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Judge tosses HP shareholder suit over ex-CEO’s payout

Court rules that board acted in good faith in approving Mark Hurd’s severance package

Hewlett-Packard Co. (HP) can finally breathe a little easier nearly two years after it suffered a major C-suite scandal.

In August 2010, Mark Hurd, who currently is president at Oracle Corp., resigned from his position as CEO of HP amid allegations that he sexually harassed Jodie Fisher, an HP marketing consultant and former reality TV star. Although HP determined that Hurd didn’t violate its corporate sexual harassment policy, the company did find that he had falsified expense reports amounting to nearly $20,000 in an attempt to hide his relationship with Fisher.

Upon his departure, Hurd received $12.2 million in severance pay and nearly $35 million in vested stock. The hefty payout angered Lawrence Zucker, an HP shareholder, who sued HP’s board of directors, claiming they wasted company money by agreeing to pay Hurd the large sum.

But last Thursday, Judge Donald Parsons of the Delaware Chancery Court tossed Zucker’s suit. In his 30-page opinion, Judge Parsons wrote that HP’s directors acted in good faith in approving Hurd’s payment, even though the amount “may appear extremely rich or altogether distasteful to some.” Additioinally, he wrote, the severance could be considered payment for past service. On top of that, Judge Parsons noted that Hurd helped HP with the transition to a new leader and agreed to a confidentiality period upon his departure to Oracle.

Read more InsideCounsel stories about HP’s Hurd scandal:

Letter detailing Hurd’s misconduct is unsealed

C-Suite Scandal

Inevitable Impediment

Executive's Departure Offers Lesson on Handling Sexual Harassment Issues

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