HP Spent Over $80M To Get Rid of Its CEOs 261
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.'"
I've got a better deal (Score:5, Funny)
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)
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.
Re:I've got a better deal (Score:5, Funny)
Re:I've got a better deal (Score:5, Funny)
They did put it on ebay. Somehow Meg came out on top in the auction. Surprising result.
Re: (Score:2)
Re: (Score:3)
Meh. After taxes it only woulda been like 5 million anyway.
Re: (Score:2)
Re: (Score:2)
I find your bid suspiciously low and therefore won't hire you to ruin my company.
Re: (Score:3)
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
Re: (Score:3)
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,
Re:I've got a better deal (Score:5, Insightful)
I'd love to get that job...tons of money when you're there...tons when you leave, and then...it seems, there are job opportunities after you leave, even in disgrace.
I don't see any perceptible skills required to be a CEO...is it all only who you know?
I mean, I'm member and good standing with the "anything for a dollar" club....so, wondering how I could get into the CEO business, and yes...I'm quite willing to sell shares of my soul for this.
Re: (Score:2)
You probably want to be born wealthy (who you know), and then get your MBA. Almost 100% of high level CEOs are MBA from a name-brand school (Stanford/Harvard/Yale).
Re: (Score:3)
Re: (Score:3)
Re: (Score:3)
No, just being very evil instead.
Re:I've got a better deal (Score:5, Funny)
Re:I've got a better deal (Score:4, Insightful)
I know someone who's MBA finals involved take home tests with direct questions and essays. I looked at his test, then proceeded to explain to him how business works and basically did an entire portion of his test based on the IT related business market... I was floored and exploded about it.. THIS IS WHAT THESE ASSHOLES ARE LEARNING? THIS IS GENERIC BUSINESS STUFF that anyone working and interacting with businesses will learn. ITS LAUGHABLE that they are paying to 'learn' this and shows just how bad their financial acumen is if they are plopping 50-100 grand on it. Smoke and mirrors, all the way down. They get fancy University titles, while folks without college degrees get labelled Con Men.
This has been a production of the MONDAY HATE TRAIN. Its just one of those days.
Re: (Score:2)
you're right, we'd try to do shit like doing real R&D to make enterprise NUMA x86-64 and port the HP/UX, NonSTOP, OpenVMS to it,s. Open source all HP wares and rewrite out the licensed 3rd party add-ons. Make sure Open/Net/DragonFly/FreeBSD and GNU/Linux drivers were available for everything. Make a new push for mobile devices with ARM. Full featured network directors and switches and SAN storage at one price without licensing of features. Make blade systems without the legacy "wintel server" comp
Where are the shareholders? (Score:5, Insightful)
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.
Re:Where are the shareholders? (Score:4, Insightful)
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?
Re:Where are the shareholders? (Score:5, Interesting)
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.
Re: (Score:2)
"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."
Re: (Score:2)
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?
A slap in the face... (Score:5, Funny)
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...
Re: (Score:3)
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
Re: (Score:2)
Sounds good, but needs more long range plans.
That's the sort of thing that wo
Re: (Score:2)
I assure you they did not fire him for cause. His severance will say nothing of the sort.
Re: (Score:3)
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
Re: (Score:3)
There are dozens. But competent leadership is not what the board wants. Apparently.
Re: (Score:2)
Re:Where are the shareholders? (Score:5, Insightful)
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.
Re:Where are the shareholders? (Score:4, Interesting)
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.
Re: (Score:2)
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.
Re: (Score:2)
However the board and the CEOs haven't been and it is likely the problem will continue and the employees and customers will start getting punished.
gee... (Score:2)
gee, I want a job like that...
Re: (Score:2)
Save up for your Stanford MBA. Practice your lying.
Re: (Score:2)
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)
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!
Re: (Score:2)
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.
Re: (Score:3)
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 :)
Re: (Score:3)
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
Re: (Score:2)
Actually, that's GNU/Hurd, and it's not at all successful.
Re: (Score:3)
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.
I Feel the Gordon Gekko Speech Coming On In...... (Score:2)
Re: (Score:2)
Your assumption is that the stockholders get a say at all. The vast majority of corporations, if the stockholders don't like what the board is doing, they have two choices: abstain from voting (they can't vote against the board) or quit being stockholders.
Based on the plummet in HP stock price, it seems that a lot are doing the latter.
Where do I sign... (Score:2)
Re: (Score:2)
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....
Golden parachutes.... (Score:4, Insightful)
Re: (Score:3)
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.
Re:Golden parachutes.... (Score:4, Funny)
Re: (Score:3)
...handled with all things soft and heralded with golden trumpets when they enter
Damn, they even have better bathrooms than working people!
Re: (Score:2)
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!
2 Points (Score:3)
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
Money well spent (Score:2)
Re: (Score:2)
Why pay them? (Score:2)
Before I either get worked up or try defending this practice, why are they being paid this again? Badly written contracts or what?
Re: (Score:2)
This is one area where I'm inclined to blame it on corruption, not incompetence.
Re: (Score:2)
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
Why does this happen? (Score:5, Insightful)
Re: (Score:2)
Re:Why does this happen? (Score:5, Interesting)
Replace CEO with politician and the same applies (which is also why you see the two interchange so often).
Re: (Score:2)
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....
Re: (Score:2)
CEOs sit on each others' boards.
Re: (Score:2)
I'm guessing, because it's cheaper than defending yourself in court.
