Posted on 16 Aug 2010
In the wake of the unexpected departure of Mark Hurd, former CEO of Hewlett-Packard Company, and a subsequent decline in company stock, the directors of HP have been named in a shareholder derivative lawsuit by a Massachusetts pension fund accusing the directors of violating their fiduciary duties regarding the CEO's exit.
The lawsuit filed by the Brockton Contributory Retirement System alleges the HP directors failed to properly disclose the existence of an internal probe into Hurd's activities, failing to "police insider trading" by company executives, and trying to give Hurd tens of millions of dollars of severance he did not deserve. "HP lost significant credibility," according to the lawsuit.
Hurd resigned as chairman and chief executive after the investigation found that he had allegedly falsified expense reports to cover a relationship with a female marketing consultant. The probe also examined a sexual harassment claim, but found it lacked merit.
Michael Holston, Hewlett-Packard's general counsel, concluded that Hurd had demonstrated a "profound lack of judgment that seriously undermined his credibility." The Palo Alto, California-based company's market value has fallen about $14.4 bn since Hurd's resignation was announced after the Aug. 6 stock market close, including about $8.6 bn on Monday alone.
Among the defendants in the lawsuit is Cathie Lesjak, the company's chief financial officer who became interim chief executive after Hurd's departure.
The complaint seeks a variety of governance changes, an order that the individual defendants pay Hewlett-Packard damages, the imposition of a constructive trust on Hurd's severance and profits from alleged improper trading activities, punitive damages, and other remedies.
Shareholder derivative complaints are filed on behalf of companies to assert claims that management or directors failed to make.