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.'"
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: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: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: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: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.