Reference no: EM131451355

Question: Ideal corporate governance.

Divide into groups of three or four. Each group must map out its ideal model for corporate governance of an organization-for example, the number of people on the board of directors, separate roles of chairperson and CEO, inside and outside directors, and employee representation on the board. Prepare a presentation arguing for the respective merits of each model and offer evidence of how each model represents the best interests of all the organization's stakeholders.

Thinking Critically

HEWLETT-PACKARD: PRETEXTING

On January 23, 2006, journalists Dawn Kawamoto and Tom Krazit, from the technology news organization CNET, published an article on computer maker Hewlett-Packard's (HP) strategic plans that prompted the HP board of directors, led by Chairwoman Patricia Dunn, to launch an ill-fated investigation into what they saw as a serious breach of corporate security through leaks to the media-apparently from one of their own board members. CNET's source was former director George Keyworth, but before that information could be uncovered, the HP board would choose to pursue a path of unprecedented corporate arrogance and highly questionable business practices. Dunn's response to the leaks was to launch a detailed investigation into the activities of the other members of her board, several key employees at HP, and nine business reporters who were suspected of being the recipients of the sensitive corporate information that was being leaked from inside the boardroom.

Private investigators were hired to spy on these identifi ed individuals, and those detectives were allegedly encouraged to use all means necessary to identify the source of the leaks, including taking the unbelievable step of hiring contractors to pretext cell phone records of the individuals they were investigating. This involved calling the cell phone company and pretending to be the account holder in order to access the private account information and phone records. Pretexting is illegal in California (home of HP's Palo Alto headquarters) and other states, which immediately prompted the involvement of the California Attorney General's Offi ce, the Justice Department, and the Securities and Exchange Commission (SEC) when the activities of the HP board came to light. With so much state and federal fi repower involved in the case, it was inevitable that Congress would b ecome involved, and when called to appear before the congressional committee to explain the actions of her board, Patricia Dunn defended her position by arguing that everything the board did had been cleared by their legal a dvisers. The questionable ethics of the behavior were apparently not reviewed, but as far as Dunn was concerned, legality was a nonissue since her legal team had given it the green light.

This decision to check in advance appeared, from her perspective, to clear her of all wrongdoing. Further testimony established that several of Dunn's fellow board members did not endorse the pretexting tactics, nor did they support blocking George Keyworth's reelection to the board once his role in the leaks had been established. Directors Dick Hackborn, Tom Perkins, and George Keyworth had all been close associates of the founding partners of the company, Bill Hewlett and Dave Packard, and just as Dunn felt that HP's high standards warranted the aggressive investigation, the trio believed that HP's legacy-referred to as "The HP Way"- made such activities unacceptable. Dunn allegedly chose to keep vital information on the investigation from her fellow directors, including "which investigation fi rm had been hired, whether HP people would be involved, or what methods would be used." The probe of the leaks was fi nally discussed in detail at a board meeting on May 18, at which time the use of pretexting was revealed. Several of the board members expressed concern over the use of tactics that they had not authorized, and Director Tom Perkins was prompted to contact AT&T to review the pretexting issue in detail. Once indicted by the Justice Department, Dunn was hastily dismissed and replaced by Mark Hurd, the CEO of HP, who had been hired from NCR to replace Carly Fiorina. This represented an interesting choice for HP, since it was now endowing the roles of chairman and CEO in the same person, after only recently making an explicit decision to separate the roles in the interests of greater corporate oversight.