September 12, 2006 6:54 AM PDT

Leak scandal costs HP's Dunn her chairman's job

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HP's boardroom drama

May 8, 2007
Hewlett-Packard Chairman Patricia Dunn, who launched an investigation into media leaks that resulted in a firestorm of controversy, has agreed to resign her post following a meeting of the company's board of directors.

The board has appointed CEO and President Mark Hurd to take over for Dunn, who will continue to serve as chairman through the company's Jan. 18, 2007, scheduled meeting, the company announced early Tuesday. After that point, Dunn will remain 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."

Hurd will continue to hold his positions of president and chief executive. In addition, HP said Richard Hackborn was named lead independent director, effective in January.

Also on Tuesday, HP announced that George Keyworth is resigning from the board, effective immediately. Dunn earlier this year had identified Keyworth as a source of media leaks.

Dunn's departure caps a tumultuous episode for HP, one of the country's largest companies and a Silicon Valley icon that just over a week ago had been basking in the glow of an economic turnaround. The computer maker now finds itself mired in a scandal sparked by an investigation into media leaks emanating from its boardroom.

Last Tuesday, several media outlets reported that an internal HP investigation into its own directors was behind one director's angry resignation this spring.

During the course of last week, it came out that the investigation to find the source of media leaks involved possibly illegal access to phone records of the company's directors, at least nine journalists and potentially many other people. As a result, federal and California state prosecutors launched investigations, and civil lawsuits and criminal charges are possible. A U.S. House of Representatives committee is also seeking records related to the case.

HP said in a statement on Tuesday that it will cooperate with the House subcommittee "and will provide the necessary facts and information."

Patricia Dunn Patricia Dunn

A top aide to the Senate Commerce Committee said on Tuesday that the panel would be pushing harder a floor vote on legislation that would increase penalties for telephone pretexting. That bill, S.2389, creates new civil and criminal penalties, and lets individuals sue over privacy violations.

Kevin Martin, chairman of the Federal Communications Commission, noted after the Senate hearing that the FCC last week sent a letter to AT&T asking for details about the HP case. "Making it illegal to sell (phone record information) would be helpful," Martin said.

Dunn, who ranked 17 on Forbes magazine's "100 Most Powerful Women" list in 2005, replaced Carly Fiorina as the chairman of the computing giant last year. Dunn had been a director at HP since 1998. She was co-chairman, chairman and chief executive officer of Barclays Global Investors from 1995 through 2002. According to a biography of Dunn on HP's Web site, she "also serves on the advisory board of the (University of California at) Berkeley Haas School of Business, as well as the conference board's Center for Corporate Governance."

Dunn had been frustrated by media leaks dating back to articles in early 2005 about the relationship between then-CEO Fiorina and the board. A Jan. 23, 2006, report by CNET News.com that quoted an unnamed source describing a strategy-planning meeting of the board apparently so angered Dunn that she authorized an investigation of her fellow directors to find the leak.

In a statement, Dunn said she was proud of her accomplishments at HP but regretted the use of "inappropriate techniques" in the investigation.

special coverage
HP's boardroom drama
Investigation into media leaks used controversial data-gathering method, SEC filing confirms.

"These leaks had the potential to affect not only the stock price of HP but also that of other publicly traded companies," she said. "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."

Eric Ross, a financial analyst at ThinkEquity Partners, said replacing Dunn is a good move for the company, if only because the controversy may be demoralizing and distracting to employees.

But Hurd's accumulated power as president, CEO and soon chairman does raise questions of corporate governance, Ross said.

"Making Hurd chairman seems to be a lot of power for one person," he said. "It seems like the world's moving away from that model."

CONTINUED: Tom Perkins gets angry…
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38 comments

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Sometimes it pays to be "Stupid"
The "Stupid Excuse" is wearing thin in corporate america. If the leak investigation were anything that Dunn and friends "thought" it was going to be they could have tapped any inside salesperson to do some quick checking around. Thus, there was no reason for a private investigator to be called in and paid exorbantly.

Instead, they hired a firm that they knew would do things like pretexting. These firms would be out of business if they didn't do that sort of thing. Hopefully, HP's board has enough business savy to know this which is why they were hired in the first place - thier brains and experience.

What didn't work for Kozlowski shouldn't work for Dunn: the "I'm incompetent" excuse. Either she's lying or she's stupid, and both of these should lead to REMOVAL from the HP Board.
Posted by phillynets (73 comments )
Reply Link Flag
It's Plausable Deniability
You use a third party intermediary to do your dirty work so you can claim you knew nothing about it. That's why the Hollywood types used Anthony Pellicano to do their spying for them.
Posted by CancerMan2 (74 comments )
Link Flag
Pat, you belong...
...at the top of this list.

