|
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
The Auto Beat
Byte of the Apple
Europe Insight
Eye on Asia
Getting In
Investing Insights
The New Entrepreneur
NEXT: Innovation Tools & Trends
On Media
Technology at Work
The Tech Beat
Traveler's Check
TECHNOLOGY
Product Reviews
Tech Stats
Hands On
AUTOS
Home Page
Auto Reviews
Car Care & Safety
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip FINANCE Investing: Europe Annual Reports Bloomberg BW50 SCOREBOARDS Hot Growth Companies: 2008 Mutual Funds Info Tech 100 B-SCHOOLS Undergrad Programs Rankings & Profiles |  |
SEPTEMBER 18, 2006
What Would Hewlett And Packard Say? An ugly spat over boardroom leaks casts a pall over HP's remarkable comeback In February, 2005, when Patricia C. Dunn replaced Carleton S. "Carly" Fiorina as chairman of Hewlett-Packard Co. (HPQ ), she inherited a deeply flawed board. That was the conclusion of the board itself, through an audit it commissioned in the tumultuous days leading up to Fiorina's ouster. The audit revealed such problems as a lack of heavyweight outside executives and lousy communication. Dunn, a former CEO of Barclays Global Investors, set to work fixing things. The board recruited new directors, such as McKesson (MCK ) CEO John H. Hammergren. She hired a governance expert to help directors brush up on the latest regulations. Dunn also moved on another problem cited by the audit: Too many of the board's secret deliberations had been leaked to the business press. And oh, what a mess that last one has created. On Sept. 6 the company admitted that in trying to identify the source of the leaks, an investigator improperly gained access to the phone records of former director Thomas J. Perkins. He has notified several government agencies of possible wrongdoing by the board. The ensuing turmoil seems unlikely to derail the impressive turnaround engineered by Mark V. Hurd, Fiorina's CEO successor. But the legal implications are still sketchy, and lawyers say HP faces some risk of civil or even criminal charges. California Attorney General Bill Lockyer told Reuters that he had issued subpoenas to various parties. The incident may leave an indelible stain on a company known for decades as Silicon Valley's exemplar of corporate virtue. Throughout the Valley, HP veterans were shocked that this Nixonian plot could have taken place at the company founded by icons Bill Hewlett and Dave Packard. Screamed the mocking headline of a blogger at SiliconValley.com: "Our boardroom lighting system is powered solely by Hewlett and Packard spinning in their graves." Leaks themselves are hardly a rarity in boardrooms. In fact, insiders say productive talks between the board and Fiorina ended when details of a key meeting showed up in BusinessWeek and The Wall Street Journal. "Leaks are a part of life," says Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. In the rare cases where leaks become an issue for boards, he says, the question is whether the leaker violated a fiduciary duty or believed that getting information out was in the best interest of the company. Given the 69% rise in HP's shares since Fiorina's ouster, its leaks may have harmed Fiorina, but it's hard to argue they hurt the company. Nevertheless, HP set out to squelch all leaks in no uncertain terms. After he was hired in March, 2005, Hurd made a point of saying at employee meetings that he would personally fire anyone who had unauthorized discussions with reporters. Around that time, Dunn gave HP's internal investigations unit clearance to hire gumshoes to find the boardroom leaker. Three directors say the probe was common knowledge on the board and that Dunn gave a status report at every meeting, though she didn't talk about tactics. Leaks seemed to subside, but the investigation jumped to the fore after a CNET.com story in January cited details of board discussions, including plans to use more chips from Intel Corp. (INTC ) rival Advanced Micro Devices Inc. (AMD ). Until that time, three HP directors say, Perkins had been one of the most hawkish about shutting down leaks. He suspected a top HP executive, and suggested Dunn employ lie detector tests -- a charge Perkins' lawyer, Viet Dinh, denies. But HP directors say his attitude changed when, they believe, he sensed his friend and fellow director George A. Keyworth might be fingered. When that occurred at a May 18 board meeting, Perkins angrily resigned his seat as it became clear his fellow directors were going to kick Keyworth off the board. He claimed Dunn had broken a promise to keep the identity of the leaker from the full board. While Perkins now insists his gripe is over the tactics used during the investigation, HP directors insist he said nothing about that at the time. Keyworth refused to quit, but was advised he would not be on the slate for reelection in 2007. In an e-mail, Keyworth declines to comment other than to say: "I am dedicated to HP's continuing progress under the leadership of Mark Hurd." Perkins' lawyer says "we're exploring all available [legal] remedies." But he agrees Hurd has prospered "despite" the board's disarray. That, after all, may well be the only thing the board's employers -- HP shareholders -- care about in the end. Editor's note: Author Peter Burrows is one of the reporters whose private phone records were sought by investigators for Hewlett-Packard.  By Peter Burrows Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2006, Bloomberg L.P.Terms of Use | Privacy Notice |
Printer-Friendly Version