Problems Facing Hewlett Packard's Board of Directors - Case Study Example

Introduction

Hewlett-Packard or commonly known as HP is an MNC headquartered in Palo Alto, California. The company was founded in 1939 by Bill Hewlett and Dave Packard. It operates in the Information Technology industry, developing and producing hardware and software components for individual customers, small/medium/large-sized business enterprises, education sectors, healthcare sectors and the government. In 2006, HP got involved in a scandal which resulted in the resignation of some HP’s top personnel including Chairwoman Patricia Dunn, few Board members and HP’s general counsel. This scandal exposed the company to negative media coverage, dropping its share prices by 5 per cent, thus placing the company’s management and leadership into question.

Problems facing HP’s Board of Directors

It started in January 2006, when an American media website CNET published an article in their website, leaking some HP’s long-term business strategies. According to the article, HP CEO Mark Hurd along with the company’s board of directors and some senior executives gathered at HP’s annual meeting for discussing HP’s future strategic plans of acquisitions. The article mentioned that HP is strategizing for more acquisitions in the software industry. It also mentioned that the acquisitions would converge with HP’s growth plans directed towards its Technology Systems Group (CNET, 2006).

When Patricia Dunn learnt about this article, she got furious and immediately decided to investigate and track down the main source of this media leak. With the help of HP’s general counsel Ann Baskins, Dunn hired a group of third party security experts for investigating the board members and nine journalists in order to find out the main source behind information disclosure.

Long-term strategic plans are very much confidential for a company. Leak of these plans can make the rival firms conscious, which can result in loss of the company’s competitive advantage. Now the question arises why did a board member leaks out such information, which should be kept confidential and within the boardroom. It can be assumed that there may be some unresolved conflicts on the board regarding strategic direction of the company including critical decisions like mergers and acquisitions or maybe there was a conflict among the board of directors regarding their appropriate role in the company.

Analyzing the decision taken by Patricia Dunn

Patricia Dunn, received an email from HP’s head of public relations in January 2006, which mentioned about the article published in CNET news website entitled, “HP Outlines Long-Term Strategy” and included that HP board of directors in their annual management retreat have made some long-term strategic plans regarding acquisitions of some software companies (CNET, 2006).

Dunn became disappointed with this leak and she immediately informed the same to Tom Perkins, the oldest member of HP who was also one of the board members. Perkins in return replied to Dunn that; although the leak is not that damaging for the company, but this news should have been published at the appropriate time and from the correct source (The New Yorker, 2007).

Dunn was persistent in finding out the source of the leak. She contracted a group of security experts to investigate all the board members and many journalists from media companies including Wall Street Journal, CNET and the New York Times. The security experts in turn hired some private investigators; that allegedly used, an inappropriate spying technique called pretexting. In this process of pretexting, the investigators created their fake identity to impersonate the board members of HP and nine journalists. Then by tricking those board members and journalists, the investigators obtained their social security number, phone number and other private information. HP’s former chief ethics officer, Kevin T. Hunsaker and General Counsel Ann Baskins, were aware of this process and had given their consent in this investigation (The New Yorker, 2007).

Later on 5th September, 2006, when Newsweek; an American-based news magazine, revealed about this pretexting on HP board members and journalists, Dunn was accused of invading privacy by the use of inappropriate and illegal means. Dunn in her statement mentioned that, she definitely initiated the investigation to find out the source of information disclosure, but she was not aware of the methods that were being used in investigating. She apologized for letting the board members down and resigned from her post on 22nd September, 2006 (The New Yorker, 2007).

Meanwhile, after Dunn’s spying investigation was revealed, board member and HP’s most experienced member, Tom Perkins resigned in anger. Board member George Keyworth, was finally held accused of leaking the information to the CNET journalist and on 12th September, 2006, he resigned. In his statement he mentioned that, he did not leak any such information to the media, which can damage the company (The New Yorker, 2007).

Dunn’s decision to hire third party investigators to find out the source might be unethical, but at that point of time, Dunn also had a responsibility towards the shareholders of the company, HP’s employees and the other board members. All of them had a right towards the company and this leak of confidential information had put all those rights of people in danger by giving a benefit to the competitors. However, when Dunn herself had initiated the investigation process, she should have kept herself updated about what techniques and processes the investigators are using to find out the source of the leak. She failed on that part. She could have also implemented some other way to find out the source instead of hiring any third party investigator. She could have directly talked to them individually about this matter and could have given the culprit a chance to come up and accept his fault or she could have done a preliminary investigation and after finding the trace of the source, she could have directly charged the culprit behind closed doors. Instead, she chose an unethical approach of investigating which finally turned out to be illegal as well.

This decision taken by Dunn with the consent of Baskins and Hunsaker involving third party investigators to find out the source can be comprehended under Utilitarian ethical theory. Utilitarian theory is an ethical philosophy where morality of an action is judged based on the happiness of the maximum number of people. This theory states that, an action is considered morally correct if it results in happiness of maximum people and is considered wrong if it results in unhappiness of maximum people (Hayry, 2013). Dunn assumed that the information leak will be harmful for the company, which in turn will affect the shareholders, the employees and also the other board members. She wanted to find out the source of the leak so that such information leak does not occur again in future. Therefore, she had good intention in her mind and she thought about the betterment of the company and people related to it. Unfortunately, things did not turn up as she expected and she realized very late that she relied on the wrong group of investigators. Her decision resulted in disgrace towards the board members and a dramatic chaos spread in the company. Although Dunn tried to follow the Utilitarian theory of ethics; she finally failed and hence, Dunn’s, Hunsaker’s and the investigators’ actions could not be held ethically justifiable.

What they should have done

Instead of following the Utilitarian theory, Dunn, Hunsaker and Baskins could have followed the Deontological theory of ethics. Deontological theory, is an ethical philosophy where the morality of an action is judged, based on whether the action is adhering to the rules (Alexander and Moore, 2007). If Dunn would have followed this theory, she would not have hired any third party investigators at the very first place without the knowledge of the board members. This is because, carrying out a secret investigation which involves spying and invading privacy of the victim is illegal and it does not abide by any rules. This makes it unethical. Dunn could have taken legal steps in investigating the matter or she could have at least, informed the board members about the investigation. The investigators also broke the law by implementing an illegal and unethical investigation technique like pretexting. Unexpectedly, Hunsaker being the chief ethics officer of HP, he got involved into this unethical issue.

Assuming myself in the position of Dunn or Hunsaker, I would have followed the Deontological theory of ethics. I would have taken some legal steps in investigating the matter or would have at least conformed that the investigators are not using any unethical and illegal techniques for investigating. Though betterment of the company and the people related to it is important, but using inappropriate and illegal method to achieve that betterment is not justifiable.

Putting myself in Mark Hurd’s position

Soon after Dunn’s resignation, Mark Hurd was appointed as the new chairman of HP and his instant challenge was to gain the respect and trust from employees and other board members. If I was in Hurd’s position, the first thing that I would have done was to make sure that the confidentiality of the strategic decisions taken in board meetings were kept intact. I would have checked whether there is any conflict or stress among the board members, which may result in such information leak in future. Finally I would make it certain that such unethical incident does not occur again in the company. In case of any such information disclosure in future, I would take legal steps in handling the matter and if necessary, I would form committees within the organization to continuously monitor such sensitive and ethical issues.