HP CEO Hurd's Severance Pay Could Hit $40 Million: Experts

Hewlett-Packard's former CEO Mark Hurd is walking away with severance and other grants worth an estimated $34.5 million—a number that could rise to more than $40 million, according to compensation experts.

Along with $12 million in cash severance, Hurd gets to keep $8.9 million in stock options, $12.7 million in performance-based stock units and, more than $600,000 in restricted stock units, according to James F. Reda & Associates, a provider of independent compensation consulting to boards of directors and top-level management.

Once medical and dental benefits are factored in, the amount surpasses $34 million, the firm said.

Hurd stepped down Friday after HP said he had falsified expense reports to conceal a relationship with a female contractor, who accused him of sexual harassment. HP's stock

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Compensation experts see Hurd's total package rising to more than $40 million. That's because the company's fiscal year performance and a rising stock price into September will boost the value of Hurd's options and performance-based stock units.

Whatever the number, it's still more than Hurd's pay last year of $30 million, which put him among the 10 highest paid CEOs for 2009.

As for the directors granting the severance, some compensation experts have questioned their decision to pay him at all, given that fudging expense reports is a firing offense for some employees.

Kevin Murphy, of University of Southern California Marshall School, questioned in an email to CNBC "why lying on expense reports isn't sufficient for termination with cause which would presumably cancel most severance payments."

And Frank Glassner of Veritas Frank Glassner told CNBC it's "a huge lapse in thought and judgement by the board."

But Mark Borges of Compensia notes that firing a CEO for cause is defined very narrowly in their contacts, making it difficult for a board to actually do it.

However, as compensation expert Brian Foley of Brian Foley & Company pointed out, HP's board may have had the opportunity to fire Hurd "for cause."

He said that the original employment agreement, signed by Hurd on March 29, 2005, used the "cause" definition from HP's Severance Program for Executives. Based on an August 2005 SEC (Securities and Exchange Commission) filing, the program's definition of "cause" is "conduct (including action or failure to act) that is not in the best interest of, or is injurious to HP." As Foley noted, that is pretty broad definition.

This is not the first time HP's board has been criticized for its generosity to an outgoing CEO. Hurd's predecessor Carly Fiorina walked away with $21.4 million in severance and $21 million in stock options when she was fired.

In a 2006 proxy filing describing the contract the board signed with Hurd in 2005, the company said the board did not want to be accused of overpaying again. Still, they rewarded Hurd handsomely. The compensation research firm Equilar reported that Hurd was paid $134.2 million dollars from 2005 through 2009, a time when the company's stock nearly doubled.

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