80M To Get Rid of Its CEOs 261

Posted by samzenpus
from the and-here's-a-parting-gift dept.
hapworth writes "Analysis published today shows that Hewlett-Packard has shelled out over $80 million to get rid of three CEOs since 2005. The first CEO to take her expensive exit, Carly Fiorina, received over $42 million, once stocks, options, and pension are factored in. Mark Hurd, after just four years, received $12.2 million to take his exit; and now, after 11 months, Leo Apotheker will walk out with a reported $25.2 million in severance. With eBay's Meg Whitman in as the new CEO at HP, industry analyst Robert McGarvey writes today that 'the HP gig could help Whitman replenish her personal coffers, depleted by the pumping of $119 million into a futile bid to become California's governor.'"
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HP Spent Over $80M To Get Rid of Its CEOs

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  • by GodfatherofSoul (174979) on Monday September 26, 2011 @12:29PM (#37516756)

    I'll ruin your company for a measly $5 million; no stock options if you don't mind since I'll probably do a pretty good job of it.

    • Re: (Score:3, Funny)

      by Anonymous Coward

      Yeah? Well I'll do it even cheaper! I'll ruin the company for $4 million!
      Your move bro.

      They should just put it on eBay, and have a special "cheapest wins" sale.
      Cheapest Price To Kill Our Company.

    • by cvtan (752695)
      Rats! I was going to offer to do it for $10million!
    • You don't get it do you? Ruining a company is not a one (wo)man job. It takes the whole village (idiots). The board is doing its part by grossly overpaying some chimp in suit. The chimp in suit does its part to ruin the company. The logical flaw is, the board that wants to ruin the company would not hire a cheaper chimp. You would have better chance if you said, "I will ruin the company for 100 million dollars" they will listen. If you ask for 1 billion dollars they will take you seriously. Ask for 10 billi
    • I find your bid suspiciously low and therefore won't hire you to ruin my company.

    • You know, it's funny, I was just reading this:

      http://www.cracked.com/article_19419_6-parodies-that-succeeded-because-nobody-got-joke_p2.html [cracked.com]

      Now if Apple hired me in the early 2000s to ruin their company, you know what I would have done? Release a phone with good, expensive hardware and locked down software. Make developers pay to release software on the device.

      And you know what I would have done after that? Make a version of the phone that can't make calls or fit in your pocket and charge even more for it.

      I

    • by kimvette (919543)

      I'll make a better offer: I propose to ruin HP for only $10 million. My proposal includes:

      n order to be especially evil and ensure doom for HP, I propose the following as our very first endeavor:

      * HP will start producing avionics - both conventional and EFIS panels. Initially product quality will be of once-legendary HP quality, but that is only to gain penetration into mainstream aircraft, both commercial and general aviation. Each model will be fully certified and once Boeing, Lockheed-Martin, Beechcraft,

  • by bill_mcgonigle (4333) * on Monday September 26, 2011 @12:30PM (#37516778) Homepage Journal

    The Board keeps choosing bad CEO's. Why do the shareholders keep re-electing them? Where are the institutional investors on this? I guess it's their company to destroy, if they really want to.

    • by LWATCDR (28044) on Monday September 26, 2011 @12:35PM (#37516840) Homepage Journal

      The problem is professional CEOs. They go from company to company and really don't care about anything long term. Isn't there one person that has worked at HP all their life that can step up and be CEO?

      • by Anonymous Coward on Monday September 26, 2011 @12:45PM (#37516978)

        What's odd is when I worked at HP, there was a strong promote-from-within culture. It was relatively rare to bring in outside executives. Carly started her tenure as controversial CEO because she was an outsider, not because she was a rhymes-with-witch in heels.

        But one article I read this weekend said the board looked around and none of the current second-level VPs was ready to be CEO. I find that somewhat hard to believe and poor planning on the part of the board. To have a prudent succession plan, they should always have a few potential CEOs being groomed.

        I still want to know how Leo swung $2 million a month for his walking papers. I want a piece of that action. If I get fired for cause, I get zip. My few remaining options are worthless, my RSU vesting screeches to a halt, no severance pay, nothing.

        • "the board looked around and none of the current second-level VPs was ready to be CEO"

          Translated, that would mean something like, "None of our current VPs have slept with, or even performed fellatio, on any of the board members."

