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Promoting Hurd is not a fitting punishment for HP

A spanking only investors can be proud of

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Opinion Miss Manners tells us that when caught with your pants down, you're meant to pull them back up all the way. Under no circumstances should one allow gaudy, suggestive bits to remain dangling out for public consumption.

So why then has HP promoted its top executive to Chairman and trimmed the number of people on its board?

That's how HP punished itself today for an unprecedented corporate scandal that employed criminal tactics, according to the California Attorney General. HP spied on its own directors and even worse spied on a cadre of reporters and their loved ones in a bid to clamp down on an innocuous series of leaks.

Rather than acting to assure us that something like this never happens again, HP has - in a move reminiscent of Washington - elevated the major players. Chairwoman Patricia Dunn has taken almost the entire blame for the spy fiasco. But instead of reprimanding Dunn in any meaningful way, HP decided to let her give up the Chairman post in January and then stay on as a director. Given the circumstances, that's quite a PR boost. Meanwhile, the all too silent Hurd will ascend to the Chairman throne, adding the title to his CEO and President collection.

Confessed leaker George Keyworth resigned from the board, prompting HP to amend its bylaws so that it only has nine directors now.

"I am taking action to ensure that inappropriate investigative techniques will not be employed again," Hurd said. "They have no place in HP."

For some reason, the majority of the press has given Hurd the leeway to produce such statements. You have to remember that HP has already made use of inappropriate investigative techniques on Hurd's watch. Despite repeated attempts to force Hurd to address this issue, HP has declined to make him available to reporters. Instead, it has sent Dunn in to do the dirty work, hanging the entire incident on her head.

HP's approach asks the public to assume a couple of things. You're meant to believe that Dunn masterminded this entire operation, while Hurd stood back as an ignorant bystander. You're also meant to assume that Dunn - and not Hurd - was so furious about media leaks that she - and not he - vowed to clean up HP. Lastly, you're meant to assume that both directors when told that their investigators obtained the phone records of directors and journalists assumed that this had been done legally.

That's a lot to swallow under normal circumstances and even more to gullet down when you look at the timeline of events. Dunn, after all, has been a director at HP since 1998. Over the past eight years, HP has proved a geyser of leaked information to the press. We're talking juicy stuff here - not product details and ink prices but serious boardroom dirt. All HP could muster in the pre-Hurd era to deal with the leaks was a semi-formal investigation that included chit-chats with executives.

Post-Hurd, however, we discover a much more aggressive HP - one willing to fund the machinations of two investigative firms. So, did Dunn really snap, as we're told, because of a CNET story stating that HP's directors needed a rest after lengthy meetings or did Hurd snap during week one when he took over as CEO? Was it the new guy that changed HP's investigative protocol or the director that hadn't done too much about leaks in the past?

And why does the press have only Dunn and former director Tom Perkins arguing about HP's spying tactics? The executives really went at it as to whether or not they should use lie detectors, we're told. Did Hurd care about that? Did anyone else? Who thought hiring a hardened team of Philip Marlowe's would prove more genteel than being wired up to a non-HP lie device?

It's pretty well accepted in Washington circles that when a scandal breaks, and you know you're busted, the smart person reveals all in one, big push rather than letting the muck dribble out one busted pustule at a time. HP has yet to receive the outline on how this PR tactic works. Instead, it chose to reveal Perkins' issues and the leaker problem about six months too late in an SEC statement. A couple days later we then discovered that HP - unlike any California company before it - spied on reporters.

You can be sure that more details about this spy operation will leak out in the coming months as the California Attorney General's office and now the US Congress begin rooting through HP's trash. There's an outside chance that HP could end up with an accused felon or two on its board before year end, if it's not able to push all of the criminal concerns onto the companies it hired for the investigations. HP could also end up with a one-of-a-kind class action suit from nine rather pissed off reporters.

We can't see how Hurd's promotion looks good under those or any circumstances.

HP has been applauded for having a strong board, chock full of independent directors. But what a mess this group has created. In one week, the company has shattered a reputation that took decades to build. And it's the shreds of that reputation that HP is lucky to be able to hang onto now. Can you imagine the outrage if a Wal-Mart of Exxon had confessed to funding a spy operation that covered reporters at the New York Times and Wall Street Journal?

Of course, HP continues to demand that it's acting in the best interest of shareholders, and in the short-term, that's correct. Promoting Hurd rather than punishing him will please investors who seem enamored with the CEO.

That said, consolidating more power under one man who was present through this whole debacle and who has failed to reveal a hint of how he participated in or handled the mess is a disgrace.

It's now fitting that Hewlett and Packard have been removed from HP's name. ®

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