HP Pretexting Scandal the Hewlett-Packard Term Paper
- Length: 10 pages
- Sources: 1
- Subject: Business
- Type: Term Paper
- Paper: #74518653
Excerpt from Term Paper :
Perkins - who had retired at the age of 70 but was coming back on the board - had by this time muscled his way into a powerful position within the HP community; he and his powerful board ally, George Keyworth, held special "technology committee" meetings with key HP people the day before each board meeting. Stewart writes that Perkins' little group actually became a "board within a board," and Perkins' power grew. His disenchantment with Fiorina also grew. Fiorina was apparently losing the confidence of the board, and Perkins was the central figure in that movement away from Fiorina. Prior to the retreat, which was alluded to earlier in this paper, there was a board meeting scheduled, and before that meeting, Keyworth and Dunn approached Fiorina and urged her to "express concerns about Hewlett-Packard's performance, stock price, unfavorable press, and need to reorganize," Stewart continues.
Although Fiorina showed resistance to Keyworth's pushy agenda, she did change the agenda for the retreat. And several days after the retreat, Stewart writes, a reporter from the Wall Street Journal (Pui-Wing Tam) approached Fiorina to confirm some details that Tam had been given regarding the retreat. Those details included the fact that the board was losing confidence in Fiorina, that Perkins had returned to the board and that Perkins had participated in the retreat.
It is hard to convey how violated I felt," Fiorina acknowledged some months later in her autobiography, Tough Choices. All board deliberations are presumed to be confidential, so Fiorina of course was taken aback by having a Wall Street Journal (WSJ) reporter call her to verify what should by rights have been private information. "Trust is a business imperative," she wrote in her book, quoted by Stewart in the article. So the following day (after the call from the WSJ reporter), Fiorina set up a conference call with all board members (except Dunn, who was on vacation) and "demanded a confession from any director who had spoken with the WSJ reporter..." Or any other member of the media.
When Perkins admitted talking to the WSJ journalist, but told Fiorina that Tam already knew much of what the board had discussed. Fiorina then ordered an investigation, Stewart explained. The HP attorney (outside counsel) Lawrence Sonsini was put in charge of hiring professionals to find who leaked the information. Albeit Sonsini's report back to Fiorina was inconclusive, Fiorina told Stewart in his interview with her "she never had any doubt that the leakers were Keyworth and Perkins."
Meanwhile, Stewart's article continues tracing the steps that lead up to today's ongoing HP battles; in 2001, Dunn was found to have breast cancer, later diagnosed with melanoma, and eventually was diagnosed with "advanced ovarian cancer." She kept her seat on the HP board, and was given the chairmanship of the "audit committee." Dunn's relationship with Keyworth and Perkins strengthened, and the board's power was more and more consolidated into Perkins' little cadre of colleagues including Dunn and Keyworth, a trio that orchestrated Fiorina's firing. Perkins was by now the chair of the nominating and governance committee - among the most powerful positions outside of board chair - and Dunn was board chair. More and more Perkins was trying to call all the shots at HP; "He evidently believed that Dunn would defer to him," Stewart writes. Part of the strength of Stewart's article is that Dunn opened up to him and helped him trace the power shifts and relationship building that went on.
Perkins' view of running a board was that "a few people - he and Jay [Keyworth] - should make the decisions and everyone else is a spear-carrier," Dunn explained to Stewart. That statement is a key to understanding why the scandal at HP has done such extensive damage not only to the reputation of a gigantic corporation like HP, but to the individuals who have given their most excellent professional lives to the betterment of HP, and instead got tangled up in the morass. From Stewart's article, it is clear that Perkins was at best a power-hungry egocentric personality, and at worst a back stabbing, rule-breaking obsessive controlling manipulator. The fact that Perkins was allowed to run roughshod on the rules of corporate behavior (he deliberately stuck his nose up in the air when corporate decorum was called for) and basically help throw mud on HP's reputation is part of the climate of deviance that led to this public relations disaster.
Updated note: Perkins' bizarre power-focused behavior during 2005 and 2006 is lately the subject of "he said" and "she said" allegations that are part of the legal process in California; indeed while the attorney general for the state has filed charges against Dunn, asserting that Dunn is responsible for illegally obtaining those phone records discussed earlier in the paper, Perkins is a big player in this part of the legal process. Dunn and Perkins, once allies, are now bitterly attacking one another in the media, which in effect is providing legs and shelf life to a story that should have been brought under control and guided to a settlement months ago. Because the organizational structure was allowed to be manipulated to the point of bloodletting and re-invented according to the whim of the moment, any vestige of cooperation has been fully thwarted, and the vitriol and paranoia continues as though it will never end. The fact that Dunn attempted to follow corporate rules of engagement and diplomacy back then is being thrown in her face today.
To wit, a March 1 story in CNET (Kanellos 2007) reports that former chairman Dunn has called Perkins "a self-serving bully" and Perkins has responded (through his attorney James Brosnahan) by saying "Dunn's obsession with procedures hampered HP's ability to compete with Dell and IBM," according to Kanellos' story. Perkins also says now that Dunn's investigation into boardroom leaks "was really part of an overall plan by Dunn to control the board by eliminating the technology committee," Kanellos writes. Perkins was quoted Tuesday, February 27, saying that "...this embarrassing public mess" is a "culmination of a war over control over the board of the company."]
Meanwhile, on January 18, 2006, Keyworth had lunch with reporter Dawn Kawamoto in Berkeley; they had been friends in previous years but had never met. While Keyworth claims he thought their lunch was a casual social meeting, in fact Kawamoto published a story a few days later that detailed some of the insider information Keyworth had shared with the reporter. HP executives were appalled that another apparent leak had occurred, and launched yet another investigation, called Kona II (Kona I was the investigation into who leaked to the WSJ reporter). After the investigators (using pretexting strategies) identified Keyworth as the HP person who was contacting Kawamoto - yet still not knowing what those conversations entailed - Hurd, Baskins and Dunn tried to get Keyworth to simply confess that he had leaked information, but he didn't budge. Page after page of the lengthy Stewart article reflect the petty back-room accusations and paranoia over these leaks. It actually reads like a soap opera, maybe "Days of Our Lives" or "General Hospital"; eventually, Keyworth did indeed admit in front of the board that he had talked with Kawamoto, and in effect, spilled company secrets.
The upshot of that confrontational psychodrama in the board meeting of May 17, 2006, was that Perkins quit the board, but he couldn't bring himself to stop meddling in HP affairs, firing off a belligerent, threatening email to Dunn. Perkins also pressed HP board members to investigate the practice of pretexting, demanding minutes of meetings and stirring up stressful matters as best he could. When (summer, 2006) Perkins learned that his own phone had been hacked into, he raged in emails to the board and hired an attorney; and through the sharing of his copies of emails and other documents pertaining to the practice of pretexting, the California attorney general's office began their investigation.
On top of this structural chaos at HP, Hurd and several other directors sold their HP shares of stock, and reaped a $39 million windfall from those sales, Stewart continues. Shareholders file suit in the Santa Clara Superior Court charging "insider trading" in that they sold their stock "while in possession of 'material non-public information' that was likely to depress the shares," Stewart continues. By this time the media was reporting in high-visibility formats that HP investigators not only had HP board and executives been pretexted, but reporters as well. Fiorina, Steward explains, was on a book tour promoting her own tell-all when a reporter showed her a list of people who had been pretexted; it appeared that Fiorina had been pretexted well after her firing, which infuriated her.
On October 4, 2006, the attorney general for California charged Dunn with four felony counts; "fraudulent wire communications, wrongful use…