Hurd Fails the Test; HP Scandal Not Over Yet

Well, Mark Hurd and the Hewlett-Packard braintrust finally demanded and received Patricia Dunn’s outright resignation from HP’s board of directors. She’s not just stepping down as chairman, she’s gone.

That’s as it should have been as soon as the dimensions of this risible corporate-espionage scandal first became known to Hurd and the other board members. It took them long enough to reach a conclusion that should have been obvious and irrefutable.

Instead, the HP board, led by Dunn but apparently supported by Hurd, stonewalled and resisted doing what it should have done, which was coming clean and admitting ultimate responsibility for the entire mess. For some bizarre and utterly inexplicable reason — but one that suggests an ethical turpitude that should appall HP’s employees and customers — they thought they could ride out the storm, pretend that nothing happened, and comport themselves as though they were responsible for none of what eventually came to light.

Well, guess what? Dunn and Hurd were wrong.

They’re not escaping from this debacle unscathed. Oh, they will try to plead ignorance, as Hurd did yesterday, saying he briefly attended a meeting at which discussion ensued regarding the first phase of HP’s misguided and wholly inappropriate investigation into board leaks of confidential information, but that he did not stay to hear anything about the conduct of the probe that was ethically or legally objectionable.

Similarly, he claimed that he was sent, but did not read,  an email message — he cannot deny that the message was sent to him, because, one presumes, it has been unearthed in one of many criminal investigations by government agencies into the legality (or lack thereof) of HP’s probe of its leaky board — regarding the ethically dubious tactics and allegedly illegal conduct of the second stage of HP’s board investigation earlier this year. It’s convenient that he didn’t read it; if he did, and he failed to do anything to quash the probe or notify the proper authorities of potential violations of the law, then his job as CEO would be hanging from the most tenuous of threads at this moment.

When claiming ignorance doesn’t work, though, HP senior officers have demonstrated that they’re extremely adept at throwing subordinates under the bus. Apparently, in a leak that presumably was approved by Hurd and Dunn, it was let slip yesterday that two senior HP employees, both of whom were involved in the investigation into board leaks, are in the process of leaving the company, and apparently not of their own volition.

For her part, Dunn explicitly blamed her minions for her downfall, saying that they conducted the investigation in a manner that she did not approve or know anything about. Some of the evidence, though, seems to suggest otherwise.

This entire board deserves to go — and not to anywhere salubrious. It has failed HP shareholders, employees, and customers. It was and is a disgrace to corporate governance.

This board now has made Mark Hurd its chairman, assuming that an autocratic carpet sweep can allow the company to put this unfortunate episode behind it and permit the focus to return to operations, products, revenue, and profits. Governance experts, however, take issue with that decision, saying the timing is poor (everybody on the board and at the most senior executive positions at HP is under a cloud of suspicion, if not under criminal investigation), and that it suggests HP has learned nothing from the ordeal.

Moreover, what can be said of the formerly irreproachable Mark Hurd? If we believe his statements yesterday about his own negligent oversight of the investigation and its aftermath, he is at best inept.

If he was sent an email regarding something as important as an investigation that he encouraged and demanded regarding board leaks to the media, then it stands to reason that he should have read it, doesn’t it? If he didn’t read it, what does that say about his attention to detail and his work ethic? If he did read it — and if evidence comes forward proving that he did so — then he’s a goner, just like Dunn.

The goal of yesterday’s press conference, it seems, was for HP to belatedly become proactive in addressing the scandal. The company wanted to offer a few sacrifices to appease its critics and burnish its tarnished brand. It also wanted to preclude further embarrassments.

I think it failed. Mark Hurd’s apology seemed forced, insincere, and entirely scripted, and his claims that he didn’t know what was happening and failed to read critical correspondence do not reflect well on him, irrespective of whether you believe him. In fact, HP’s apology, as Charles Cooper of CNET’s News.com wrote, was lame, raising more questions than answers and causing many of us to further lower our estimation of HP’s board and its C-level executives.

Yesterday, California attorney general Bill Lockyer stated that his investigation so far had not produced evidence that Mark Hurd had committed a criminal offense. Still, a spokesman for Lockyer asserted that the investigation wasn’t complete and that nobody was out of the woods yet.

But, make no mistake, the woods are burning. Getting out won’t be as easy as was assumed.

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4 responses to “Hurd Fails the Test; HP Scandal Not Over Yet

  1. Just a-n-o-t-h-e-r example of low people in high places. These
    high paid people, with low to no integrity, honesty, goodness, etc., need to be required to take remedial courses on ethics, and write a paper afterwards. Oh, yes, and many thanks again Dunn for ALL that
    you have done and will do for HP.

