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The New HP Way - Updated

Tuesday, September 12 2006 @ 11:45 AM EDT

HP has decided to keep Patricia Dunn on the board. However, she has resigned as chairwoman, as of January of 2007, to be replaced by the CEO Mark Hurd. That will require a change to the Bylaws [PDF], actually, which currently require the chairman be not an executive (see page 14). The Board of Directors can change bylaws, of course, but some are expressing surprise at not choosing an independent chairman in the current regulatory environment. In January, she steps down as chairwoman, but remains as a director after that, so the bottom line is that HP is keeping her on the board as a director:

In a statement, Hurd said, "I am taking action to ensure that inappropriate investigative techniques will not be employed again. They have no place in HP."

Uh huh. If they are keeping her on the board, how have they ensured it won't happen again? What is the message they are really sending? A spokesman for HP is quoted in Forbes as saying that she "stepped down voluntarily to minimize the distraction to the company." Um. What? She told us Friday she'd only step down if the board asked her to. Is that voluntarily? Pretexting is a form of lying, remember. Let's not get in that lying habit, shall we? Dunn, for her part, expressed regret that people who are not her used "inappropriate techniques". Personally I'd have used the word illegal:

"Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques," said Dunn in a statement on Tuesday. "These went beyond what we understood them to be, and I apologise that they were employed."

So, now we know the new HP way.

A lot of headlines are playing the story that she got canned. But David Berlind's headline is more accurate: "Dunn is done (as HP's chairwoman) but stays on Board". He is suggesting there needs to be a law protecting folks from corporate pretexting. When corporations display squishy ethics, you probably yearn for stronger laws. But there were laws already on the books, and the pretexting happened anyway. Those laws will continue to play out. But will anyone feel comfortable calling an HP director now? Ever?

So who is really out? George A. (Jay) Keyworth. He resigned today, with Hurd praising him and saying that his discussions with the media were done with HP's interests in mind. His statement:

"I acknowledge that I was a source for a CNET article that appeared in January 2006," Keyworth said. "I was frequently asked by HP corporate communications officials to speak with reporters--both on the record and on background--in an effort to provide the perspective of a longstanding board member with continuity over much of the company's history." Keyworth said that past statements were "praised by senior company officials as helpful to the company." "The comments I made to the CNET reporter were, I believed, in the best interest of the company and also did not involve the disclosure of confidential or damaging information." In his statement, Keyworth also lashed out at the investigation tactics used in the leak probe. "The invasion of my privacy and that of others was ill-conceived and inconsistent with HP's values," he said.

Thomas Perkins made a flowery speech also, and Hurd praised him too. Read it for yourself. It's clear they all think HP will now move ahead. But the bottom line is Perkins and Keyworth are out, and Dunn is still there. That's how it looks to me, anyway. The message I take is that HP cares about leaking more than pretexting. And if all is forgiven, what will happen to the investigations now, I wonder? FT.com got an HP representative to explain keeping Ms. Dunn on the board:

An HP spokesman defended a decision that Ms Dunn would stay on as a director. "She has brought a lot of valuable insights into the company. She is still beneficial to HP," he said.
He added that she was remaining chairman till January "so that she can tie up some loose ends with the investigation", but she had voluntarily decided to step down in order not to be "a distraction". Carly Fiorina had combined the roles of chairman and chief executive. They were split when Mr Hurd took control.

Ah. Those loose ends with the investigation. That may be the explanation right there.

Update: Wait a second. Ina Fried's article says that HP's Hurd praised Keyworth:

In the statement, HP said that Keyworth often had contacts with the press to explain HP's interests at the company's request, but said "The board does not believe that Dr. Keyworth's contact with CNET in January 2006 was vetted through appropriate channels, but also recognizes that his discussion with the CNET reporter was undertaken in an attempt to further HP's interests."