        • by ryanov (193048)

          Ditto with Mark Hurd. Although I guess the problem there is that the sexual harassment investigation turned nothing up. But that was still the excuse they used, wasn't it?

        • by AliasMarlowe (1042386) on Monday September 26, 2011 @01:19PM (#37517416) Journal

          I still want to know how Leo swung $2 million a month for his walking papers.

          Actually, it took a lot of courage and fortitude on his part. He had to talk the board down from their initial settlement offer, which was vastly greater (it's only shareholders' money, not their own). Apparently, he wanted the monetary compensation to be so small that it counted as an obvious reprimand, almost an insult, and he clearly succeeded. A mere $25million is as hard a slap in his face as this board could be expected to give...

        • by LWATCDR (28044)

          You mean when things started to go bad?
          HP used to be quality. Now it means cheap printers and laptops. They sold off the Alpha, and PA-RISC teams. They sold of instruments as well.
          They should hire me as CEO.
          Here is my plan.
          1. Bring back Compaq as the low end name for desktops and laptops. Move HP up market to take on the Thinkpad line now that it isn't by IBM anymore. When people think about a high end desktop or laptop have them lust for an Apple or an HP depending on what camp they are in.
          2. Release VMS f

          • Sounds good, but needs more long range plans.

            • 1. Memristors! Memristor based flash memory devices for starters, with the ultimate goal being to replace RAM.
            • 2. Try for the graphics market? And not by copying what NVidia and ATI did, but by introducing a new generation. Massively parallel ray tracing graphics.
            • 3. Bionics. How about a "mouseless" pointer? User just puts on a skull cap and thinks where the pointer is to go. If that works, try to replace the keyboard.

            That's the sort of thing that wo

        • by Surt (22457)

          I assure you they did not fire him for cause. His severance will say nothing of the sort.

        • This is an unfortunate consequence of Wall Street getting to call too many shots.

          Wall Street does not want hands-on, promoted from within CEOs in any company, especially not publicly traded ones. It wants CEOs whose worldview is the same as theirs. The ideal CEO would buy into their worldview, and who would react to impulses that make sense to Wall Street and ignore all other information. Wall Street is particularly biased against folks with engineering training.

          In general, stocks of any company where the C

      • by Surt (22457)

        There are dozens. But competent leadership is not what the board wants. Apparently.

      • It boggles my mind why anyone thinks a CEO is worth that much at all. No CEO should make 200 times the lower level employees. Especially when they prove to be incompetent time and time again.
    • by doconnor (134648) on Monday September 26, 2011 @12:41PM (#37516918) Homepage

      One problem with shareholder democracy is that if a shareholder doesn't like the management of the company it is far easier for them to sell the stock and forget about it then to work to elect better management.

      A lot of people have been selling their HP stock recently.

      • by Archangel Michael (180766) on Monday September 26, 2011 @01:38PM (#37517648) Journal

        This is because to care about a stock, you have to care about the company. To care about the company, it can't be run by professional Board Members who are appointed by Professional Stock Managers. The simple plan is to immediately divest yourself of any stock the moment that Institutional Investors (ie Wall Street) gain control of the Board.

        Look for smaller companies that don't have professional boards and haven't been discovered by institutional investors. Or don't care, and buy Market based Mutual Funds.

        • by doconnor (134648)

          Good advise for investors.

          That still leaves the problem that many large companies are badly run which hurts their employees, customers and the overall economy. It's a fundamental flaw in capitalism as implemented.

  • gee, I want a job like that...

    • by Surt (22457)

      Save up for your Stanford MBA. Practice your lying.

      • by idontgno (624372)

        I don't see why you can't roll up the two. [google.com] Certainly, it would save a lot of time and effort, and after it worked you wouldn't be appreciably worse off when they eventually fire you.

  • Interesting... (Score:5, Insightful)

    by Ecuador (740021) on Monday September 26, 2011 @12:30PM (#37516782) Homepage

    The one who was considered successful by all (Hurd) was the one with the least compensation (by a huge margin if you consider his years on the job vs Apotheker). It is no joke we say the worse you do as a CEO the more money they pay you!

    • by maxume (22995)

      Plenty of people think he (further?) ruined the company with cuts that made for nice short term financial statements and completely ignored the long term.

      • by am 2k (217885)

        Plenty of people think he (further?) ruined the company with cuts that made for nice short term financial statements and completely ignored the long term.

