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Can HP's 'Turnaround' Chief Turn it Around?

Mark Hurd's apology Friday over spying tactics HP's board of directors used to plug boardroom leaks to the media may lessen the firestorm for now.

Whether HP's CEO can survive the sorry mess the scandal has brought to one of the world's most respected companies is the looming question.

Before all of this, he was known as a turnaround executive whose no-nonsense approach and cost-cutting helped spur strong earnings results at HP and lifted morale after the bruising board fight to oust former CEO Carly Fiorina.

Now, ahead of his appearance at the upcoming House congressional committee hearings into 'pretexting,' Hurd is facing a career-defining moment.

Why? Because no one -- not him, not HP's general counsel, not its ethics officer or some executive designated with that responsibility -- stepped up to put a stop to an investigation into boardroom leakers that plummeted into murky legal and ethically questionable waters.

Only when board member Thomas Perkins resigned in disgust in May did the word of the pretexting scandal and spying tactics start to trickle out.

The lid isn't entirely blown off the case, even after Hurd and the law frim brought in to track down what happened offered up more details. But we've seen enough to know that Hurd's not quite clear of the taint, despite his statements that he did not approve questionable tactics.

The tactics we know of include pretexting (the use of subterfuge to gain access to another person's phone records using their social security numbers). HP has confirmed it had board members, journalists and their families, as well as two HP employees, followed, and attempted to place tracer software on a journalist's computer (which Hurd said he wasn't aware of).

Some of the leaked memos even discussed a plan (not carried out as far as we know), to plant "cleaning crews" in the newsrooms of the Wall Street Journal and Cnet. All in an effort to find out who on the company's board of directors was leaking information to the press.

Although Hurd has pledged to clean up the mess, the drama has the industry shaking its collective heads over how it got to this.

"To the extent that he had knowledge of this, and may have been actively involved in planning or approving tactics" -- if he didn't know, he should have known," says Jill Fisch, a T.J. Maloney Professor of Business Law at Fordham Law School.

"These days, reliability, trustworthiness and tone at the top are a really big deal," in this era of Sarbanes Oxley regulations that sprung from the Enron accounting scandal. "Right now, we're really focusing on that aspect of corporate governance. I don't think a company can continue to have a leader whose integrity" may be in question.

James E. Lukaszewski, chairman and president of The Lukaszewski Group, a PR consulting firm, is even more blunt. He said the whole board of directors at HP needs a house-cleaning -- more than Patricia Dunn's immediate resignation from the board (and even if a few more are expected to go).

"When a board becomes this visibly dysfunctional, there needs to be a process in place that will fix this, rather than allow something like this to take place."

Plus, the one thing to remember with crisis management problems is that they are management problems first.

"This is about fundamentally bad, and, it now turns out, potentially illegal management decisions," he says. "Let's also call them fundamentally stupid management decisions."

What concerns him and others is who was watching the moral tone at HP?

That's the CEO's realm, not to mention a company's ethics officer, who is obligated to go to the CEO or the board if any questionable behavior or wrongdoing is found. The board is supposed to act on it.

"If the board is corrupted, then you've got a problem. The shareholders should be demanding that HP be completely cleaned out at the top."

And if that's not enough, there's also a sideshow in bitter irony playing out regarding a privacy award that HP sponsors.

The award "recognizes an organization that has transformed or enhanced business through the implementation of a privacy technology. These awards recognize organizations that have embraced privacy both for its competitive advantage as well as its role in improving the customer/citizen experience."

Even more head-shaking, the International Association of Privacy Professonals (IAPP), which sponsors the award with HP, has a section for news headlines on its site called "Eye on Privacy."

While the HP case dominates the headlines of every major business publication, not one mention of it can be found on the IAPP's Privacy Innovation Web site.

Erin Joyce is executive editor of internet.com's news channel.



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