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Perplexed by Pretext

Sep
27
2006

As I continue to follow the Hewlett-Packard saga, I continue to be perplexed by pretext.

Since I last discussed the issue, there have been more revelations, and the situation continues to change. It will probably change again before this missive sees the light of day. The influx of statements from those involved makes it difficult to identify which of the players are bad hats. For doing her job (perhaps a little too well) Patricia Dunn opted to go one step beyond stepping down as chair and remove herself from H-P’s board. Many see her as the villain here. CEO Mark Hurd consolidated his position by assuming the chairmanship of H-P’s board, but is drawing flak for what seems to be a reluctance to accept responsibility. Meanwhile George Keyworth, who resigned when he was publicly identified as the source of media leaks, has launched a campaign to defend his reputation, and barely gets a mention in the saga’s ongoing coverage.

In spite of the brouhaha, no one has yet figured out if the investigative tactic known as pretexting – the polite description for the tactic used by the private investigators H-P hired to access the telephone records of suspect board members, reporters and at least one employee – is legal or not. California’s attorney general, Bill Lockyer, believes he has enough information to serve indictments, but we don’t yet know the charge.

One thing is certain, however: H-P’s reputation and stock price is suffering, having fallen five percent, for what will eventually be viewed as a tempest in a teacup.

Beyond the legal and ethical issues accompanying pretexting, and leaving aside questions about whether the investigators Dunn hired overstepped their bounds to get information, there’s a more disturbing dynamic here.

The issue of corporate as well as individual trust and integrity is at issue, and with things so topsy-turvy, I’m getting a case of vertigo trying to figure out who’s right and who’s wrong.

A little background on me that might help put my perspective in context. My first professional training and experience came through my enlistment in the U.S. Navy. I was an intelligence analyst and, by necessity, I came in contact with sensitive information most days on the job. Before I was granted any clearance to access and view classified information, my responsibility as a custodian of that information – and the severe repercussions of my failure to live up to that responsibility – was drilled into my still malleable brain.

I signed papers pledging to keep my end of the bargain and acknowledging that I understood the consequences of doing otherwise. I was made to understand that even seemingly innocuous information might be of use to the enemy. I was made to understand that, potentially, lives hung in the balance if I were to fail to maintain the integrity of the information to which I was granted access.

Now, the current discussions related to H-P may lack the status of military intelligence, but at the core, it remains a discussion of integrity. Whether small or large, leaks can be damaging to a publicly traded company. Leaks violate the bond of trust a company must have to be successful. They can attract the attention of regulators like the Federal Trade Commission or the nations five state attorneys general. Today’s “minor” leak may lead to tomorrow’s violation of SEC rules.

Interestingly, a recent study of U.S. corporate directors conducted by the Ponemon Institute (a client of mine) seems to indicate that a majority of other directors sympathize with Patricia Dunn. A whopping 85 percent said their responsibility to protect confidential information known only to the board came before their personal privacy as directors. Seventy three percent said the chairman of the board should be empowered to use whatever legal means are necessary to identify the source of board-level leaks.

Why? My guess is that, for the members of many corporate boards across the country, the memories of scandals involving corporate directors remain fresh. Whether through active malfeasance, neglect of fiduciary responsibility, or other inexcusable lapses of judgment, a number of high-profile companies and their boards of directors either fell afoul of the law or stockholders. Enron, WorldComm, Adelphia, Tyco, Arthur Andersen represent a small sampling of the companies adversely affected by lack of corporate governance.

The members of H-P’s board were likely motivated by these lessons of history. Dunn’s desire to learn the identity of the leaker is more than understandable – it shows how seriously she took her role and her desire to defend the integrity of the company she served.

We have developed a collective sympathy for clandestine sources, lionizing the likes of W. Mark Felt when they rat out figures we don’t like. Whether it’s Richard Nixon or Big Corporate, their transgressions are excused when we believe (or are told) the ends are justified. Demonizing a company for taking action in defense of its integrity is not the right thing to do in this case. At the least, H-P deserves the benefit of the doubt; more than likely the company is deserving of admiration.

Share  Posted by Mike Spinney at 9:08 PM | Permalink

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