The news is astonishing. HP's high-performing CEO Mark Hurd has been ousted for what seems, from news reports, to be a modest amount of expense account fudging associated with a relationship with a contractor that he apparently wanted to keep secret. With Hurd's mega-million dollar compensation, he could have afforded to pay for the $1000-20,000 in expenses out of his own pocket in the first place, a gesture that he offered to make later in lieu of resigning. But he didn't. Undoubtedly additional facts will be revealed in coming days. Meanwhile, this situation raises a important question: How can very smart, accomplished people do such stupid things?
Hurd is not the first, and probably won't be the last, top leader to fall from grace over seemingly trivial and avoidable lapses of judgment. I've written recently about General McChrystal's off-the-cuff remarks to Rolling Stone magazine, which led to his removal from command by President Obama. A Boeing CEO's downfall was a trail of romantic exchanges with a mistress at the company using company email. Last year, a number of high-tech executives were implicated in an insider trading scheme which seemed to have consisted of casual conversations rather than willful intent. Numerous politicians have had to contend with the consequences of small mistakes in financial disclosure or resume claims, including British Members of Parliament implicated in recent housing reimbursement scandals. Reaching back into ancient history, I recall the story of Presidential candidate and U.S. Senator Gary Hart, who responded to media reports of sexual misconduct by daring the media to follow him — right into the arms of Donna Rice, a finding that abruptly terminated his campaign and future national prospects.
And these are just a few examples. We can only shake our heads and wonder, WHAT were they THINKING? What is the mind-set that permits people doing big things, such as Hurd's achievements in leading HP's strong growth and profitability, to trip over small things?
One explanation is embarrassment. Fear of disclosure of one mistake can start people down a slippery slope of ever-bigger lies to cover the first misstep. We all know intellectually that the cover-up is always worse than the crime, but that doesn't stop people from compounding the original error by hoping no one will notice.
Another is lack of attention. People in power can feel that they have so many important things to do that they leave the details to others. U.S. Treasury Secretary Timothy Geithner was stalled in his confirmation hearings because of some financial disclosure problems because he said he hadn't read the rules — but then was confirmed anyway, perhaps reinforcing the notion that missing a few details is okay if you didn't intend to do harm and your job is mission critical. Some of the CEOs implicated in accounting scandals tried to shift the blame to their CFOs to whom they delegated the details, pleading ignorance as an excuse.
A third explanation is arrogance. Those who succeed despite the odds and keep succeeding when others fail can too easily begin to feel that the rules don't apply. They start to feel invincible.
Some would say that we shouldn't sweat the small stuff. If the job performance is stellar enough, we shouldn't punish results-producing leaders for an error here and there, even on company time and with company money. I'm sure that some HP shareholders will make that argument, decrying the board's actions in forcing Hurd out. The HP general counsel, Michael Holston, defended the board's decision to the New York Times, saying that Hurd "showed a profound lack of judgment."
As is often said, the devil is in the details — and so is the angel. Signs of character are most visible when they are least visible — that is, demonstrated by what people do when they think no one is watching, such as following the rules or taking the moral high ground with no audience observing them. That's why the signals of a leader's judgment lies in the small things. That's why we don't want to entrust national security, corporate finances, or leadership of a major enterprise to people who can't put institutional interests above personal indulgences or turn in an honest expense report.