Reference no: EM132204476
On the Edge Hewlett-Packard’s Secrets and Oracle’s New Hire On August 6, 2010, the board of directors of computer company Hewlett-Packard (HP) fired Mark Hurd, CEO of the com- pany. Earlier Hurd had been accused of sexual harassment by Jodie Fisher, who had been hired to work at HP marketing events that Hurd had attended. Investigators found that Hurd did not violate the company’s sexual harassment policies, but said he had falsified some expense account entries, apparently to conceal his relationship with Fisher—a relationship that Hurd, who was married, insisted was not sexual. The falsified entries violated HP’s written business ethics standards, the board said, so it had to fire him, although his contract required that HP give him about $30 million as a severance package. The size of the severance was in part due to the fact that when Hurd became CEO, HP was in trouble and he not only managed to turn it around but also increased company revenues by almost 50 per- cent, for which stockholders were extremely grateful. Although he said he did not prepare his own expense reports, Hurd admitted: “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 and which have guided me throughout my career.” About a month after leaving the company, Hurd announced he had been hired by Oracle Corporation as president with a sal- ary of $950,000 a year, a bonus of $10 million, and stock options for 10 million shares of Oracle. Like HP, Oracle is also a computer company and so is a major direct competitor of HP. At Oracle, Hurd replaced former president Charles Phillips, who had been fired after a woman, YaVaughnie Wilkins, said she was his mistress and announced on a series of large billboards posted along major roads in New York, San Francisco, and Atlanta: “You are my soulmate forever.” Like Hurd, Phillips was also married, although Phillips divorced shortly after the billboards appeared.
As HP’s former CEO, Hurd knew HP’s weaknesses and its future products, pricing, margins, customers, planned acquisi- tions, research discoveries, and company strategies, including how it planned to compete against Oracle. Some news reports noted that Hurd’s inside knowledge of “HP’s strategy and mar- kets and its enterprise customers” was certain to help Oracle. HP’s board of directors agreed and sued Hurd, arguing that he
had signed a confidentiality agreement to keep all HP informa- tion secret, especially from competitors and that in his new position, he could not perform his duties for Oracle without necessarily using and relying on HP’s trade secrets and confi- dential information. Defenders of Hurd argued that HP had so many lines of business that the agreement would have effec- tively barred Hurd from any employment in which he could use his executive skills, so it was unfair and invalid both legally and morally. The confidentiality agreement Hurd had signed while at HP read:
This agreement concerns trade secrets, confidential business and technical information, and know-how not generally known to the public . . . which is acquired or produced by me in con- nection with my employment by HP . . . I agree to use such information only in the performance of HP duties . . . and to use all reasonable precautions to assure that such information is not disclosed to unauthorized persons or used in an unauthorized manner, both during and after my employment with HP. . . . I agree that for a period of twelve months following the termina- tion of my employment with HP . . . I will not provide services to a competitor in any role or position (as an employee, consultant, or otherwise).
Assuming that Mark Hurd really had (intentionally or unintentionally) falsified some entries in his expense accounts, evaluate whether this act was enough of a reason for HP's board of directors to fire him, whether it was morally wrong for the board to fire him, and whether it was a wise decision.
Do you agree that Hurd could not perform his duties for Oracle without violating the agreement he had signed with HP? Why or why not? To what degree do you think Hurd could rely on the distinction between skills and information? Can you explain the position of Hurd's defenders in their argument that the confidentiality agreement was unfair and morally invalid?
Was it wrong for Hurd to accept the position of President at Oracle? Was it wrong of Oracle to hire him?