And Keyworth says he never spilled any secrets. And more significantly, he says he was "a source" for the CNET article, not "the" source. Hurd praised his contributions to HP and hopes he'll continue to advise him:

"Jay is an important member of the HP family. He has served admirably for more than two decades and has provided great expertise, especially on matters relating to technology policy. We wish him well. I appreciate his long and distinguished service to HP."
Hurd said he personally valued Keyworth's experienced counsel and hoped Keyworth would continue providing it.

Huh? So, he can be trusted with information to equip him to give meaningful advice now? As Reuters bluntly puts it, "The company's statement on Tuesday suggests it orchestrated at least some leaks." And apparently Keyworth was often their man to do it. Just maybe not that one time. The story keeps changing.

So, riddle me this, Batman. Does this mean he actually was not the primary leaker after all? Who is the bad guy here? Either there never was one (and HP's press release stresses how harmful leaking is, so that isn't the likely explanation), or they didn't catch him or her yet.

There is one other, human side to the story. Ms. Dunn has been battling cancer for some time. It is not beyond the realm of the possible that a human and humane decision was reached that included that consideration. It is never wrong to be kind.

The Inquirer has an article on someone else leaving HP, announced today in a memo from Hurd to the troops. Gilles Bouchard, who led HP's Global Operations for the past two years, has decided to leave as of October 31. He was with HP since 1989. I'm not at all connecting any dots, by the way, I hasten to say. Just making a complete record of an HP at this point in time. They wish him the best in his future endeavors.

And now come the investigations. Nothing that has happened today changes that, according to a Reuters report:

A spokesman for California Attorney General Bill Lockyer said the board changes had no impact on its inquiry. While the issue has not deterred investors from HP, it has raised questions over the board's integrity and unity, analysts said.
"They've taken some important steps today on the road to recovery, but they haven't cured the problem," said James Post, a Boston University management professor who specializes in corporate governance issues. "They have to weather a whole series of investigations. Their credibility is going to be at stake with each and every one of those."

Here's the complete HP press release:

Patricia Dunn to Remain HP Chairman Through January 2007 Board Meeting;
Board Appoints Mark Hurd As Successor
Palo Alto, Calif., Sept 12, 2006
HP today announced that Patricia Dunn will remain as chairman through the company’s Jan. 18, 2007, board meeting. Mark Hurd, the company’s chief executive officer and president, will succeed her and retain his existing positions. Dunn will continue to serve as a director.
Richard Hackborn, who has served on the board since 1992, has been designated lead independent director, effective in January. In addition to having been chairman of the company in 2000, he spent 33 years as an HP employee, concluding his career in 1993 as head of the PC and personal information product business.
Dunn said, “The recent events that have taken place follow an important investigation that was required after the board sought to resolve the persistent disclosure of confidential information from within its ranks. These leaks had the potential to affect not only the stock price of HP but also that of other publicly traded companies. Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques. These went beyond what we understood them to be, and I apologize that they were employed.
“I am very proud of the progress HP has made over the past 18 months. During the remainder of my tenure as chairman, I look forward to completing the transition that is underway, including expanding the board, continuing to improve our corporate governance standards and bringing the current issues to resolution.”
Hurd said, “I am taking action to ensure that inappropriate investigative techniques will not be employed again. They have no place in HP.
“HP holds itself to the highest standards of business conduct and we are accountable to these standards for everything that we do. The company will work to put these matters behind us so that we fully resume our focus on the business and continue to earn the trust and support of our customers, employees and stockholders.”
About HP
HP is a technology solutions provider to consumers, businesses and institutions globally. The company’s offerings span IT infrastructure, global services, business and home computing, and imaging and printing. For the four fiscal quarters ended July 31, 2006, HP revenue totaled $90.0 billion. More information about HP (NYSE, Nasdaq: HPQ) is available at http://www.hp.com.

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Corrections Here

Authored by: feldegast on Tuesday, September 12 2006 @ 12:15 PM EDT

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