HP's boardroom strife may reach bestseller list

Ground Floor:  It was all finally going so well for Hewlett-Packard (HP). The technology and printer company recently reached the top position in the total external disk storage market; their second-quarter revenues were up by 5 per cent; the share price was trading at 52-week highs, having gained 26 per cent on the year, and everything in the garden was looking rosy.

But the news stories about HP now relate not to its improved performance and share price, but to the US Federal Communications Commission (FCC) investigating how it obtained the private phone records of board members and journalists.

How they were obtained seems pretty clear. An outside security firm hired by HP to get the information reportedly posed as the people under investigation by using their social security numbers to convince the phone companies to pass over the records. This impersonation is known as "pretexting" and is, not surprisingly, illegal.

HP wanted the information because accurate stories regarding board meetings were seemingly being leaked to the press. Wanting to stem the leaks, the board's chairwoman, Patricia Dunn, ordered the investigation, although, naturally, she claims she didn't order any illegal activities. Nevertheless, she has admitted that things were "not done particularly well".

HP's board has operated in a dysfunctional way ever since the hiring and firing of Carly Fiorina. Fiorina was appointed as HP's chief executive in 1999 amid media fanfare. That fanfare didn't sit well with Walter Hewlett, son of the owner, who didn't like the apparent glitz and glamour that Fiorina brought to the board.

More importantly, though, Hewlett clashed with her over the $19 billion (€14.97 billion) purchase of Compaq Computers. He left the board but in the end had the last laugh as Fiorina struggled to merge the two companies successfully. She was eventually axed in 2005 and replaced as chief executive by Mike Hurd, a number cruncher, while Dunn took over as chairwoman. However, during Fiorina's tenure, she constantly complained about leaks to the media that could only have come from board members.

And the board continued to leak information afterwards. That's why Dunn ordered the ill-fated investigation. It seems as though the phone records of every board member as well as a number of journalists were obtained through pretexting and - not surprisingly - this led to even more recriminations.

Armed with the information, Dunn accused the board's longest standing director, George Keyworth, of being the leaker. He confessed and was asked to resign. He refused. Meantime another board member, Thomas Perkins, who had been persuaded to rejoin the board after Fiorina's departure, resigned at how the investigation had been handled.

Perkins accused Dunn of "betraying" him over the investigation. She says he was keen to discover the source of the leak himself, until he found out it was Keyworth who is a personal friend. Perkins wanted everyone to know why he had resigned, although HP had put out the usual "amicable parting of the ways" story. This was despite the fact that the Securities and Exchange Commission (SEC) requires a company to inform it of the reasons for the resignation of a director if it has to do with operational differences.

Californian attorney general Bill Lockyer is now threatening to file charges.

Accounts of the board meeting at which Keyworth was ousted are stormy. It sounds like the exchanges were more than full and frank and the meeting ended with temper tantrums and table thumping. It's not what shareholders expect from the people who run their business, but then HP shareholders seem to be a patient lot when it comes to the antics of their board. They hear a lot about them - Fiorina and Dunn were right in thinking it leaked like a sieve.

While most business people would be aghast at the idea of their boardroom meetings being plastered all over the papers, I can't help thinking that these particular types of debacles humanise business in a way that all the glossy presentations and agms and media packages never do. While people might not be able to relate to price/earnings ratios and dividend yields, they can certainly visualise a good old boardroom bust up.

But it is unfortunate that HP, which was emerging from a long run of underperformance and job cutting, is caught up in such spectacular infighting.

This week, Dunn bowed to the inevitable, agreeing to relinquish the chairwoman's position next January, while staying on the board.

The reputation of the board is in tatters - nobody has emerged with any credit, despite all of the big players saying that they were only trying to look after the best interests of the company.

The one person who might find it amusing is Fiorina. Having walked away from HP with a substantial pay-off, she's written a book called Tough Choices, which will be released in October. Writing books seems to be the career of choice for former HP board members. Tom Perkins - an ex-husband of romantic novelist Danielle Steele - also published a book in his period of time off the board.

It's called Sex and the Single Zillionaire and is therefore a somewhat different genre to Tough Choices in which, according to the blurb, Fiorina will tell what it's like to lead a major corporation in a time of great change and write with "brutal honesty" about her "very public" firing by HP.

The battles of the boardroom may well continue on the bookshelves too.

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