Today, in a sharply worded post titled “In Defense of Standards, Ethics, and Honest Financial Reporting at Hewlett-Packard,” prominent venture capitalist Ben Horowitz took to his blog to shoot back at the plethora of critics of the Hewlett-Packard board for their conduct related to the controversial jettisoning of CEO Mark Hurd.

That came after Hurd admitted to filing inaccurate expense reports related to an outside contractor who worked closely with him, and who later alleged sexual harassment on his part. Those charges were dropped after Hurd settled with the woman, named Jodie Fisher, but before HP could complete an investigation.

Since then, the board has been under fire from Oracle (ORCL) CEO Larry Ellison, who hired Hurd as the database giant’s president, and former GE head Jack Welch, who laid into the HP board this week.

Now Horowitz has fired back and here’s a taste of his ire, which is aimed at execs, the media and more:

If a CEO is prone to compromise for any reason, he will have every reason. This time it was his expense report. Next time will it be a marginal accrued liability? A deal that came in at 12:01 am on the last day of the quarter? This is a slippery slope that a public board simply cannot tolerate.

And:

Who is Jodie Fisher? According to press reports, Fisher is a former Playboy model, reality show contestant, and softcore porn movie actress with no work history relevant to her job with HP. She was hired by Hewlett-Packard and paid up to $5,000 per meeting to meet with Fortune 50 CEOs.

The mainstream press has reported these facts as mundane, ordinary, and hardly worth concern. I disagree. HP employs over 300,000 people. Every single one of HP’s employees is keenly interested in the qualities, skill sets, and behaviors that HP values most. Financial compensation and access to the CEO are the most important ways that HP communicates what it values to its employees. Jodie Fisher had more access to the CEO and was paid more than 99.9% of HP’s workforce, despite having no traditional qualifications.

It’s important to note that this was not Hurd paying for his personal extracurricular activity out of his own pocket. This was the Hewlett-Packard Corporation paying a softcore porn movie star with no relevant work experience more than it pays Harvard graduates with 20 years of industry experience. This was the company spitting in the face of the people who worked hard and sacrificed every day to help the company win in the market. It was completely and categorically unacceptable.

And:

There are many who take the view that business is singular in purpose–to increase shareholder value. They further take the position that constraining that purpose in any way is inefficient and counterproductive. The mainstream press seems to have broadly adopted this position in its attacks on HP. The Wall Street Journal Op Ed page even complained that businesses were being held to an unfair standard when compared to politicians.

I do not subscribe to this view. Running our companies with no moral or ethical standards is bad for society, bad for the country, and ultimately leads to criminal behavior.

So, what do you really think, Ben?

Horowitz does have an interest in the situation, which he discloses clearly at the top of his piece: His longtime business and now venture partner is HP (HPQ) board member Marc Andreessen.

And the Silicon Valley soap opera continues….

“I’m not afraid
To take a stand”
—Eminem

Disclaimer: my business partner, Marc Andreessen, is on the board of directors of Hewlett-Packard (HPQ). I note that I have no inside information, and this blog post is based purely on published material. In 2007, I sold Opsware, the company that I founded and ran to Hewlett-Packard for $1.6B. I worked at Hewlett-Packard from 2007 to 2008 as an executive in the software business.

Recently, my old company Hewlett-Packard has been in the news–and not in a good way. I’ve been watching the coverage from the sidelines up to this point, but felt increasingly compelled to join the conversation and share my point of view. So here goes.

After firing their CEO, Mark Hurd, the HP board has been accused of everything from incompetence to being prudes. The criticism comes from credible, important journalists and bloggers such as Joe Nocera from the New York Times (NYT), prominent economics blogger Felix Salmon, and former GE (GE) CEO Jack Welch. In addition, HP competitor Larry Ellison lambasted the board and even went so far as to hire Mark Hurd to be President of Oracle (ORCL).

So why in the world did the HP board fire such a high performing CEO? Don’t they care about profits and shareholder value? Aren’t those the most important things? Who cares about his personal shenanigans? Did Mark and his marketing contractor even have sex?

While I am pretty sure that there is much more going on behind the scenes than has been broadly reported, as there often is, let’s look at what has been reported:

* Mark Hurd falsified expense reports.

* The false expense reports are related to a contractor named Jodie Fisher, a former softcore porn movie actress and Playboy model with no relevant marketing experience, who HP was paying up to $5,000 per marketing event.

* At the time of his departure from HP, Hurd issued a public statement saying that he’d violated HP’s Standards of Business Conduct:

“As the investigation progressed, I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career. After a number of discussions with members of the board, I will move aside and the board will search for new leadership. This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time. I want to stress that this in no way reflects on the operating performance or financial integrity of HP.”