        Doesn't mean that he wasn't the best, compared to the others :)

      • Dunno, while I was there, he made plenty of sensible decisions. Yes, quite a bit was cut, but I didn't see any egregious cuts that jettisoned core products or teams. All in all, morale was actually doing quite well under Hurd. Granted, it was easy to do better than Carly, but still - I had the impression that HP was actually stabilizing under Hurd. Now.... it's the insane asylum run by the insane.

        As for the compensation quip by the GP: that was actually established in a few studies that compared work outcom

    • Actually, that's GNU/Hurd, and it's not at all successful.

    • by dkleinsc (563838)

      Remember the basic Dilbert Equation: Money = Work / Knowledge (Because Power = Work / Time, Time = Money, Knowledge = Power, and the algebra is pretty easy after that)

      So it's no surprise that the most competent CEO is the one paid the least to go away.

  • ... to get a job like that? Oh wait, I need to sign using blood? And what stranger paper is this that smells like... sulfur?
    • by cayenne8 (626475)

      ... to get a job like that? Oh wait, I need to sign using blood? And what stranger paper is this that smells like... sulfur?

      Hey, you there....

      Are you gonna take all day? If you're not sure, had me over the damned pen so I can sign up!!

      You're indecision is really starting to hold up the line....

      :D

  • by luis_a_espinal (1810296) on Monday September 26, 2011 @12:33PM (#37516816) Homepage
    ... should be tied with performance measurements meeting certain baselines - reduce waste (not the same as reducing cost), or increase profits by % - that are established at the time of hiring instead of being given wholesome at the exit door. Then again, I might as well wait for pigs to fly.
    • by skids (119237)

      You've got it all wrong: it's the CEO's job to institute performance metrics, not become subject to them. After all, just by virtue of being a CEO they are among the nation's top "earners" so they simply must be made out of ponies and sassafras.

    • by ceoyoyo (59147)

      Silly, if you imposed requirements like that you wouldn't be able to attract the best talent to be CEO of your company. You might get some schmuck who actually made your business profitable!

    • There are 2 issues with what you are saying. There are pros & cons with everything –so I am just point this out:

      Profits, waste, etc. are based on accounting numbers which can be gained. Want to increase short term profits – decrease the deprecation of assets. Want to increase long term profits – borrow lots of money, invest in high risk projects, etc. This is why a lot of people favor equity based (Stock options, restricted shares, etc.). The value is being assigned by somebody outside

  • Based on the performance of these bozos I would say it is money well spent. They should do the same with the board that appointed them.
    • The shareholders are doing the same with the board that paid the outrageous severance packages, they're selling in large numbers. Before long they'll resemble the board of AOL, able to make big decisions about a company that used to be relevant.
  • Before I either get worked up or try defending this practice, why are they being paid this again? Badly written contracts or what?

    • by tverbeek (457094)

      This is one area where I'm inclined to blame it on corruption, not incompetence.

    • Before I either get worked up or try defending this practice, why are they being paid this again? Badly written contracts or what?

      No, I believe the contracts basically say you "won't disclose stuff to other companies, now go... go think of things that will bring the stocks up. Anything.. Just have fun! We trust you implicitly, until you screw up. Here's some money to make it worth your while."

      I'm sure I'm 100% wrong on that one.
      /sarcasm

  • by MrCrassic (994046) <deprecated AT ema DOT il> on Monday September 26, 2011 @12:37PM (#37516878) Journal
    Why is it that even poorly-performing CEO's get incredibly huge severance packages? I can understand CEOs that actually helped raise a company getting nice parting gifts (like Lou Gerstner and Bill Gates), but shouldn't leaders that, effectively, failed to lead? get much, much less?
    • The problem is the CEO is more or less the head of making decisions. So the first CEO ages back made the decision that CEOs should get a ton of money when they leave, regardless of the reason, the only way such a boneheaded policy can be removed is if the next CEO pushes for it. The problem is... where on earth do you find a CEO that will fight against giving himself money.
      • by TheSpoom (715771) <slashdot@ u b e r m00.net> on Monday September 26, 2011 @12:57PM (#37517146) Homepage Journal

        The problem is the CEO is more or less the head of making decisions. So the first CEO ages back made the decision that CEOs should get a ton of money when they leave, regardless of the reason, the only way such a boneheaded policy can be removed is if the next CEO pushes for it. The problem is... where on earth do you find a CEO that will fight against giving himself money.

