Hewlett-Packard's directors have been sued by a Massachusetts pension fund that alleges they violated their fiduciary duties in connection with the abrupt departure of Chief Executive Mark Hurd, causing the company's shares to fall.
The shareholder derivative lawsuit accused the directors of failing to properly disclose the existence of an internal probe into Hurd's activities, failing to "police insider trading" by company executives, and trying to give Hurd tens of millions of dollars of severance he did not deserve.
"HP lost significant credibility," according to the lawsuit by the Brockton Contributory Retirement System, filed Tuesday in the Superior Court of Santa Clara County, California.
Hurd resigned as chairman and chief executive after the investigation found that he had allegedly falsified expense reports to cover a relationship with a female marketing consultant.
The probe also examined a sexual harassment claim, but found it lacked merit.
Michael Holston, Hewlett-Packard's general counsel, concluded that Hurd had demonstrated a "profound lack of judgment that seriously undermined his credibility."
The Palo Alto, California-based company's market value has fallen about US$14.4 billion ($20.1 billion) since Hurd's resignation was announced after the August 6 stock market close, including about US$8.6 billion on Monday alone, Reuters data show.
Hewlett-Packard shares closed down 1.5 percent on Thursday at US$40.14.
Hewlett-Packard did not immediately return a request for comment. Mary Blasy, a lawyer for the Connecticut-based firm Scott + Scott LLP representing the pension fund, also did not return a request for comment.
Among the defendants in the lawsuit is Cathie Lesjak, the company's chief financial officer who became interim chief executive after Hurd's departure.
The complaint seeks a variety of governance changes, an order that the individual defendants pay Hewlett-Packard damages, the imposition of a constructive trust on Hurd's severance and profits from alleged improper trading activities, punitive damages, and other remedies.
Shareholder derivative complaints are filed on behalf of companies to assert claims that management or directors failed to make.