  2. I really like this blog and usually agree with the posts, but this post is just plain wrong.

    As the CEO of a technology company, my inner secret agent might make me want to spend time worrying about a super secret investigation into leaks around my board of directors.

    But a disciplined CEO — and boy, is Mark Hurd a disciplined CEO — spends his or her time focused on the things that matter…the operational dynamics and fundamentals of the business.

    That’s why HP stock is up 77% since Hurd’s arrival.

    Fine, so he didn’t read a report and glossed over the other material he might have had access to. Do you know how many boring reports or meetings that I’ve zoned out on and instead thought through some of the more thorny issues that mattered?

    It’s just far too easy, when you are doing your real job, to miss something like this. It’s easy for the Monday morning quarterbacks to say he shouldn’t. But Mark Hurd was busy generating 50% profit growth and a 77% run up in the stock price — precisely what he was hired to do.

  3. Anonymous,

    I don’t think you should assume that Hurd was indifferent to the board leaks or to the investigation into them.

    From what I have read, he was an active agent (pardon the pun) in ensuring that the investigation was revived and energetically pursued earlier this year. Apparently, when he first made the rounds of HP’s branch offices, he was adamant that company confidentiality would be enforced under his watch, warning HP employees that he personally would fire them if they talked out of turn to journalists.

    From what I have read, Hurd would have perceived a connection between the leaks and the company’s evidently strenuous efforts to shape and control the outgoing information that was processed by the trade press and media before being released to the outside world and forming HP’s corporate image.

    I think that’s something Hurd worried about. I believe he saw its indirect connection to the “things that matter,” including operational dynamics and the blocking-and-tackling fundamentals of the business.

    Let me finish by asking a couple questions rather than making statements. If Mark Hurd did care about the leaks and investigation into them, and evidence suggest that he did, why would he not have read an investigation report that, he readily admits, was sent to him? Second, why would a CEO who is widely lauded as a detail-oriented proponent of rigorous process and structure fail to read a document relating to a matter that he had been following with considerable interest? Something doesn’t make sense here, and I was being personally provocative in writing that last post. For obvious reasons, in writing that post, I had to be more ambiguous than I typically prefer to be.

    I think, though, that Hurd is all about process, structure, and — ultimately — control. That’s the conventional wisdom on how one gets execution and results from a company as large as Hewlett-Packard. You can draw your own conclusions as to whether he’s suddenly become a slacker or whether something else might be at play.

  4. Your points are well stated.

    I’ll just say as a CEO that I’m constantly looking over my shoulder trying to guess how things will look in hindsight. It’s easy to say that his reputation as a details-oriented CEO would make him read the report.

    But I’m in a much, much smaller company and I simply cannot read the volume of reports and information that come my way. I spend my time focused on the things I can make a difference on.

    Let me paint a picture of what I mean. In any given day, I have 15 calls that my sales team has sent to my assistant for me to make. I have a blizzard of meetings with people from around the company. And I have numerous reports and briefings on lesser issues from sales, marketing, customer support, R&D, finance, HR.

    I tend to focus my time and real attention on the issues that matter to me now, which usually are the sales calls. I know my CFO will walk into my office if there is a real problem, so there are days that I don’t open the finance briefing.

    Five months from now, if my company had a cash crisis, could people say “he was sent a report showing that cash levels had dropped 10%”? Sure, they could say that.

    Mark Hurd might be a scoundrel. He might have actually read the report and said “do whatever it takes, and spare me the details”. I don’t know, and I’m not claiming he didn’t.

    But it is this kind of automatic hindsight judgment that worries me as a CEO. None of us are perfect. We each have different strengths. The most difficult skill required in being a CEO is knowing when you need to learn something new, and knowing when to trust your instincts.

    On a constant basis, I hear something and a red flag goes up. I’m instantly confronted with a decision. Should I trust my instincts and raise a question? Or is this something that is “the way things are done” and I need to learn something new?

    I will say that I often either raise the question, or try to follow up later after some thought, research or counsel from a trusted advisor.

    But what worries me is…what about the moments where I don’t catch something and the red flag doesn’t go up? Will I be judged on the totality of my career, or for that moment?

    We don’t know what happened to Mark Hurd. I’m just suggesting that this is a little more complicated than the two extremes of “approved and authorized the pretexting” vs. “suddenly became a slacker”.

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