Let’s start with the issue of falsifying expense reports. This factor has been largely dismissed in the press with characterizations like this from Joe Nocera of the New York Times:

“When pressed, H.P. said that Mr. Hurd had fudged some expense reports.”

Nocera goes on to argue that there must have been an alternate motivation to dismiss Hurd, because clearly no CEO would be fired simply for “fudging” an expense report.

When I first read of the expense report issue, my reaction was the opposite of Nocera’s. If the Chief Executive Officer of a public company falsifies any official financial statement, he must be fired. In my mind, this is non-negotiable. We are not talking about a low-level employee tossing an extra receipt into his expense report. We are talking about a public company CEO who is paid tens of millions of dollars a year and is responsible for the integrity of the company’s financial statements fraudulently reporting his own expenses. Why is this a problem?

Every person who invests in Hewlett-Packard does so on the basis of HP’s financial statements. Every pension fund, every retiree, every charitable organization, every employee who joins and is compensated via stock options. When they do so, they trust that the statements are true and that the numbers are accurate. The person they trust to ensure accuracy is the CEO.

If the Chief Executive is willing to compromise the integrity of the company’s financials for any reason, then it is impossible to trust any statement. Every day, there are many potential reasons to falsify financial statements. Here are four examples:

* If you miss the quarter, shareholders will lose money.

* If revenues aren’t high enough, you’ll be forced to lay-off hard working, valued employees.

* If you grow slower than a competitor, you may jeopardize your job.

* A shareholder that you’ve been having an illicit affair with doesn’t want the stock price to go down and threatens to tell your wife.

If a CEO is prone to compromise for any reason, he will have every reason. This time it was his expense report. Next time will it be a marginal accrued liability? A deal that came in at 12:01 am on the last day of the quarter? This is a slippery slope that a public board simply cannot tolerate.

What reason was so powerful that it caused Mark Hurd to break his ethical standard, falsify an official financial statement, mislead the board, and ultimately be fired? It seems that this was done to cover up a “close personal relationship” with a woman named Jodie Fisher, who later accused him of sexual harassment, then subsequently withdrew her claim after Hurd personally paid Fisher a large sum of money.

Who is Jodie Fisher? According to press reports, Fisher is a former Playboy model, reality show contestant, and softcore porn movie actress with no work history relevant to her job with HP. She was hired by Hewlett-Packard and paid up to $5,000 per meeting to meet with Fortune 50 CEOs.

The mainstream press has reported these facts as mundane, ordinary, and hardly worth concern. I disagree. HP employs over 300,000 people. Every single one of HP’s employees is keenly interested in the qualities, skill sets, and behaviors that HP values most. Financial compensation and access to the CEO are the most important ways that HP communicates what it values to its employees. Jodie Fisher had more access to the CEO and was paid more than 99.9% of HP’s workforce, despite having no traditional qualifications.

It’s important to note that this was not Hurd paying for his personal extracurricular activity out of his own pocket. This was the Hewlett-Packard Corporation paying a softcore porn movie star with no relevant work experience more than it pays Harvard graduates with 20 years of industry experience. This was the company spitting in the face of the people who worked hard and sacrificed every day to help the company win in the market. It was completely and categorically unacceptable.

Finally, Hurd admitted in a press release to violating the company’s standards of ethics and integrity. So what? Why do companies have standards and ethics anyway? Shouldn’t they just be concerned with profits? Do we want choir boys or shareholder value?

There are many who take the view that business is singular in purpose–to increase shareholder value. They further take the position that constraining that purpose in any way is inefficient and counterproductive. The mainstream press seems to have broadly adopted this position in its attacks on HP. The Wall Street Journal Op Ed page even complained that businesses were being held to an unfair standard when compared to politicians.

I do not subscribe to this view. Running our companies with no moral or ethical standards is bad for society, bad for the country, and ultimately leads to criminal behavior.

Companies should not merely be thought of as money generating machines. Business can represent human society at its best. A business is a group of people working together to deliver value to the world and improve people’s lives. When done ethically, business quite literally changes the world for the better. However, if the dark side of human motivation is not mitigated with standards and ethics, business can destroy.

