Ethics Cloak On Politics

“Politics is the art of looking for trouble, finding it whether it exists or not, diagnosing it incorrectly, and applying the wrong remedy.” – Ernest Benn

Mark Hurd, CEO of HP lost his job over the allegations made by the board that he breached the code of business ethics of the organization. Initially, the investigation was for sexual harassment charges leveled against him. Subsequently, the explanation given is that he is all clear of sexual harassment charges, but had submitted incorrect reimbursement bills for the meetings he had with the contractor. HP board is said to have taken a high moral ground and terminated his services. The value of these expenses would be insignificant in comparison to his salary and perks.

There seems to be more than what meets the eye. While it might be considered speculation, it appears that Mark Hurd usefulness as CEO had expired and the board was looking for a way out. Possibility exists, that Mr. Hurd may have objected to leaving his job, hence the allegations were framed. He may have realized that instead of washing dirty linen in public, it is better to quit and it is not worth salvaging the relationship with HP board.

So the question comes up, is HP board really being ethical and demonstrating good corporate governance, or are they using it to camouflage personal agendas. Time will tell whether the decision to terminate Mark Hurd’s services was beneficial for HP.

Interestingly enough, if one considers the financial crises, very few CXO’s suffered the same fate as Mark Hurd. The Citibank from being the largest bank in the world needed a government bailout. The CXO’s and the board have retained their positions. There was much flak regarding Vikram Pandit’s performance but over time everything appears to have been rolled under the carpet.

If you recall in 2008, the French bank Societe Generale had reported a fraud of $7.14 billion, the history’s biggest. A single futures trader Jerome Kerviel was blamed for it, and subsequently it was stated that it was due to lapse of internal controls. Mr. Boutan the CEO then, was asked to remain initially and stepped down in May 2008. Jerome Kerviel’s contention that seniors were aware of the transactions he was entering into holds some ground. In each bank there is a system of MIS and reports which seniors review periodically to monitor profits and performance. The bank would have very dubious internal control systems if one middle level employee could supersede them to enter into such transactions over a period of two years. In this case also, most of the senior management was reshuffled but retained their seniority. It again appeared that politics was covered in a cloak of corporate governance.

If we see these cases, Mark Hurd’s sins of business misconduct appear negligible. He still lost his job while showing a tremendous performance and growth for HP. Although this appears cynical, when compared to the other cases, the message comes across that it is alright for CXO’s to completely run down the company and make it bankrupt; however an immaterial amount of bills supposedly submitted by them can make them lose their jobs.

One has to question here, is HP really showing good corporate governance when its previous CEO also left under a cloud. Can we consider this sound business ethics or has it opened a can of worms?

Is it really possible to separate corporate governance from the board politics of the organization? Is corporate governance a useful tool to dispose of unwanted CXO’s as it is comparatively easy to find some scope of misconduct? Will the board of major organizations continue to provide lip service to corporate governance and the public has no other recourse but to accept this reality?

Welcome your opinion on this topic; do you think HP board did the right thing?

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