Can Hurd Survive The HP Drama?

During the Senate Watergate hearings, the question “What did he know
and when did he know it?” became a mantra surrounding Richard Nixon’s
bungled attempt to spy on his political opponents.

Now, more than 30
years later, the answer to that same question could determine the
fate of HP CEO Mark Hurd.

At a news conference today at HP headquarters in Palo Alto, Calif., Hurd expressed apologies and regret over the way in which investigations were conducted over board members’ leaking information to the media.

“We may never know the full extent of what of what went on…or whether we’ll be able to obtain all the information in this investigation, due to its complexity,” Hurd said.

That probe, which, it was discovered, employed private investigators to
obtain phone records of HP board members and journalists, has set off
a firestorm of controversy, including multiple government inquiries
and congressional hearings.

Until recently, Hurd has been able to keep some distance from the issues.
But details have surfaced that make it seem Hurd was aware of plans to spy on a number of employees and outsiders.

While few doubt HP can survive the corporate spying fiasco, questions
remain whether Hurd can come away unscathed.

“It depends on what he knew,” former SEC chairman Harvey Pitt told
internetnews.com.

Pitt said the HP scandal, including hiring
private investigators to illegally obtain private phone records of
board members and snoop on journalists, is “wholly different” from
past corporate scandals, such as Worldcom and Enron.

“If he were involved and condoned these actions, it would be
problematic for the company,” Charles Elson, director of the University of
Delaware Center for Corporate Governance, told internetnews.com.

Although unwilling to name names, Elson said fresh faces are needed
on the HP board.

The computer maker is the first case of a corporation getting into
legal hot water for illicitly gaining access to personal data of
employees and reporters, Pitt said.

“It’s been handled very, very poorly,” Pitt told internetnews.com.

HP says it will cooperate with a broader SEC inquiry into the
company’s conduct.

“If nothing further points to him directing activity, he’s not in any
particular risk,” Richard Steinberg, former head of PricewaterhouseCoopers’ corporate governance and author of “Corporate Governance and
the Board – What Works Best,” told internetnews.com.

Hurd said an outside law firm, Morgan, Lewis & Bockius, had
been hired to analyze the leak investigation. On Friday, the firm detailed how far it was in tracking down the chain of decision-making behind spying tactics used in the press leak investigation.

Steinberg laughed when asked what mistakes HP made.

“Mistakes began with the director who leaked to the media,” Steinberg
said. George Keyworth, who HP said was the board member who contacted
the media, resigned last week.

Steinberg said HP made further mistakes by involving internal
personnel in the investigation and not hiring sooner an independent
law firm to conduct the probe.

“It’s apparent there is some dysfunction on the board,” Steinberg
said. “They need to get that in order.”

If recent allegations are correct, there is a corporate culture
problem, Elson said.

Although board chairwoman Patricia Dunn announced her resignation at today’s press conference, effective immediately, HP needs to do more house cleaning, said Jill Fisch, T.J. Maloney Professor of Business Law at Fordham University Law School.

“A CEO can’t operate under this kind of cloud,” Fisch told
internetnews.com. Involving Hurd means the CEO has less time
to concentrate on the continued revival of HP, she added.

For business, that’s the real threat, she said. CEO integrity is a
tremendously important issue, Fisch said.

Elson said the reason we haven’t seen
this sort of scandal previously is simple.

“Most people have the good sense not to do this,” he said. HP should
have kept the investigation within the boardroom. “Never conduct
these investigations.”

With many CEOs receiving thousands of e-mails daily, it’s safe to
assume there was some connection to Hurd, according to Fisch.

Can Hurd hope attention on HP-Gate wanes? With his appearance at a congressional hearing next week, that won’t be easy.

“If I were HP,” joked Fisch, “I’d be hoping there was a problem with
Dell next week.”

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