Mark Hurd, the man credited with saving Hewlett-Packard, was forced to step down as its chief executive yesterday after a sexual harassment inquiry unearthed false expenses claims designed to cover up a "close personal relationship" with a former contractor.
The giant IT company's shares have doubled in value during Hurd's five-year stewardship; news of his resignation sent them tumbling almost 10%. HP said it had learned about the relationship several weeks ago, when a woman who did marketing work for HP sent a letter accusing Hurd, 53, and the company of sexual harassment. An investigation found that Hurd had falsified expenses reports and other financial documents to conceal the relationship. The company concluded that its sexual harassment policy had not been violated but that its code of business conduct had been.
Hurd said the decision to go was a "painful" one but admitted the investigation had made it difficult for him to continue. "As the investigation progressed, I realised there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP," he said. "After a number of discussions with members of the board, I will move aside and the board will search for new leadership."
Hurd, who is married with two children, will get a $12.2m (£7.6m) severance payment and nearly 350,000 shares of HP stock, worth about $16m based on Friday's closing price. The company has also extended the deadline for exercising an option to buy up to 775,000 HP shares.
"This is a painful decision for me to make after five years at HP, but… I believe this is the only decision the board and I could make at this time," said Hurd. "I want to stress that this in no way reflects on the operating performance or financial integrity of HP."
Hurd is beloved by investors for his relentless cost-cutting but widely scorned by the thousands of employees he has axed along the way. He is credited with rescuing HP from the mess left behind by his predecessor, Carly Fiorina, and has turned it into the world's biggest technology company in sales terms by reducing its reliance on making printer cartridges and moving into technology services and other fast-growing areas of the market.
Robert Ryan, the company's senior non-executive director, said the board had "deliberated extensively" on whether Hurd should go, adding that board members recognised "the considerable value that Mark has contributed to HP over the past five years".
HP's general counsel Michael Holston was more blunt, describing a "systematic pattern" of submitting falsified financial reports to hide the relationship. "The facts that drove the decision for the company had to with integrity, had to do with credibility, had to do with honesty," he said. He added that the inaccurate financial reports in question related only to Hurd's personal expenses.
A person with intimate knowledge of the case told reporters that the woman worked as a host for more than a dozen events for chief executives that Hurd attended between 2007 and 2009. The source said the disputed expenses ranged from $1,000 to $20,000 per item for travel, lodging and meals. The total amount of the expenses in dispute is not known, but Hurd has offered to repay the sums in question.
Cathie Lesjak, the company's chief financial officer, will serve as interim chief executive while a successor is sought.
News of Hurd's departure overshadowed better-than-expected third-quarter results from HP. Shares in the New York-listed company, which had closed at $46.30 on Friday, tumbled 9.7% in after-hours trading following news of Hurd's resignation.