Wednesday, September 06, 2006

H-P's Illuminating Disgrace

Transparency International rates the US as more corrupt than the UK, although my experience of working in both is they're equally trustworthy. Now a report on a boardroom tussle at HP suggests corrupt US public companies may account for the difference.

The data:

World RankingNationCPI Score
11th least corruptUK8.6
17th least corruptUSA7.6

The garage where Hewlett-Packard Co. started in Palo Alto was still there last time I looked, and it grew from there to become the bedrock of Silicon Valley - innovative, open, and honest. Look like that's changed (WSJ, $, my emphasis):

A year and a half after Carly Fiorina was pushed out as chairman and chief executive of Hewlett-Packard Co., the aftershocks of that firing continue to shake the computer company's board of directors.

The latest eruption came at a meeting on May 18, when the board reviewed the results of an extensive investigation into press leaks that was undertaken by new board Chairman Patricia Dunn shortly after Ms. Fiorina departed.

The report, which relied in part on private telephone records, fingered George Keyworth, a longtime director and former science adviser to President Reagan, as the source of many of the leaks about board deliberations.

A boardroom showdown ensued, during which the board voted to ask Mr. Keyworth to resign, and he refused, saying he was elected by the shareholders. Venture capitalist Tom Perkins, a friend of Mr. Keyworth, quit the board on the spot in anger.

While full details of H-P's internal probe remain unclear, it appears to involve a controversial practice known as "pretexting." Under the practice, public investigators apparently call the phone company, and use personal information to falsely represent themselves as another person, in order to obtain that person's records.

H-P board members say the investigation was done by an outside contractor to the company, retained by another outside contractor. Those contractors continue to insist they used only legal methods to obtain the phone records.

But some H-P board members acknowledge feeling uncomfortable with the methods used.

I bet they do! If this is true, the chairman and some board members of HP hired someone to steal another board member's personal phone records.

In the UK this would be a criminal act - the HP board solicited, received and made use of stolen goods. It would also be a personal disgrace for the board members complicit in the act and they'd be expected to resign immediately. And they'd find it tough getting another board position, because institutional investors are suspicious of crooked directors.

And any company that behaves this way at board level is likely to have low ethical behavior right down the line.