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Scandal Behind the HP Scandal
Published on Wednesday, September 20, 2006 by the Providence Journal (Rhode Island)
Scandal Behind the HP Scandal
by Lee Drutman

There's something odd about all the attention attracted by the Hewlett-Packard corporate-board scandal. Suddenly everyone -- the media, the FBI, the Securities and Exchange Commission, the California attorney general, even the House Committee on Energy and Commerce -- wants to know: Did investigators hired by HP board members to spy on other board members break the law? And if so, how could this have happened?

"It appears a crime has been committed," says California Atty. Gen. William Lockyer. "We're convinced of that."

Say it ain't so, Bill! Crime in the boardroom? Not in corporate America!

The details, as far as they make sense, go something like this: In the last few years tensions have run high on the HP board. Some board members, apparently unhappy with how things were going, started to leak secret board information to the press. Other board members got upset. So they hired investigators to figure out who was doing the leaking.

Problem is, these investigators seem to have used false identities to get phone records of the leaky board members and of nine journalists suspected of receiving the leaks. Pretending to be somebody else, it turns out, is a crime in California, where HP is based. (The official name for the crime is "pretexting," as in presenting yourself under a false pretext.)

So it appears that a crime may have been committed. The question is: Why should we care?

Sure, the salacious details of boardroom espionage and betrayal give legs to the plot line (so much more fun than those numbers-heavy accounting frauds!). But isn't this just a petty internecine struggle among board members at one company, full of sound and fury but signifying nothing much?

Sure, there's the issue of dysfunctional boards (a favorite trope in this era of increased scrutiny of corporate governance). But I find it refreshing to see some actual signs of life coming out of corporate boardrooms for a change. Usually when we conduct a post-scandal autopsy on a corporate board, we find a team of yes-people smiling atop massive accounting fraud, rubber-stamping all of management's cockamamie and questionable schemes. In retrospect, we could have used a boardroom battle and a few leaks at, say, Enron or WorldCom.

But what about this secret spying? If HP will spy on its own directors, is HP also spying on its employees? Or, as The New York Times's Floyd Norris put it, "I own an HP computer, and have allowed the company to get remote access to it to repair it. Does HP feel free to spy on me?"

Well, ever own a credit card or make a phone call or search the Internet? Some company has those data and knows what you've been up to. And another company is probably data-mining all that, and may even be sending you personalized junk mail.

If it's secret spying that's got you worried, frankly I'd be more scared about systematic government spying on citizens than a corporate-boardroom battle. Where's a Republican-led House committee when it comes to demanding information about potentially illegal spying by the state?

As far as questionable corporate behavior goes, boardroom spying should barely register. If you want to pile on HP for something, how about the board's having paid former chief executive Carly Fiorina $180 million for six years when company stock performed horribly? Or that HP has been slow to phase out harmful polyvinyl plastic (PVC) from its products? Or allegations that the company has been using sweatshop labor in China?

But to be fair, HP is widely considered one of the most socially responsible large corporations. Business Ethics magazine has listed it as one of 10 best corporate citizens for seven years running (it's No. 2 this year). The magazine cites the company's commitments to diversity, community and the environment. Perhaps the board of directors had something to do with all that.

Who knows? Maybe, upon careful consideration, HP's socially responsible commitments should trump this spying brouhaha. Sadly, such consideration is notably absent in coverage of the scandal.

To those government prosecutors, congressional committees, and especially journalists who want to give corporate executives a hard time for doing things that are ethically suspect, great! There's much to expose.

But it's always worth asking: Why should anybody care? How widespread is this? And who is actually getting hurt?

Undoubtedly, there is a bottomless treasure trove of corporate scandals that people should care about, because 1) they are widespread; and 2) they have lots of victims. But this HP spying case isn't one of them. All it appears to offer is a few board members and government prosecutors who know how to play the media.

Lee Drutman, a frequent contributor, is the co-author of The People's Business: Controlling Corporations and Restoring Democracy.

© 2006, Published by The Providence Journal Co.


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