Ethical breaches are never easy for directors to deal with, especially when it comes to the CEO, who often is also chairman, that is, their boss. But you have to be willing to act. For better or worse, the Hewlett-Packard board certainly took action when it got word of a scandal brewing around CEO Mark Hurd.

The board investigated the allegations and took appropriate action once it obtained the information it needed--that he had been playing loose with expenses. The board certainly didn't coddle the man. Indeed, some think it acted somewhat rashly. One investor has now sued. The company's stock unfortunately tanked, and losing billions in market value.

But the alternative would have been worse. (Many think the stock will recover.) If the board was derelict in any area, it would have to be succession. There is no logical succor in place and the board is being forced to quickly find a new CEO. The board is hardly out of the fire. In addition to hiring a new CEO, it has a big decision to make regarding severance pay for Hurd.

By some reports, he'll rake in somewhere between $28 and $50 million. One investor advocate calls that "appalling." There is "no reason to permit a departure following an ethics violation to be characterized as a resignation--when the result is a $50 million payout that would otherwise stay in the corporate bank account." We'll see how the board reacts.

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