HP CEO Resigns Stands to receive $40+ million in Severance

Mark Hurd recently resigned from his position as Hewlett-Packard Co. Chief Executive.  Hurd’s resignation was surrounded by controversy.  Initially the move left many scratching their heads in wonder.  Hurd had wowed Wall Street with his seeming ability to cut costs and move the company back in the right direction.  However, problems with his expense reports gave HP a reason to force Hurd to resign.

Had the company fired Hurd for cause, they would have faced a messy legal battle.  Proving a firing for cause can be difficult.  By forcing Hurd to resign, the company was able to avoid heading to the courtroom, but Hurd may be able to walk away with a severance package in excess of $40 million.  It has been reported that his contract contained no language that precludes Hurd from receiving a severance package for a breach of ethics.  A clause stating that no severance will be given under certain circumstances, including ethical breaches, is standard in most companies’ contracts with executives.  The fact that Hurd’s contract apparently contained no such language has left many wondering how HP managed to overlook the clause.

According to a HP filing, Hurd is guaranteed to get $12.2 million, however he stands to gain significantly more.  It appears that Hurd will still have the right to sell his company vested stock options when the next trading window opens, which runs from August 23 until September 7.  He is also entitled to performance base shares he was granted in January of 2008, and time-based shares he received in December of 2009.

Pay experts have said that all told, Hurd will likely walk away from Hewlett-Packard with at least $40 million.

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