Technology

Exclusive: Mark Hurd on the HP Scandal


Until news began breaking early this month that Hewlett Packard (HPQ) had spied on its board members and others to find the source of boardroom leaks, Mark Hurd's tenure at HP has been as close to a corporate fairy tale as one is likely to find. In February, 2005, the relatively unknown former chief executive officer of NCR (NCR) replaced the controversial Carleton S. "Carly" Fiorina—inheriting problems ranging from a credibility gap on Wall Street to lousy morale in its Palo Alto headquarters.

These days, the theme of Hurd’s tenure is a lot less fairy-tale with reports that HP (HPQ) used possibly illegal means to expose leakers. The matter has resulted in the departure of Chairman Patricia Dunn, who unleashed the probe, and Director George Keyworth, identified as the source of a leak. Another director, Tom Perkins, resigned in dismay over how HP handled the investigation.

Hurd seemed to have all the answers. Within a few months the stock had doubled as investors and HP employees cottoned to his no nonsense management style. Now, in his first extended interview since admitting he should have taken a more active role in preventing the scandal—and just three days before he is to testify before Congress—Hurd tells BusinessWeek computer editor Peter Burrows what damage the scandal has caused, and what he ought to do about it.

Everyone knows you're an operations guy who gets into the nuts and bolts of running your company. How could you have missed the scandal that's now unfolding?

I'm a detail-oriented guy, by trade. But when you have a place of this scale, you have to pick your spots where you're going to go dive. Ethics and compliance wasn't the first process I was going to go look at. I was going to go look at processes related to the performance of the company.

Many people are wondering about your role. You have said you missed most of a meeting to discuss the investigation in mid-2005, that you didn't read a key report earlier this year, and didn't know an e-mail being sent to a reporter from a made-up HP executive had tracing software in it. Those sound like excuses to some. What should people make of this?

That I should have figured it out sooner. I'm not trying to shirk it. I wish I would have figured it out sooner.

What's top of mind for you at this point?

The company. I believe in the company, and I think what's unfortunate is that this had nothing to do with the performance or the strategy of the company. The number of people in the company that participated [in the scandal] is an almost incalculably small percentage of the company.

We have to fix this. All I can do at this point is figure out exactly what happened and figure out whether we had a process breakdown or an execution breakdown or both, and make sure that we build a future capability that while we protect the company, works within our ethical values and standards of business conduct. Frankly, that's all I can do.

Sitting back and saying 'what if' isn't really helpful at this point. What I have to do is focus on how to fix this, and turn this the best way possible from an issue into an opportunity. We have a chance to get better.

Do you have any reason to believe your job is in danger?

No.

Why didn't you read the summary report of the investigation that was completed in March?

The whole subject of the discussion [before he received the report] was 'what's the answer' [that the leaker was George Keyworth]. My first thought was that this was really, really bad news. You had a really good board member who had made tons of contributions to HP over the years.

I'm not trying to justify the fact that he leaked a news story to CNET or whoever, but I knew this was going to be tough stuff. The guy had done a lot for the company, and had a lot of support—not just on the board, but in the company.

But when you get that kind of data, my instinct is to escalate it. Patty [Dunn] did say 'What do you think we should do this with this?' I said you have to escalate this up through the chain [to the board's audit committee and to the outside counsel]. She did that, which I think was the right process to go through. So my first reaction wasn't to say 'tell me how we did this.'

If I had read this report, I probably would have got it. It's funny, because [there are] footnotes strewn all through [the report] stating that everything was legal. But that's not exactly the question here. It's a question about appropriateness, and we [at HP] have a different standard. We're not trying to straddle the legal line at every turn. One of the strongest attributes of our brand is trust, so we have to make sure we're doing things in a way we can proud [of].

You have said that the reason Keyworth was ousted from the board was that he violated HP standards of business conduct. Did you violate those standards as well?

I don't think so. I've read through the document multiple times, but I can't go any further than that. I think there's a different question than just did I violate the SBC. I'm the CEO, so right or wrong you're accountable for what goes on in the company. You get a scorecard in the end.

As I've said to many people, you can never roll the perfect game. You can always play the would-have-should-have game—should I have focused my energy with more detail here and less there, or whatever the case may be. History will tell whether you made the right set of judgments about where to apply your energy. That's a question I'm never completely comfortable with. There are so many choices about where to spend your energy, and how to pick your spots.