        Replace CEO with politician and the same applies (which is also why you see the two interchange so often).

        • by Uberbah (647458)

          Applies, how. Joe Lieberman is a widely loathed politician, but he wont be collecting an 8-digit severance package when he's tossed out of office next year....

    • by roc97007 (608802)

      I'm guessing, because it's cheaper than defending yourself in court.

    • by Surt (22457) on Monday September 26, 2011 @01:27PM (#37517512) Homepage Journal

      But Leo took a huge risk taking on HP. I mean he failed, and so he will literally never work for more than $10 million per year again. To get him to take that job, they had to negotiate it so that no matter how he left he'd be taken care of for life. Otherwise, who would take that kind of risk?

    • by Evro (18923) *

      Probably because the severance is agreed upon when they're hired, not when they're fired. After firing one, it may be hard to find someone willing to lead - maybe they assume the board is prone to firing CEOs, so they're reluctant to take the job? - and the huge severance is considered insurance against that outcome?

      I'll agree that it's sickening to think that a CEO who tanks his company and fails at his job gets a severance many times more than the lifetime earnings of probably 50% of the US workforce.

    • by ISoldat53 (977164)
      Often it's cheaper to pay off the CEO than to have them losing the company money. Considered over the yearly revenue, the CEO pay is not always that significant.
    • by Andy_R (114137)

      Boards judge potential CEOs on their negotiating skills. The only negotiation the board has with potential CEOs is their pay and severance package. Therefore, boards agree to being swindled out of huge pay and severance deals because the fact that the new CEO talked them into it is cast iron proof that he's exactly the kind of money-oriented cutthroat negotiator they want.

    • I believe that part of the problem is that it's often negotiated ahead of time. When they hire the CEO, there may be part of the contract negotiations that include huge payouts if they're fired.

      The bigger question in my mind is, could these CEOs possibly be worth it? When you pay one of these yahoos $20 million, are you really getting $19 million more in value than if you hired the best $1 million CEO? With some of these CEOs, I doubt it.

  • by hesaigo999ca (786966) on Monday September 26, 2011 @12:47PM (#37517020) Homepage Journal

    This problem will always be there if non eof the CEOs are held accountable for their bad decisions, some make them on purpose, as insider information makes dipping stock prices easy for another company paying a hidden fee to buy into another one. Yes it is punishable should it come to light, but hell, none of these things ever come to light except when someone happens to stumble upon something and raise a flag to the right people.

    I hate to say this, but if we started keeping tabs on the actual work that CEOs did in terms of good work vs. shody work and say have it in the clause that should there be any badly managed portions of their work, they could be held accountable to pay a fee, of which could be based on the amount of the screw up.

  • by Animats (122034) on Monday September 26, 2011 @12:55PM (#37517128) Homepage

    The way CEO pay for publicly held companies should work is that shareholders should enter the amount on the proxy. The share-weighted median is the CEO's total compensation. (And no default value for unvoted shares.)

    Also, voting rights should pass through as far as the tax break does, so mutual fund managers have to pass voting rights through to their shareholders.

  • by HockeyPuck (141947) on Monday September 26, 2011 @12:57PM (#37517160)

    "It's good to be the king."

  • Hope they sell that stock as soon as possible.
  • by psydeshow (154300) on Monday September 26, 2011 @01:14PM (#37517350) Homepage

    So at this point, Hewlett-Packard is just a shell company that exists to funnel the long-term campaign contributions of conservatives into Meg Whitman's war chest by means that are not subject to contribution limits or public oversight... right?

    Why would anybody invest in HP if not to directly support the new CEO's compensation package?

    • She does not have to go through this elaborate scheme to get campaign contributions. We are in the post Citizens United decision world. Any one can simply set up a private corporation, it can collect money from various people, send the money to the campaign, vote itself out of existence by the time disclosure window rolls around. At that point there is absolutely no way for any one trace where the money for the campaign came from.

      Here is the kicker. Mitt Romney has already done it. At least once. Probabl

  • The two words have a meaningful difference, and her bid was hardly futile.

    • by prakslash (681585)
      Good catch! There is indeed a subtle difference.

      A futile effort is one that will not produce a desired result in the future.
      A failed effort is one that did not produce a desired result in the past.

