What HP Should Have Done
By Kirk O. Hanson
The Hewlett-Packard debacle last week was eye-opening, not
only to junkies of boardroom drama, but to students of business
ethics and crisis management. If Pattie Dunn, HP's board chair,
had deliberately set out to create a case for debate in business
schools, she couldn't have done any better!
Here is a "cheat sheet" of the critical decisions
-- the ethical turning points -- in this amazing story:
1. Should the chair inform the board it is being investigated
for leaks? Knowing that is was likely only one board member
was leaking to the press, Pattie Dunn either did or did not
have an obligation to inform the board she was about to undertake
an investigation and how it was to be conducted. I believe she
did have such an obligation, out of respect for the innocent
board members and their rights.
2. How do you pick an outside investigator and what guidance
do you give him or her? Every company hopes its vendors,
contract manufacturers, or business partners follow its standards
and values. Today, companies are increasingly being held accountable
for what happens in its supply chain, for example. How explicit
should HP be in giving direction to its outside investigators?
I believe HP had an obligation to pick an investigator with
a reputation for respecting the rights of those investigated,
and the obligation to give explicit direction that the outside
firm should follow HP values or the "HP Way."
3. Should ethics or legality be the standard for how an investigation
is conducted? Investigative methods are evolving quickly.
While companies have increasing responsibility to investigate
employee or even board misbehavior; they are also facing a legal
landscape which is changing rapidly. The American public is
clearly worried deeply about the privacy of its financial, websearch,
and, yes, telephone records. Should HP be guided by what they
and their lawyers believe is legal - or by some sometimes ambiguous
standard of what is "ethical?" I believe HP has long
been committed to acting "ethically," not just legally,
and they would give up a major portion of their reputation by
choosing legality as the standard.
4. What should you do when a report to the board was based
on private telephone records? We know only about Tom Perkins
reaction when the board was presented with the report fingering
George Keyworth as the leaker. He slammed down the cover of
his briefcase and immediately resigned from the board. What
should the other board members have done? I believe every member
of the board should have been concerned that the report was
based on private phone records, and recognized this was an ethical
problem. That could have enabled the HP board to have moved
quickly to clean up its own mess before Perkins forced its hand
several months later.
5. How candid should you be while the facts behind a scandal
are being examined? It was clear from the beginning that
HP knew more than it was telling the public or the press. For
example, it knew the name of the outside investigator, what
guidance was actually given to the investigator, and how the
investigator went about his work.
6. Do you apologize for what happened? Who should apologize
and to whom? At what point in the emergence of a scandal does
a company apologize for what happened? How much "blame"
does the company admit? I believe HP was a bit slow apologizing
to board members and the employees for the invasion of private
phone records. To say one was "appalled" at the methods
used falls short of an apology. The board chair and the management
spokesperson should have apologized early and often - to the
board members and to the employees.
7. Should anyone be punished? One of the fundamental
ethical turning points is whether anyone is held accountable
and whether the punishment fits the crime. You hope that any
penalty communicates an unambiguous message about the values
of the company and its commitment to accountability. I fear
HP gave at best a mixed signal. Apparently the board concluded
Pattie Dunn did something wrong, but it was unclear what, and
why stepping down only in January and then remaining on the
board was the appropriate punishment.
8. Should you explain in detail what has been done to prevent
a similar incident in the future? Should HP explain to its
employees and to the public exactly what steps have now been
taken to prevent a recurrence? I believe it must do this to
satisfy the anxiety of employees that their phone records could
be examined next, and to relieve the worry of HP customers that
the data HP keeps on them might be used against them.
9. Should you also purloin the phone records of reporters?
Sorry, the answer to this one is so obvious that you get no
credit for saying "No, they should not." This merely
insured that negative media attention would follow!
Above all, I believe past scandals - including the tragic poisonings
of Tylenol buyers 25 years ago, and the spate of corporate scandals
which began with Enron in 2002 - have established a clear standard
for the management of ethical scandals and other corporate crises.
The four principles are a) tell everything you know as you learn
it, b) apologize early and often; c) punish those who are guilty,
and d) state clearly what the company has done to make another
such incident unlikely. Unfortunately, the HP board stumbled
on several of these fundamental principles.
O. Hanson is executive director of the Markkula Center for
Applied Ethics. A version of this articles originally appeared
in BusinessWeek Online, Sept. 18, 2006.