Fire Alarm Companies

While early-stage companies are particularly fragile, we expect the mature are less vulnerable to bad advice condition

"A good board can not make a company, but a necessary evil to end it."Thus spake Barry Weinman, the capitalist, sir, when I joined the brotherhood of venture capital. He meant to tell me to take into account the co-investors on the board of the companies in our portfolio. He was right. We, the vulture capitalists are supposed to be ruthless - but, in fact, we are without teeth. We see problems in the future, but we hatched that dispute and make the tough decisions only when the damage is already done.

While early-stage companies are particularly fragile, we expect the mature, having survived childhood diseases, are less vulnerable to the disease bad advice. But for a large company, a dysfunctional board of directors can be as toxic as a group of investors is divided by a start-up. We have two icons of the valley to prove it: Yahoo and HP.

Last week, Yahoo unceremoniously expelled three years of its CEO, Carol Bartz,who immediately and publicly questioned the virility of his chair and called the Board a bunch of doofus. Wisely, Roy Bostock, chairman in question, refused to take the bait. Bartz subsided. And the "not for sale" Yahoo directors and temporary CEO wrote to the soldiers, urging them to keep up the good work - when they are caucusing with investment bankers for a sale. Joint or limb one by one.

Here is a small sample of the message of the co-founders of Yahoo and the president hopes will motivate the troops:

What Yahoo has to do better - and we talked about this - is to accelerate innovation, to reactivate the inspiration, and give our users what they want now ...

Gee, thanks. We will accelerate innovation, the troops of repeating in unison. Why did not I think of it before. All Things D's Kara Swisher offers full and savage treatment that corresponds to lame posts on top.

As for HP, this week was the opportunity of its board to solidify its reputation for incompetence and rudeness.They rose to the occasion. As recounted last year in August (Curious Summer), September (Redemption of More Insanity Ahead), and October (HP's Board Gets No Respect) Monday Notes, this group of supposedly wise and experienced individuals managed to accumulate a sorry track record of boneheaded decisions. Admittedly, there's a revolving boardroom door, directors have come and gone, but something in the coffee keeps addling their brains.

To wit:

• In 1999, HP hired Carly Fiorina as CEO. She is a sales executive at Lucent, without qualification to run a technology giant. Was there no more to be found throughout the industry? Behind the bad decision is not the failure of the Board at one of its most important missions: succession planning, the preparation of one or more candidates for Director General of waiting.
• In 2002, after much infighting, the revenue table with the acquisition of Compaq expensive: $ 25 billion, 36% of the combined entity to the stockholders of Compaq and a power struggle with the heirs of Hewlett ugly.
• A rare moment of lucidity on board, or is the incessant pounding of the facts? In 2005, Carly was the boot and replaced by an executive of industry experience, Mark Hurd, who arrived with a lap record around NCR.
• Members of the board and execs get caught in unsavory pretexting shenanigans, spying on directors and employees. The board chair and the company's general counsel leave.
• Hurd delivery, some say that cutting too: HP is the # 1 technology company ahead of IBM. Shareholders love new CEO.
• Five years later, in August 2010 after alleged but unproven allegations of misconduct of a sexual nature, and of course spending problems, but minor reporting, Hurd is shown the door. The decision is debatable, but what follows is not: at the request of the board, the company issued public statements disparaging Hurd, accusing him of ethics violations and misjudgments. And then, after pillory him, inexplicably, the company paid to the "unfortunate" Hurd to the tune of $ 30 million to $ 40m. HP's shareholders sued the directors and the media will roast.
• Hurd is immediately hired by Larry Ellison of Oracle, do not miss the opportunity to mock HP directory. The same applies to Joe Nocera in his New York Times column: "The board of Hewlett-Packard is back to doing what he does best:. Shot in the foot"
• Saying it will "inevitably" misuse of confidential information from HP on their new jobs in Oracle, the board authorizes a lawsuit against Hurd. Two weeks later, under the combined weight of the ridiculous and the void non-compete clauses, HP is installed.
• After failing once again in its mission to develop CEO successors internally, HP Board hires a hurry Leo Apotheker, a veteran of the enterprise software industry, former CEO of industry giant SAP. In haste? Yes: As the New York Times says that in this "Vote to hire a head without knowing it" column, when the board decided to hire Apotheker, "the majority of board members had not met Mr Apotheker" . How not to fire these directors are so atrocious for a period of trial, especially after his vicious verbal attacks Hurd for his alleged bad decision? What the most important duty manager hiring and firing of the CEO? His excuse? "But we were too tired of all the infighting." Shoot Hurd was very hard on these fragile creatures.
• In September 2010, Apotheker takes the helm and, understandably, remakes the board, with seven new directors, especially Ray Lane, once president and CEO of Oracle and Kleiner Perkins Managing Partner and Meg Whitman, former CEO eBay and expensive defeated candidate for the post of governor of California.
• Last week, less than a year on the job, it's time for Leon to be fired. He took controversial decisions: to leave the PC business and stop investing HP WebOS devices after initial poor performance of the panel. Shareholders did not like the form or substance of these decisions and actions dumped. And the Board of dumping Leo. Nothing blatantly unfair, this is normal CEO of occupational hazards.
• However, within hours of the departure of Leo, faithful to its code of conduct for the sick, the Board of HP goes to defame her ex-CEO. After taking the title of chief executive, Ray Lane offers a long list of reasons that HP had to let go Apotheker. What prevents the track to discuss is why the Board approved the decisions of Leo, and his public position.
• Leo, wisely, issues a sober farewell memo to HP employees.

