Former DXC Technologies’ executive vice president Stephen Hilton — who was once seen a possible successor to CEO Mike Lawrie — is accusing the company’s CEO of ordering the alteration of the vesting dates on his stock options to avoid paying $20 million in severance that he would be owed, according to a federal lawsuit filed in Manhattan.
The erstwhile Executive Vice President, Head of Global Delivery, who once oversaw 120,000 employees, 60,000 contractors and $14 billion in company assets, said he was fired last July without cause, and Lawrie ordered changes to the vesting dates “without contractual or other legal authority.”
“Upon his termination, Hilton was not paid what CSC and DXC promised,” the suit states. “Hilton was paid none of the benefits promised under his Severance Agreement, and all of his outstanding Restricted Stock Units and Stock Options were cancelled. The way in which some of his stock grants were cancelled offers clear proof that Lawrie and DXC were acting in bad faith in their termination of Hilton.”
The suit was filed in U.S. District Court Southern New York seeks $14.3 million in damages as well as interest, and other damages the court may impose. The 36-page complaint details the rise and fall of the relationship between Hilton and Lawrie, who Hilton reported to directly as one of the leaders of the “build” “sell” “deliver” units in DXC. The former heads of all three of those units are no longer with the company. Lawrie fired Hilton last July.
“Lawrie had decided to characterize Hilton’s termination as for ‘cause,’ and had decided to cause Hilton’s stock vesting dates to be postponed, because Lawrie knew DXC owed Hilton in excess of $20 million in compensation,” the complaint states. “Upon information and belief, Lawrie hoped to force Hilton to “leave money on the table” when Hilton left DXC — just as Lawrie boasted he had done with Hilton’s predecessor.”
When reached by phone, a DXC spokesperson declined to comment on the case. In an emailed statement, however, the company said the suit has “no merit.”
“We are aware of the lawsuit,” the statement reads. “We believe the allegations have no merit and we intend to vigorously defend this case.”
The lawsuit is a window into the upper-most levels of a one of the nation’s largest system’s integrators, No. 10 on the 2018 CRN SP500. DXC was created in 2017 as a result of a merger between CSC and HPE’s Enterprise Services division.
Hilton’s tenure on the senior leadership team bridged the transformation of CSC into DXC. Among Hilton’s accomplishments at DXC was an operational data mining program called DXC Bionix that revolutionized how the $25 billion company ran its IT operations. That initiative allowed the company to “reduce its workforce by approximately 8,000 more in 2018, with total savings of $445 million per year,” the complaint states.
Despite the savings, one of the reasons cited for Hilton’s termination in a DXC letter was “failure” to meet the target in Lawrie’s budget for spending cuts within the Global Delivery Division, according to the complaint.
“Senior executives at DXC consistently missed the targets set by Lawrie’s internal budgets,” the complaint states. “Lawrie’s internal budgets were universally understood to be purely aspirational.”
The lawsuit accuses Lawrie of possessing a “toxic” management style that valued obedience above honest feedback, of having no boundaries between the professional and the personal. Their relationship frayed after the merger that created DXC, according to the complaint.
“Hilton observed that Lawrie’s treatment of many of his subordinates grew worse under the stress of the merger and its aftermath,” Hilton wrote. “DXC executives who had come from Hewlett Packard were often taken aback by the conduct of their new CEO. Several such executives approached Hilton separately for advice about how to handle Lawrie … Hilton was an obvious choice of a confidante: He is a calm man, compassionate and honest.”
In the complaint, Hilton stated he felt it was his responsibility to be candid about Lawrie’s strengths and weaknesses as a leader.
“Lawrie’s management style was in some respects toxic,” the complaint states. “Hilton repeatedly witnessed Lawrie verbally abuse his subordinates, and Hilton repeatedly saw Lawrie make business decisions not based upon metrics and performance, but based upon Lawrie’s sense of whether an employee was sufficiently loyal or subservient to Lawrie personally.”
However, when news of these interactions reached Lawrie second-hand it caused a rift, the suit states. Hilton said for Lawrie, “personal feelings take precedence over appropriate professional conduct.”
He said Lawrie had a pattern of terminating subordinates shortly before their stock grants would vest, finding various ways to avoid paying out compensation that was owed.
“Lawrie gloated, for example, about how much money” (in the form of unvested stock) Stephen Hilton’s predecessor “left on the table” when CSC fired him,” the suit states.
Hilton was in charge of valuable business relationships including serving as “partner executive” with Dell EMC, “one of the strongest partnerships” DXC had. Hilton also launched a partnership with AWS known as the “Icelander,” the suit states. It was that partnership that Lawrie cited in two memos he wrote first to warn, then to fire Hilton.
“As Executive Sponsor for the AWS relationship you were responsible for developing a favorable relationship with AWS,” Lawrie wrote in a May 2018 memo, filed as an exhibit in the complaint. “You have put little effort into this and have failed to fulfill your responsibility, even to the point that AWS questions your absence from the relationship.”
Hilton disputes that in his complaint saying he and an appointee ran the Icelander venture successfully. . “If Hilton did not meet Lawrie’s expectations for AWS, it was a performance issue, and not a basis for firing for ‘Cause’,” the complaint states.