Click above to visit the entire site

16 February 2007:

James B Stewart on the Hewlett-Packard spying mess

James B Stewart's account of the Hewlett-Packard spying scandal, "The Kona Files" (in the current, anniversary edition of The New Yorker) had me pulling down James Surowiecki's The Wisdom of Crowds. The many snatches of boardroom conversation - and altercation - reported by Mr Stewart add up to a picture of collective bluster and fecklessness. Readers of The Wisdom of Crowds will recall the sickening chapter about horrifically bad group-think at NASA that failed to prevent the Columbia disaster. Because important group leaders had made up their minds in advance, the question of repairing damaged tiles was never seriously broached. Because they thought, incorrectly, that DoD exterior photographs would fail to display any damage with sufficiently high resolution, the photographs were never requested.

Nothing quite like this happened at Hewlett-Packard when a spring of leaks began to trickle in the last months of Carly Fiorina's chairmanship. It was never established who leaked the news that Ms Fiorina had lost the confidence of the board; an outside attorney conducted a quiet, perfectly legal investigation that failed to trace the rumor to any board member. After Ms Fiorina's departure, Patricia Dunn was named chairman of the board, but not CEO. At no time in what followed (she maintains, rightly in my view) that as she didn't have the power to hire and fire anybody - that went to a caretaker who kept the seat warm for Thomas Hurd, who seems to be doing very well at HP these days - she can't be held responsible for illegal covert activities conducted by HP legal staff and outside investigators. A second leak prompted another ineffectual inquiry, Kona I. Then a rather anodyne story appeared at CNET. The source of the story, however, had to be a director, and this time Ms Dunn and HP executives were determined to root it out. Now Ms Dunn and several others face possible jail terms.

I was reminded of The Wisdom of Crowds because the Hewlett-Packard board emerges from this story as a corporate liability. As a deliberative body, it rates a big, fat zero. Riven by a culture clash between old-guard technology visionaries such as Tom Perkins and Jay Keyworth and post-Sarbanes-Oxley corporate-governance wonks such as Lawrence T Babbio of Verizon and Ms Dunn herself, the board eventually asked for Mr Keyworth's resignation when Ms Dunn identified him as the third leaker, but entertained no discussion of the methods employed by the company's investigators. Mr Perkins, who alone of the directors disputes this non-discussion claim - he insists that he displayed ethical lapse implicit in the snooping - was infuriated by Ms Dunn's action against his old friend - and summarily resigned. Whether or not he raised legal issues at the board meeting, he did so presently with a professor at Georgetown Law School professor, and presently complaints were filed with the SEC and with various attorneys general. Either way, the board failed to ask the right question. Ms Dunn never put it on the table, and if Mr Perkins brought it up, no one else was willing to pursue it.

Patricia Dunn was wrong not to investigate the investigators before taking their case to Hewlett-Packard's board. She was obviously only too pleased to use serendipitous evidence to get rid of a director who'd been a thorn in her side. But her board ought to have righted her keel, and they didn't.

Permalink | Portico

Write to me