How come Patricia Dunn isn't in the Top 10 yet?

<a class="jive-link-external" href="http://www.whotohate.com" target="_newWindow">http://www.whotohate.com</a>
Posted by morkster (7 comments )
Link Flag
Definitely a much needed start
Even with Patricia Dunn stepping down as Chairman (but not leaving the HP Board), that leaves a lot of people on the HP Board who apparently (from their silence) condoned the investigation and the use of "pretexting". There are many highly qualified people available to replace these other Board members and bring back a sense of ethical standards and improved governance to HP. I hope that Tom Perkins or some other respected Valley figure will nominate a slate of candidates to challenge the official nominees of the HP Board next Spring. I also hope that institutional shareholders will vote for such a slate to send a clear message about the limits of acceptable corporate behavior.
Posted by twasserman (11 comments )
Reply Link Flag
Tom Perkins should be brought back NOW
To take over as chairman. Dunn should be sacked by close of business today.

Hurd and Keyworth can be tomorrow's session.
Posted by Too Old For IT (351 comments )
Link Flag
Tom Perkins should be brought back NOW
To take over as chairman. Dunn should be sacked by close of business today.

Hurd and Keyworth can be tomorrow's session.
Posted by Too Old For IT (351 comments )
Link Flag
You cover my rear and I'll cover yours....
That is all that is being said here. The board has changed nothing and I hope that the external investigations bring them down since they won't step down themselves.

I am most disappointed in Mark Hurd's actions as I thought he was going to be great for HP. Now I find that he is only a lapdog to the board.
Posted by fred dunn (793 comments )
Reply Link Flag
News.com -- your headline is misleading
She is still staying on the BOD, so she has NOT lost her job. Regardless, I do not see this "solution" as a satisfactory one. I see HP engaging in the usual corporate buddy tactics: covering each others' *****. SHE SHOULD BE GONE.

Therefore, I think HP will suffer considerable consumer backlash. I know it will from me. I've already started looking at Epson, Brother, and Canon products. I'm GONE.

HP: Invent? HP: Spy.
Posted by giggles (46 comments )
Reply Link Flag
she DUNN something
now lets get something DUNN about it
Posted by Atomic1fire (270 comments )
Link Flag
Headline is correct (as of now)
Not sure if they changed it, but it currently reads that she lost her chairman job. That does not mean she is off the Board of Directors.
Posted by zaznet (1138 comments )
Link Flag
"Action" my arse...
...if she was in any other position besides the Board, she would've been handed her walking papers eons ago (and no one would've really heard about it), and she would've possibly been doing the perp walk by now.

If even half of what she's been alleged of doing is true (and it certainly seems to be), HP's 'remedy' is rather shameful, to say the least.
Posted by Penguinisto (5042 comments )
Reply Link Flag
what a joke - she still has a job at HP
Her actions were unethical and most likely illegal. And she is not only going to stay on the board at HP but also she will only step down in January. This is a clear message from HP that they do not remotely care about ethics, privacy, and common decency as long as you hold a high level position. Do you think an engineer would have had the same fate? he/she would have been escorted out the door by HR on day 1. It will be a long time before I spend my money on their products again.
Posted by ffx06 (1 comment )
Reply Link Flag
Hallelujah
But why "a long time" ... why not NEVER?
Posted by giggles (46 comments )
Link Flag
SHE IS NOT EMPLOYED BY HP - she is employed by their stockholders. BIG DIF
she still has a "job" because she is NOT employed by HP but by hp's stockholders - which she is one. Other than her voluntary resignation, only the stockholders voting en-masse could remove her.
Posted by zboot (168 comments )
Link Flag
She's being eased out - she's toast
She's being eased out rather than immediately sacked, that's all. She WON'T be reappointed to the board next year. It'll be kind of hard to fulfill her board duties from a jail cell, which is where she will be. Martha Stewart's name was on the building, Dunn's ain't.
Posted by MikeDson (50 comments )
Link Flag
different set of rules
If someone who was a regular employee had done something like this, how long do you think it would take HP to FIRE them? This is nothing but a wrist slap with a feather.

I stopped buying HP for my company when Carly was buying Compaq. I had been thinking about buying from them again.....but not now! Stockholders should revolt and demand that she really loose her job.
Posted by befuddledms (113 comments )
Reply Link Flag
Remove the women from power?
Looks like HP has been on a witch hunt of sorts over the past
couple of years. They have now successfully removed the two most
powerful women in the company from power.

Just an observation.
Posted by ronjay (109 comments )
Reply Link Flag
REMOVED Incompetence from Power
Witch hunt?????? yeah right.
The two incompetent losers should have NEVER been hired in the first place.

