The takeaway from the latest top gun flame-out at Hewlett-Packard: Chief executive ‘success,’ in America today, essentially demands no more than greed and a developmentally arrested ego.
The tall tales we’ve inherited from ages long gone we call myths. The tall tales that spook our contemporary everyday life we call “urban legends.” But we’ve yet to come up with a label for the tall tales that Corporate America showers down upon us.
These corporate tall tales, unlike urban legends, actually make a difference in our lives. Corporate tall tales don’t just drive the decisions that drive our economy. They drive these decisions in a reckless direction. And the most reckless of these drivers? That may be the tall tale of the “rare talent.”
We’ve heard this whopper quite a bit over recent decades. Running a major corporation, we’re told, takes enormous — and exceedingly rare — executive talent. To get this top talent, and keep it, firms have no choice but to pay top dollar and then some. If they don’t, they’ll never succeed in the fiercely competitive global marketplace, and we’ll all be doomed.
Five years ago, the corporate board at America’s premiere technology company, Hewlett-Packard, anointed Mark Hurd one of these rare talents and named him HP’s new CEO. Earlier this month, that same HP board shoved a disgraced Hurd out the door, the same door that Hurd’s rare and talented predecessor, Carly Fiorina, had been shoved out of early in 2005.
Out goes one “rare” talent, in goes another. This CEO revolving door has become Corporate America’s standard operating procedure. Major companies — high-tech giants like Yahoo, retailers like Home Depot, financial kingpins like Merrill Lynch — routinely shell out fortunes to sign wonderfully “special” talents they then proceed, a few years later, to ingloriously dump.
But none of these dumpings ever seem to dent the corporate demand for CEO superstar “talent.” Corporate boards simply dispatch their failed talents off into the sunset, with generous severance packages, and proudly announce their new corporate savior du jour — and that savior’s generous sign-on package.
In HP’s case, Carly Fiorina, the current GOP candidate for California’s open U.S. Senate seat, left the company with $42.4 million in severance and stock options, after entering HP’s executive suite with a four-year deal that ensured her $90 million. Mark Hurd followed Fiorina into HP’s chief executive suite with a contract that featured over $20 million in signing inducements.
HP’s engineer founders, William Hewlett and David Packard, would no doubt be aghast. The company they founded in 1939 celebrated and valued all employees, not just top executives. Their philosophy — the “HP way” — shunned hierarchy and shared rewards.
Sacrifices, too. During one 1970s economic downturn, the company avoided layoffs by cutting pay 10 percent across the entire board, executives included.
At the height of the HP way, as one reporter would marvel, Hewlett-Packard’s CEO worked from “a cubicle in the midst of a vast room instead of a corner office.” Mark Hurd, in the first speech as HP’s top exec, played to that spirit.
“Building a great company isn’t all about a CEO,” he pronounced five years ago to cheers of delight from HP employees. “It’s a team sport.”
But Hurd quickly proved to be something less than a team player. Four months into his Hewlett-Packard reign, Hurd announced plans to cut over 14,000 jobs, a tenth of HP’s global workforce, and started shutting down the company’s traditional pension program.
Conspicuously exempt from this cost-cutting offensive: HP’s executive suites. Just days before the layoff announcement, HP introduced its new chief information officer, Randall Mott, a former executive at Wal-Mart. Mott started his CIO duties with a pay package worth $15.3 million.
Hurd’s early months as CEO would set the tone. William Hewlett and David Packard, years earlier, had built HP market share by valuing employees and investing in R&D. Hurd cut R&D and abrasively dissed employees at every opportunity. He would “grow” HP by “merging and purging” — taking out debt to buy up rivals, grab their customers, and fire their workers.
Hurd wheeled and dealed his takeovers at a frantic pace. In his first 46 months at HP, he orchestrated 31 mergers and, in the process, killed nearly 40,000 jobs.
Hurd treated consumers with no more respect than workers. At one point during his tenure, HP was upping prices on computer printer ink — the company’s cash cow — at over double the inflation rate, charging $30 for cartridges that cost HP a mere $3 to manufacture.
Hurd’s HP gave customer service equally short-shrift. In early 2009, after surveying 44,000 readers, PCWorld magazine rated HP dead-last — among top computer makers — on reliability and service for laptops, dead-last for printers, and next to dead-last for desktops.
On Wall Street, meanwhile, nobody noticed — or cared. Investors were too busy shouting Hurd’s praises. HP’s share price, after all, had doubled under his Hurd’s watch. In Corporate America’s eyes, Hurd had truly proven himself a rare and special talent. He had a paycheck to match. This past April, Forbes rated Hurd the top-paid executive in America’s technology hardware industry.
But what “rare” talent did Hurd actually demonstrate? Does slashing R&D demand an executive expertise in excruciatingly short global supply? Are CEOs who can wheel and deal their way to one job-killing merger after another few and far between? Does ripping off consumers require some gift that only the universe’s finest executives have been granted?
In reality, Hurd demonstrated no special talent. His basic merge-and-purge business plan at HP made sense only as a personal enrichment strategy.
“Boosting earnings via acquisitions and cost cutting,” as corporate analyst Eleanor Bloxham noted recently in Fortune, “is not a sustainable business model and wouldn’t have been one for the long term, with or without Hurd.”
Sustainable business models, of course, do have a drawback. They don’t make anybody super rich. So why bother, Corporate America and Wall Street have jointly concluded, putting one together?
The Hewlett-Packard board of directors certainly didn’t hold Hurd’s failure to think sustainably against him. They lavished upon him high praise and rewards right up until the moment earlier this month when the married 53-year-old Hurd became an public relations liability — by wining and dining a 50-year-old former erotic actress and fudging HP’s books to cover up his indiscretion.
HP’s next CEO will almost certainly pick up where Hurd left off, just as Hurd picked up where Carly Fiorina left off. The new CEO will wow Wall Street with still more cost cutting and wheeling and dealing.
None of that will take rare talent. Just greed.
Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up to receive Too Much in your email inbox.