Re:Why does this happen? (Score:4, Interesting)
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?
Re: (Score:2)
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.
Re: (Score:2)
Re: (Score:2)
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.
Re: (Score:2)
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.
Re: (Score:2)
A good CEO is definitely worth the money. The trick is it's hard to know beforehand.
Re: (Score:2)
Yes, that misperception is the source of many troubles. A better statement of the situation would be that the wrong CEO can cost tens of millions of dollars in profits. The difference between how much money they can make with a competent CEO and a superstar CEO isn't that high.
As usual... (Score:3)
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.
CEO pay should be determined by stockholders (Score:3)
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.
Re: (Score:2)
Would anyone vote for more than 0?
To quote Mel Brooks... (Score:3)
"It's good to be the king."
It's all part of the business model (Score:2)
???
Profit!
Stock? (Score:2)
Political cover (Score:3)
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?
Re: (Score:3)
Here is the kicker. Mitt Romney has already done it. At least once. Probabl
the word is failed not futile (Score:2)
The two words have a meaningful difference, and her bid was hardly futile.
Re: (Score:2)
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.
The reason for this lies in share speculation (Score:2)
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
This is stupid and won't work, but... (Score:2)
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.
Other things they could have done with the money (Score:2)
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.
carpers of competence (Score:3)
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
No Surprise to Warren Buffett (Score:3)
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.
Careful (Score:2)
When the news of HP's troubles gets out, there will be a line around the block of people applying not to work there.
On the other hand, they could charge people just to come in and watch. How many BOD members can they fit in that tiny little car anyway?
Re: (Score:2, Troll)
stop hiring out side MBA's and promote people from with in.
It may be better to get people who have / are working at HP to do CEO and VP level work then some out side person who does not know a lot about what goes on in the inside of HP.
That only works if your corporate culture is healthy. Unfortunately, personality pervades an organization from the top down, and HP has spent years under some comically dysfunctional personalities. Anyone who presently occupies a post in HP upper managment is, ipso facto, the problem rather than the solution.
Re:stop hiring out side MBA's and promote people (Score:5, Interesting)
It may be better in terms of long term performance, but consider this approach to making money if you're on the board of a company:
1. Hire a perceived "rock star" CEO.
2. Stock goes up on the announcement.
3. Sell some of your stock right after the announcement (nothing suspicious about that, just collecting a gain)
4. If "rock star" CEO doesn't work out (as seen in some of the quarterly reports, so you aren't insider trading illegally) buy up some company stock as the price gets lower.
5. Fire bad CEO, stock goes up on the announcement.
6. Form CEO search committee, go to step 1.
This will eventually run the company into the ground, but a director could make a lot of gains on the way down. And they can continue to hold their seat on the board by timing things so that board elections happen between steps 4-6.
Re: (Score:2)
Actually, what you really want is to fire not just the CEO, but everyone about 3-4 levels down from there, all at the same time. Otherwise you just have the people who supported/enabled the failed CEO running the show.
Re: (Score:2)
Re:So HP is learning painfully expensive lessons (Score:4, Insightful)
"but we are talking about the one in a million type person/personality types. Just like there is little chance any kid you went to school with would ever be a NBA/NFL star or Hollywood A-lister (or even B and C) their chance at this level is equally small."
Hm... maybe that's the problem. HP (and other companies) should stop hiring one in a million, self-important sociopaths with overly inflated egos and try some normal, competent people.
Re:So HP is learning painfully expensive lessons (Score:4, Insightful)
Normal people arent competent.
Competent people are harder to find than 1 in a million.
Re: (Score:2)
Maybe we should just define competency differently then...
Re: (Score:2)
Re: (Score:2)
Re: (Score:3)
I won't even pretend to think I would ever be at this level, but I would love to sit in a room and watch how they work one day as a fly on the wall. Just what does set these people apart?
Newsflash: they're people like you and me, and eat and shit the exact same way we do. They even work the same way we do. The difference? They were at the right time, the right place to use their particular skills (marketing/design/direction in the case of Jobs, identification of long-term market trends in the case of Gerstner, etc). Most of them are smart - some even scary smart. But not 1:1000000 smart, and certainly not that exceedingly knowledgeable. From what I've seen, what sets CEOs apart from others
Re: (Score:2)
I won't even pretend to think I would ever be at this level, but I would love to sit in a room and watch how they work one day as a fly on the wall. Just what does set these people apart?
Newsflash: they're people like you and me, and eat and shit the exact same way we do. They even work the same way we do. The difference? They were at the right time, the right place to use their particular skills (marketing/design/direction in the case of Jobs, identification of long-term market trends in the case of Gerstner, etc). Most of them are smart - some even scary smart. But not 1:1000000 smart, and certainly not that exceedingly knowledgeable. From what I've seen, what sets CEOs apart from others is that they are very, very good at schmoozing. 1:1000000 good. Otherwise, they'd never have been in the right place at the right time.
QFT.
Sadly, megaschmoozing is wonderful for becoming CEO but not very good when it comes to generating long term profit.
Re: (Score:2)
I dont think it is a matter of "schmoozing", but rather of attitude and culturing. As an example, what sets people apart into cliches in high school such as jock, prep, nerd? Invariably it is as much to do with their attitude and experience as anything else. Executives have an "executive" attitude. Their whole life is about their work, with little time for even families on the side. Their ethics are different than the average worker, and their instincts usually honed from years of training in high class and
Re: (Score:2)
Hardly trolling; I think it's a good analogy.