Original URL: http://www.theregister.co.uk/2006/10/11/hp_dunn_dysfunction/

Dunn editorial officially ends the 'HP Way'

Dysfunctional and proud of it

By Ashlee Vance

Posted in Financial News, 11th October 2006 15:02 GMT

Opinion Former HP chairman Patricia Dunn has displayed remarkable courage during the unravelling of the company's spy scandal. Where others might hide behind humility and full disclosure, Dunn has bravely moved to rewrite history and fashion her image in something approaching a decent light.

Those wondering about the source for such audacity need not look far. Dunn learned how to shun responsibility – and for that matter reality – while serving at the pleasure of HP's inglorious board.

Dunn – or some underling pretending to be Dunn – penned a recent editorial for the Wall Street Journal dubbed simply "The HP Way". How fitting that Dunn would pick the very publication she blames for making HP's internal discord public as the vehicle for her most up-to-date absolution of any sins. Never shy from seizing on an opportunity, right?

"Throughout the (investigation) process, I asked and was assured – by both HP's internal security department and the company's top lawyers, both verbally and in writing – that the work being undertaken to investigate and discover these leaks was legal, proper, and consistent with the HP way of performing investigations," Dunn writes.

Those who have read Dave Packard's book The HP Way will note that the chapter dealing with spying on directors and reporters is thin. It's, in fact, so thin that you're likely to miss it no matter how many times you read the book. Perhaps an HP insider like Dunn has a secret unedited version of Packard's book that includes the spy bits and other chapters on shirking responsibility.

The rest of Dunn's editorial borrows heavily from the works of Disney and the Brothers Grimm.

For example, Dunn calls out one section form HP's Standards of Business Conduct. "You may not grant interviews or provide comments to the press without prior approval from HP Corporate Communications . . ."

In reality, such discussions between the press and company officials occur all the time, and Dunn knows it. More often than not, these chats benefit the company. Few executives have the motivation or desire to undermine their work. The swapping of information between company officials and reporters is part of the lubricant of business, and corporate communications officials often undermine the practice. HP knew this and authorised officials to speak with reporters from time to time to nudge the scribes in the right direction.

The point here isn't that directors should be leaking harmful information. They shouldn't. The point is rather that the issue is not as black and white as Dunn makes it.

Also in the editorial, Dunn writes that "the most sensitive aspects of a company's business come before its board: strategy, executive succession, acquisitions, new product development. This is exactly the type of information a company's competitors and those who trade in its stock would love to have before information is properly disseminated".

Let's remember that the vast majority of newsy nuggets doled out to the press by members of HP's board were not really newsy at all. One director whined about being tired after working all day for HP. He also revealed that HP hoped to sell lots of its Opteron servers, which can only be viewed as juicy if you assume that HP secretly planned to sell hardly any Opteron servers. Elsewhere, there were leaks about HP pushing out Carly Fiorina and a "dysfunctional" board.

After watching Fiorina be fired in a humiliating fashion, few observers would need a reporter to assure them of management discord.

The only real leak of any substance is one that Dunn also points to quite often. On 5 January, 2006, the Wall Street Journal wrote a story about HP considering CSC as an acquisition target. That story rattled CSC's share price higher, and a following story saying that HP was no longer pursuing the buy sent CSC shares back down.

Dunn contends that such leaks could have put the company in violation of securities laws.

That argument is true to a degree. Companies detest leaks about mergers and acquisitions more than anything else out of a need for self-preservation, competitiveness, and legal concerns. As you all know, however, such leaks will happen, but that doesn't mean the rare dribbles should spark Nixon era probes.

What's remarkable is that between mid 2005 and January 2006, when HP paused one investigation before starting another, the company faced plenty of other leaks. You've got HP "exiting" the switching market, releasing a new server line and other tidbits about whom CEO Mark Hurd pals around with.

Dunn, however, maintains that "the leaks ceased or at least slowed dramatically", during this period.

In actual fact, the leaks showing how dysfunctional HP's board was slowed, but the leaks about "strategy, product development" and the like continued.

Are we to believe Dunn then when she portrays the well-being of HP as her most pressing concern? Or was it rather that HP's board was more worried about how awful it looked to the public?

Well, it's tough to believe much of what Dunn says given her floundering prose. She claims to be "still learning about some of the techniques that were used or contemplated" during HP's investigation. This is a statement meant to show how complex and tough to understand the investigatory tactics were to a laywoman. Anyone with half a brain can see how suspect HP's methods were in just a few minutes.

Dunn parses words elsewhere too. She only thought the practices were legal because people assured her they were. She did not oversee the investigation, she only authorised it, encouraged it, heard reports about it, and sought funding for it.

Dunn, of course, isn't to blame for all this. She learned to accept a dysfunctional board under Fiorina and under Hurd. And it's amazing to see how proud HP executives are of this fact.

Fiorina, for example, has spent the last week reminding people again and again that her board was dysfunctional. They were so messed up that they fired her without warning. Then, three people who don't seem to get along well – Dunn, Tom Perkins and George Keyworth – picked the next CEO. All three directors have since left HP's board because of its dysfunction, and a thinned out dysfunctional board has promoted Hurd to the chairman slot.

Longtime HP CFO and one-time HP CEO Bob Wayman has sat by through much of this dysfunction, as has Hurd who received warning from Perkins months ago that this spy scandal would be made public. Did Hurd bother to read the report about the spy scandal or face the situation seriously? No, he hired a law firm to deal with the mess three days after the press already had all the information.

The HP Way now seems to be one in which dysfunction is tolerated over the course of many years without anyone trying to do anything about it. Don't take responsibility for mistakes or try to correct them. Just blame a dysfunctional board for your mistakes – even if you're a board member.

We can only assume that this will continue until Hurd is left as the only board member. Perhaps he can be functional on his own.

In the meantime, it's fitting to see Dunn write about the HP Way for the Wall Street Journal - a newspaper that HP spied on. Now we can all stop pretending the tagline has any meaning left. ®