Someone please explain this to me

[bluehand]

two things-
one- are those units crawling in front of him from his unit(D company)? If so, I don't know if this works in game terms but, panic spreads. seeing part of his command routed already can effect his ability to remain calm and rally them too.
second- what year is it? if it is pre 43 then your "regular" HQ unit is actually more akin to a conscript HQ unit; and with the routing of afilliated subordinates nearby (and likely from the same machine gun) the panic of the HQ is not a surprise...