      Hence, Whitman's 2008 bid was a failed bid. OTOH, Ron Paul's 2012 bid may be characterized (by some) as a futile one.
  • I know this may sound like a troll, but this might be worth a thought: the shareholders don't give a flying f..k who runs the company and how much they get paid to leave. They make money on soap opera type information and herd mentality of small "investors". I wonder how much of HP shares are in hands of shareholders who care about how HP *does* in the future as opposed to how will HP's short to mid-term share price do? Does anyone have the numbers?

    I bet that for any company whose shareholders are distribut

  • Don't offer a CEO 10's of millions of dollars and a golden parachute right off the bat. If they perform, then give them the big money. A certain percentage of them are only good at negotiating their compensation package, and, well, that's about it.

  • Supported 40 middle class families for life

    developed 10-80 next great ideas to assure the company's future.

    Hired 800 people at a good salary for a year.

  • by epine (68316) on Monday September 26, 2011 @02:41PM (#37518502)

    Severance is what permits you to grow yet another head after you misplace those who have gone before. You could always try picking up a discount head off the bargain rack, but the flighty shareholders will vote thumbs down. Or you could rent out the "captain of industry" chair for good coin to thrill seekers with Sim-City cred--except that the lawyers would spoil it. There goes your profit center. By the time your shareholders, the lawyers, and your directors+candidate/sucker all nod in agreement, it's another predictable episode.

    There actually is something interesting going on here in the rumpled manifold of greed and commerce.

    I think part of it is a selection bias toward winners. It's our heroism reflex run wild. If ten talented people vie for king of the hill (any career juncture from high school to grad school to middling rungs on the corporate ladder) and only one person prevails (probably as much through luck as good management), the winner walks off with the prize and a survivor halo. What price the survivor halo?

    Then, like poker, you stake your halo at the next table (in the antechamber of Cloud Nine), in another round of lucky bastard takes all. What price your survivor halo now? Think of the halos as lottery tickets, where you have few ultimate winners at the end of the day. Making the first cut doesn't make your ticket worth anything at all except for prospects in the final draw. Only one person can cash out, so the halos are transacted in multiple rounds of winner-take-all.

    Guys like Apotheker, who come into the job wearing the halo of halos (as expected by the flighty shareholders), aren't going to risk all that went before on a sour moment from a sour board (see Dunn, Patricia).

    These people aren't necessarily more competent than their rivals, but there are only so many heroism slots available to the human psyche. They got one, their adversary didn't. We believe in success. We believe that success fuels success. Every year we award trophies in all the major sports leagues, whether the champion deserves it or not. It's the slot we hold fixed, while the champion varies. Then along come the carpers of competence, wondering why not all champions are created equal, as if competence prevails on any given Monday. Have you ever opened your eyes in a board meeting?

    Shareholders want the halo of "born winner". You see this on sports forums even more clearly. Chris Drury: born winner. Look at his contract lately. Savvy halo owners don't transact on their trophy without a substantial safety net.

    The only way the halo represents what it claims to represent is when having the halo grants you super powers because people believe in your halo. When exercising the power of that belief, your decisions might not resemble ordinary competence, and then the resentful competence carpers will fill you with darts. Your halo tarnishes, and you recede, diminished, into The West. You know this going in. Your severance prospects are configured accordingly.

    Competence might be a better corporate performance model in long-term aggregate, but with money, the non-linearity of the cash-in/cash-out cycle drives people to manipulate time frames.

    Imagine you hold HP stock and the company is positioned to earn 15% in each of the next two years. But that's not good enough. So you convince the exec. (though lush compensation) to represent earnings the first year as 20% and then you cash-out on a 20% annual return in one year, and free up your money to LRR somewhere else. Nice. Next year the company will announce 10% return and the CEO will probably get fired. So unless the midterm compensation was extremely lush, the CEO would prefer to announce 10% return the first year and 20% the second year.

    This is why we get halo dramas rather than sustained competence. The aggregate return on the company often matters less to sharp interests than how it's spun. It's the same non-linearity which propels the finance community to b

  • by organgtool (966989) on Monday September 26, 2011 @03:31PM (#37519060)
    This is exactly what Buffett was talking about in his 2005 letter to Berkshire Hathaway shareholders [berkshirehathaway.com]. If you don't want to read the whole thing, there is an excerpt of the relevant portion here [wallstreetwarzone.com].

    In this letter, Buffett explains how a CEO can make tons of money while driving a company into stagnation or even destruction. Here we are six years later and it seems like nothing has changed.

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