A LOOPHOLE in Mark Hurd’s contract made it hard for Hewlett-Packard to dismiss him outright and added to pressure on the board to give him severance pay which could be worth nearly $40 million despite his admission of ethical lapses, according to experts in boardroom practice.

The terms of the former HP chief executive’s employment did not lay out any specific circumstances in which the company would fire him “for cause”, which would have enabled it to avoid paying severance.

This contrasts with the contracts of most US chief executives in the US, whose contracts usually lay out more detailed conditions on which they can be fired, including for breaches of a company’s ethical code of behaviour, said Nell Minow, a US corporate governance expert.

Mr Hurd resigned a week ago after admitting that he did not “live up to the standards and principles of trust, respect and integrity that I have espoused at HP”.

The company said he had left by agreement with the board over expense violations and a “close personal relationship” with an external contractor that contravened its code of conduct.

Mr Hurd’s severance includes $12 million in cash and stock benefits. The precise value of the package has yet to be determined but probably comes close to $40 million. The Hurd payout has drawn criticism from governance experts and has already become a focus of the first shareholder lawsuit filed against HP over his departure. – (Copyright The Financial Times Limited 2010)