We saw this unfold at Enron, a company that was, in its time, celebrated for its impressive profits. Underneath the profits was a culture designed from the ground up to completely ignore any ethical standard including a dazzling display of ethically questionable sexual activity among its executives. These activities, such as promoting secretaries to executive positions in exchange for sexual favors, parallel Hurd’s behavior with Jodie Fisher. In Enron’s case, the bad behavior bled over into first line employees who conspired to create blackouts in California in the name of profits and in the absence of ethics. Ultimately, Enron imploded in a swirl of criminal behavior that bankrupted the company, but not before destroying tens of thousands of peoples’ life savings and damaging millions of innocent victims. After the fact, the press bemoaned the culture that lead to the destruction. However, the same reporters instantly forgot the cause as they cavalierly dismissed Hurd’s ethical breach.

In closing, I point out the impressive courage of the HP board of directors to ignore popular opinion and do the right thing. It is not an easy thing to fire a popular, highly successful CEO. It’s even more difficult when you know that you will be roundly criticized for tolerating that same CEO’s failure to develop internal successors. Despite those factors, Hewlett-Packard’s board of directors stood tall and protected the company, its shareholders and all of us from a dark and destructive journey. As a member of the business community and as a citizen, I am extremely proud of and grateful for their actions.

Ben Horowitz is co-founder and general partner of Andreessen Horowitz. He co-founded Loudcloud, later renamed Opsware Inc., in 1999 and served as CEO of the company before it was acquired in 2007 by Hewlett-Packard. He was most recently vice president and general manager of Hewlett-Packard’s Business Technology Organization Unit.

“The Hewlett-Packard board has committed sins over the last 10 years,” the former GE CEO told The Wall Street Journal. “They have not done one of the primary jobs of a board, which is to prepare the next generation of leadership….They end up blowing up the CEOs and don’t have anyone else in mind to come in. Where the hell was the leadership development? Who are these board members?”

Interestingly, Welch (pictured above, measuring his respect for HP’s directors) seems particularly annoyed that HP passed over Todd Bradley, executive VP of the company’s Personal Systems Group and a former GE employee, for the top job. In a second interview with Bloomberg TV, he lambasted HP for hiring yet another outsider as CEO and wondered aloud why the company didn’t just hire Bradley.

“It tells you that they haven’t done the management development job,” he said. “Look, they hired Carly before Mark Hurd, so this is the second time that they’ve had to do that. You know Todd Bradley is out there and Todd Bradley worked for us at GE and Todd Bradley is a very good guy. Somehow or other he wasn’t picked. I don’t know any of the dynamics. So they chose to change the game again. This is their third outside CEO in eight years or something like that. It is obviously a board that isn’t thinking about management succession internally for a long time.”

Asked by the Journal if he knows any HP board members, Welch said, “I wouldn’t admit it if I did.”

Harsh words coming from the guy who was named “Manager of the Century” by Fortune magazine in 1999.

PREVIOUSLY:

• Insiders Criticize Ellison For HP CEO Slam

One of the supposed buyers for the New York Times’s (NYT) stake in the Boston Red Sox–one of the few assets the paper can unload as it tries to bail itself out of a cash crunch and looming debt problem–says he’s not buying. Here’s the report from the Boston Globe (which the Times owns):

Both Boston Herald publisher Patrick Purcell and former Boston advertising executive Jack Connors separately flatly ruled out being involved in deals to buy the Boston Globe, which is owned by the New York Times Co. Connors further said he had no interest in buying the Times Co.’s stake in the Boston Red Sox.

The Times has put its 17.5 percent stake in the Red Sox up for sale, and recent news accounts have reported that the company has also offered to sell the Globe, too. The Financial Times reported last week that Connors was in talks with Times executives to buy the Globe and the Red Sox position.

‘There’s nothing to it,’ Connors told the Globe. ‘I’m not buying the Boston Globe. I’m not buying anything that the New York Times owns.’”

As denials go, that’s a fairly strong one. And while that doesn’t mean the Times can’t find someone else to buy its stake in the baseball team–it was reportedly seeking up to $300 million, while other estimates peg the value in the $170 million range–the market didn’t react well to the news. Shares in the Times’ beaten-down stock dropped more than seven percent in after-market trading.

The fate of the Boston Globe, sadly, doesn’t mean much for the Times in terms of solving its financial mess: A few years ago, former GE CEO Jack Welch was reportedly interested in spending up to $600 million for the paper; today it might fetch $50 million or so.

Late today the Times also announced that it had filed a shelf registration with the Securities and Exchange Commission–essentially a placeholder document that allows the company to move quickly with a debt or equity offering if it decides to pull the trigger. Spokesperson Catherine Mathis:

In these difficult markets, the Company wants to ensure that it has maximum flexibility and, accordingly, is filing a shelf that would permit it to offer both debt and equity.

But convincing investors to buy anything is only getting harder for the paper, given the miserable sales numbers it has been reporting: Even before the after-market drop, the stock was worth 60 percent less than it was a year ago.