08.11.10

H-P's PR

Crisis communications experts tell Peter Lauria that APCO, the public relations firm hired by H-P, only offered the company one option—get rid of its CEO—instead of presenting more private solutions.

Peter Lauria weighs in on Mark Hurd's departure and the public relations firm hired by H-P's board.

You can bet that APCO, the public relations firm hired by Hewlett-Packard for counsel on how to handle unsubstantiated sexual harassment allegations brought against CEO Mark Hurd, didn’t present directors of the computer company with an analysis of the humiliation it would endure for taking its advice and firing Hurd.

Indeed, it seems clear that APCO, a firm with little experience in crisis communications and seemingly even less knowledge about the historical ineptitude of H-P’s board, never thought that its recommendation to fire Hurd or face months of humiliation should the charges become public would be second-guessed. Or that H-P’s board, paralyzed by past folly, would blame it for the firestorm of controversy surrounding Hurd’s dismissal, which has arguably been more damaging to the company than the alleged harassment claims.

“The fact that there [was] a New York Times story pointing the finger at APCO makes me think that there is dissention on the board between those trying to justify their position in getting rid of Hurd and those that are second-guessing it,” said the head of a prominent crisis communications firm.

Still, according to this source and several other crisis communications experts—all of whom declined to be identified in this article—APCO appears to have presented H-P’s board with only one option for handling the situation when in fact there were many.

Reached for comment Wednesday, a rep for APCO told The Daily Beast: "We don't comment about private client matters."

Although Hurd was technically dismissed for falsifying expense reports and misappropriating company funds, those transgressions—which are being disputed by the former CEO’s representatives—were only uncovered as a result of an investigation into sexual harassment charges brought by B-movie actress Jodie Fisher that proved unfounded. Moreover, given that the inaccurate expense reporting wasn’t the basis of the investigation but a byproduct of it, sources say APCO could have advised H-P on ways to handle the matter internally.

“Once they realized there was no sexual harassment, there was at least two ways to play it,” said a second crisis communications expert. “They could have went public and charged [Davis] with trying to blackmail the company, or forced Mark to reimburse the company for the misstated expenses and be done with it.” (Although H-P hasn’t disclosed the amount Hurd is alleged to have falsified, a source told The Wall Street Journal it was around $20,000.)

Said a third source, who specializes in crisis communications for corporations: “They could have punished him but still kept the whole thing private.”

According to this source, APCO could have suggested taking away half of Hurd’s stock options for the year as well as writing up a formal report detailing the charges and the results of the investigation.

“You either take the moral high ground or say, ‘Hey, we all need to grow up,’ but instead they came up with this weird compromise,” said the third source.

“You put that in a drawer somewhere and if it never comes out, you never have to deal with it. But if it does come out, you can accurately say that you heard about it, investigated it, and have proof that you took appropriate action and dealt with it internally.”

Mark Hurd and 20 Outrageous CEO ParachutesThe decision by H-P’s board to fire Hurd, one of the most successful CEOs in corporate America who engineered a turnaround after taking over for former chairwoman Patricia Dunn, appears to be based on a desire to protect the company after an earlier scandal. In 2006, the company was found to have taken part in an investigation conducted by independent security experts trying to obtain the phone records of journalists in an effort to uncover the source of leaked information. When he assumed the CEO post after that incident, Hurd pledged to make H-P a more transparent and ethical organization. To be sure, sources told The Wall Street Journal that the strict ethics policy implemented by Hurd is what led directors to lose faith in him as details emerged from the investigation.

But according to the crisis communications experts, that rationale appears disingenuous. They point to the fact that Hurd wasn’t technically fired but instead was allowed to resign with a roughly $40 million severance package as evidence that they backed themselves into a corner by taking APCO’s advice to make the sexual harassment allegations public.

“You either take the moral high ground or say, ‘Hey, we all need to grow up,’ but instead they came up with this weird compromise,” said the third source.

The irony of the situation is that just one day before Hurd’s resignation was made public, he reportedly reached a private settlement with Fisher, who despite retaining pit bull lawyer Gloria Allred acknowledged that she didn’t have an “affair or intimate sexual relationship” with the CEO.

“That’s the part that doesn’t add up,” said a fourth expert in crisis communications. “If there was no relationship and she settled with him independently, then why would they go public with the allegations and charges afterwards? It seems to me that if they settled, this whole thing could have been avoided.”

Perhaps. But then again, maybe APCO made a very convincing case for the virtues of a public execution.

Peter Lauria is senior correspondent covering business, media, and entertainment for The Daily Beast. He previously covered music, movies, television, cable, radio, and corporate media as a business reporter for The New York Post. His work has also appeared in Avenue, Blender, and Media Magazine, and he's appeared on CNBC, Bloomberg, BBC Radio, and Reuters TV.