Carly was a walking disaster area, she appointed so many retards to positions of power I am surprised HP is still in business. If there are any other losers hired by the disaster queen, they need to go as well.
Posted by nothingavailable (53 comments )
Link Flag
I would have fired her for not taking action!
What is so sacred about spying that you can't even counterspy? I would still hold her responsible but for not acting sooner!
Posted by luisosio (3 comments )
Reply Link Flag
that's what i'm talking about...
Can't people keep their mouth "shut"? Leaks here, leaks there, leaks everywhere. "Anonymous sources" and "speaking on the condition of anonymity" when you're in a position that expects you to be able to keep a secret seems to have run amok. I don't agree with some of the alleged things that were done, but I think they had every right to employ all LEGAL means available to them to find that blabbermouth.
Posted by kevvykev (4 comments )
Reply Link Flag
Slap in the wrist...
Nothing really changed in HP. Dunn still works there and can still influence the politics in the board of directors. Once the media furvor dies down, it will be "business as usual" within HP.
Posted by treet007 (123 comments )
Reply Link Flag
Aw, poor Dunn loses her job
Aw, poor Dunn. All she did was spy on other board members, what's the big deal? And now she has to suffer the horrible of fate of stepping down from her chairman position- a half year from now. HP swooped in and swiftly defended their moral character, didn't they?

Thankfully Dunn will still be on the board and a guiding force for HP's direction.
Maybe in the wake of this HP can create an Ethics branch and have Dunn lead it up to atone for her misgivings.

That sounds just comically farcical enough that HP would be dumb enough to do it.

Here's the icing on the cake: Dunn probably has a contract clause that gives her some massive multi-million dollar bonus for not having completed her tenure as chairman for HP.

Could high-level corporate antics stink any more than they do?
Posted by Fireweaver (105 comments )
Reply Link Flag
Buh bye now
Board members who condoned or went along with illegal activity
need to be fired today and brought up on charges tomorrow. Dunn
should already be out the door and no longer on the board, and if,
as it appears, the board of HP did not publicly reveal the illegal
activity the minute they learned of it, and if Perkins' allegations are
correct, they should all be sent to preside on the the board of the
local concrete country club. Period.
Posted by Groucho6 (104 comments )
Reply Link Flag
Weak Excuse
"These leaks had the potential to affect not only the stock price of HP but also that of other publicly traded companies," she said.


So which is better, having this information leaked to the press so investors can act on the information, or keeping it secret so insiders can trade on the information while keeping ordinary investors in the dark?

You're gonna have to try harder than "they took away my insider profits" to justify authorizing fraud, Ms. Dunn.
Posted by solrosenberg (124 comments )
Reply Link Flag
She Needs to be fired
So Mrs. Dunn hired an outside firm to find out who was leaking company information to the press. What make what she did very bad was the fact that this company got personal info about their executives which in my opinion has nothing to do with work. If you what to find out who is leaking company info then you call a meeting and ask them point blank who the F**k is leaking this information and who ever is doing it needs to stop it right now, or you can call in each executive and have a personal sit down meeting with them to find out if they are happy with the company, do they like the direction in which the company is going, do they see anything that the company can improve on and if they are the one that is leaking company information. What makes this soo bad is the fact that when the information got out about what she did and the information that was uncovered she acted dumb. What do you mean you didn&#8217;t know, aren&#8217;t you the one that sign the check, aren&#8217;t you the one that ask this company to find out who is leaking company information to the press. Why didn&#8217;t you find out from the company on how they are planning to find out who the leaker is? I&#8217;m sure that you are not a dumb woman, but for you to say that you didn&#8217;t know just make you seem incompetent and just makes it easy for the board to dismiss you. The only reason for you not to say that you didn&#8217;t know is that when you hired this company you know or had a hunch that they might do something illegal and if that&#8217;s the case then guess what don&#8217;t hire them because it might comeback and bite you in the ass. Also I hope this sends a message to corporate America that behavior like this is not acceptable. So HP this is what you need to do since the actions that Mrs. Dunn may look like it also illegal you need FIRE her not ask her to step down teach her a lesson and show to the tech community that you will not put up with this kind of behavior
Posted by firestarter (43 comments )
Reply Link Flag
idiots
she still has a "job" because she is NOT employed by HP but by hp's stockholders - which she is one. Other than her voluntary resignation, only the stockholders voting en-masse could remove her.
Posted by zboot (168 comments )
Link Flag
Corporate World is becoming like the government
It seems like you can screw up in the worst possible way (just like Politicians) and still be rewarded for it. What concept. I wonder if any member of the HP board are politicians themselves.
Posted by bucketscum (1 comment )
Reply Link Flag
RE: Corporate World is becoming like the government
Bush will probably give her the Congressional Medal of Freedom.
Posted by befuddledms (113 comments )
Link Flag
Corporate World runs our Government
It's not a surprising observation that you made. The corporate world runs our government. Most high-ranking elected and appointed officials are current or former board members of large corporations.
Cheney and Bush have direct, active ties to major corporations that receive huge no-contest government contracts.
Governement is quickly becoming the not-so-secret ***** of corporations and their money and it will only get worse because it's become an accepted, if not downright flaunted practice.
Posted by Fireweaver (105 comments )
Link Flag
Leak or Plumbing
Sometimes you want to unofficially pass information to the press. It's only a leak when you decide it's not the information you wanted out there.
It's a corporate tool that usually works to the institutions advantage. Sometimes leaks can also help the public uncover wrong-doing.