How much of a distraction is this for you? Are you concerned about the company's ability to perform this quarter?

Let's just say I'm intermittently very focused on our quarter.

Other than the leak mess, how would you characterize the performance of the board? Is it as dysfunctional as some analysts suggest?

What you have here is a board that has had more infighting with themselves than with me. I think the board has solidified around me and around the strategy for the company. What you had were some historical issues that just continued to percolate.

Can those problems be fixed?

Some of them are matters of history at this point [because of the departures of Keyworth, Perkins, and Dunn]. But at the end of the day, we have to do the same work with the board that we've done with the company, that is, to rebuild its very foundation. I think we can do that with the board members we have today.

Going through tough times like these can be a tremendous bonding opportunity. They can also be highly divisive times. My job as chairman of the company is to make sure it's a bonding opportunity. My objective can be nothing short of building the best board in the world. We clearly have some work to do.

Did the board, and you personally, become overly focused on press leaks, to a destructive degree? Have you changed your views on how companies can have the most appropriate interaction with the business press?

First off, I wouldn't call myself too focused on [leaks], because I wasn't really focused on it. I wasn't here in '04 and '05. I don't have those scars that everybody else on the board has. But leaks are not good. People who leak confidential information out of a company are not acceptable.

At the same time, bad investigations of bad things are not acceptable, either. I don't think you can combine the two. There's no doubt that things are going to come up in the future at this company that have to be investigated. It doesn't mean you can't deal with them appropriately, and deal with them within our standards of business conduct.

What can other companies learn from HP's experience?

I can only imagine there are opportunities for others in Corporate America to learn from us. I would say to go get the process inspected by professionals, to make sure you have the appropriate checks and balances in your process, and that you have the process staffed with the perfect people [for the compliance job].

Is there anything else you have dealt with that compares to this?

This is so public. I've had other crises that had lots of complexity to them, but nothing that's played out in the public domain like this has.

Will you watch Carly Fiorina on 60 Minutes next Sunday?

Is she on 60 Minutes? I didn't know. If I'm around, and if it's on in the room I'm in. I wouldn't have any problem with it.

How can it be that HP has not fired a single person over this?

As I said on Friday (at his press briefing), we don't have all the data. I got full control of [the investigation] at a certain point of time. Now it's my ball. We have to get all the details, at least to the degree of appropriateness that I feel is needed.

We don't want to make yet another mistake. There's a temptation [to quickly fire people and take action]. But these things tend to domino. Someone's got to stand up and say 'let's slow down, let's make sure we have all the data to an appropriate level of detail.' That's what I'm doing.

What do you hope to accomplish with the investigation you're now leading?

It's the whole ethics and compliance process. Let's review the standards of business conduct, to make sure we feel good about it and it's up to date and it's aligned with our values. Let's make sure our investigations in support of the SBC are appropriate and are ones we can feel great about.

I just think we need to put fresh eyes on it, and look at it as a zero-based budget kind of thing. Let's look at this from the ground up, and not try to tweak what we have. Let's try to be a leader here. It sounds absolutely nuts, based on the circumstances we're in. But sometimes when you're in a situation like this, it creates an openness to change. And I can't think of anyone more open to change than us.

HP was doing so well and everything was going so right since you arrived at HP. Will this be a temporary bump in the road or a permanent blot?

We all have scorecards. This happened on my watch. Like it or not, you get credit for the good stuff and the bad stuff. But at the end of the day, my scorecard is less relevant than HP's. At the end of the day, what matters is whether HP is the kind of company that everyone respects and trusts, so it can take advantage of its opportunities in the marketplace. I've got to make sure that happens. The people of HP didn't do this.

There has been talk that you were going to quit—just say "I don't need this."

I've heard that rumor and I'm very disappointed to hear it. There was a rumor that I walked out of the board meeting on Thursday and that I wasn't coming back. I don't know where that comes from. I'm not walking—on my own, anyway. I'm going to work my hardest to fix this thing and put it behind us. But I still have work to do.

Editor's Note: Author Peter Burrows is one of the reporters whose private phone records were sought by investigators for Hewlett-Packard.


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