And now the grand finale: the appointment ofMeg Whitmanas President of one of the largest technology companies in the world.She has a background in technology from scratch, his is in the consumer business. On eBay, he managed to screw up the acquisition of Skype, failing to graft onto the auction business and ultimately deliver the shareholders of a loss of $ 2.75bn. And in the Valley, people who do the actual work on eBay, tell how divisions, unpleasant and distant era.
This does not prevent Ray Lane Whitman shower with praise, and fellow of the signing of a memorandum to the troops. That letter is totally devoid of actionable content, full of platitudes such as "First let's say that we are true believers in the future of HP."Do not tell me.

Again, the board did not look inside or outside a candidate with the real sector of high technology and large scale management of the credentials of the company. Meg Whitman como''una present uniquely qualified "candidates on Spencer Stuart, or any number of recruiters senior executives could find is an insult to HP shareholders and employees.

In the end, as some see it, this could be a takeover not very subtle by Ray Lane, co-signed note at the bottom of the note to the troops: Meg and Ray. As the newly appointed chief executive, is set to "help" Meg. Why appoint a chief executive who needs such assistance in the first place? It would not be a normal, non-executive chairman or director of any assistance anyway?

But wait, there's more than the failure of the board to really look for the candidate best director.Kara Swisher as related in his "Conversations Whitman ATD About his new job at HP" post, Ray Lane, admits he has been talking to Meg about what amounts to a coup boardroom for eight months:

Lane said he came to Whitman for the job at some point after joining the boardeight months ago, Because he felt he had the kind of leadership that HP needed and lacked under ousted President Leo Apotheker now.

This just three or four months after the shower with Leo effusive praise:

"I have known and admired in Leo for almost 20 years. It is ideal to build on solid foundations for HP, building on their many advantages and keep the company at the forefront of innovation."

The same kind of praise that is choking with Meg ...

I'm isolated in my point of view of movement of Lane. See this from my favorite Twitterer:


Or read Dan Lyon piece sarcastically but aptly titled "HP President Ray Lane: A profile of courage".
His conclusion:
1. Watch your back, Meg Whitman.
2. You stay classy, ??Ray Lane.
Does this board have no self-respect?

As for HP employees and students as a server, ask: What happened to Bill and Dave's company, with the HP Way?

JLG@mondaynote.com