It's just not black and white.
Posted by thatkelly (8 comments )
Reply Link Flag
So there are consequences?
Finally a "leak scandal" results in some sort of consequence for the person at fault. Most of the time the person in charge of the company who was at fault for a security leak doesn't have to deal with the aftermath of a data breach.
<a class="jive-link-external" href="http://www.iwantmyess.com/?p=95" target="_newWindow">http://www.iwantmyess.com/?p=95</a>

This should be a wake-up call to other top-level execs to start taking security seriously.
Posted by ml_ess (71 comments )
Reply Link Flag
Well, if she could've shut her trap
Then this wouldn't be happening. The next question
<a class="jive-link-external" href="http://www.teckmagazine.com/content/view/659/42/" target="_newWindow">http://www.teckmagazine.com/content/view/659/42/</a> is how many billions is she going to steal on the way out?
Posted by (156 comments )
Reply Link Flag
I wouldn't be surprised about her payout
I wouldn't be surprised that her payout from the Chairman's job, will make Carly's look cheap in comparison, when she goes!
Posted by heystoopid (691 comments )
Reply Link Flag
WTF!!!?
So she gets a slap on the wrist. She still gets director's pay for doing nothing.

They need to fire her &lt;beep&gt; along with any other directors involved.
Posted by bob donut (90 comments )
Reply Link Flag
First Fort 500 Woman Exec Caught Spying?
Is this a case of the "First Fortune 500 Woman Exec Caught Spying"? In the spirit of the liberal press "First Woman..." obsession, I would like to know if women have crashed yet another corporate glass ceiling by being just as crooked and deceitful as men. I do hope that the EEOC will make sure that Fortune 500 companies are fulfilling their quota of women and minority crooks. At least HP has already met the quota.
Posted by CancerMan2 (74 comments )
Reply Link Flag
HP Board lacks integrity
The spying scandal is a sorry comedown for a company that HAD a reputation for excellence and integrity.

The board's actions have been more of the CYA variety than of truthfulness.

* WHAT PHONE RECORDS? The board played dumb when they realized that directors' phone records were used in the leak investigation. No one asked, "How did we get these records?"

* BOARD MEMBER RESIGNED FOR "PERSONAL REASONS": Perkins resigned in May. HP resisted proper reporting to the SEC of the reasons for Perkins' resignation until the past few days.

* STONEWALLING: Dunn and Hurd have made only weak apologies. Dunn has been far more strident about tracing the leaks from an individual than about the corporate breech of integrity in fraudulent investigations.

* PROTECTING CRIMINALS: HP has refused to identify the private investigation firm or the third party investigators who are suspected of doing the pretexting.

* WEAK APPEASEMENT: Recent announcement of Board changes are weak.
1. Dunn remains chair for 4 MONTHS.
2. She remains on the Board.
3. She will be replaced by Mark Hurd, who is also CEO and President.
4. The Board will backtracking on its new rule, that the Chair and CEO would be different people. This weakens HP's Corporate Governance.

If the Board had any integrity, it would have acted...
* immediately, upon learning of wrong doing
* without coverup, without excuses
* without compromise to the offenders

The Board must demand Dunn's resignation from the Board. (There will be more legal fallout for HP if she remains, than if she leaves and HP cooperates fully with the California State, Federal, Congressional, SEC and FBI investigations).

The Board needs to have a non-executive Chair. There needs to be a check on the CEO.

The Board must make a public statement, repudiating in the strongest terms, the tactics used by its private investigators, and reiterating its stand on corporate integrity.

The Board must take ACTION to convince the business and investment community that it is determined to regain the mantle of integrity and excellence it once had under Hewlett and Packard.
Posted by Hardrada (359 comments )
Reply Link Flag
Dunn Needs to LEAVE...
now it's confirmed that two other HP employees were used as a "test"....

She should not be on the board at all...Dunn needs to do the right thing and resign NOW...
at least it will give her some credibility!
Posted by oceanview_1 (14 comments )
Link Flag
 

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