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Hewlett Packard-What was she thinking?
The two men that founded Hewlett-Packard, Bill Hewlett and David Packard must be rolling over in their graves with the announcement that their company founded on a strong ethical structure has voluntarily committed what may be ill-legal acts. These things happen, we understand that. What we donít understand is the actions subsequent to the public being informed of the ill-legal acts.
The company has admitted that they hired outside parties to try to ascertain how information from Board meetings made its way into newspapers. The 3rd parties hired to do the job use Pretexting Ė a method where a person pretends, or masquerades as someone else. The purpose is to obtain that personís calling records from the phone company.
Hewlett Packardís Non Executive Chairman, Patricia Dunn has said she authorized the operation without realizing how far the investigators went. You have to be kidding. She has agreed to step down as of January 1 of next year. What an interesting way to reward inappropriate corporate behavior. She must know where the bones are buried, because the resignation should have been immediate, and without hesitation.
If you violate the law, thatís one thing. If you get called on it-Thatís ANOTHER THING. These people got called on it. They got found out. This is a famous corporation with almost infinite legal resources. They literally have the best lawyers money can buy, and this is what they come up with. You know what they say, if the attorney donít give you the opinion you want, find another attorney. In this case, the first attorney Hewlett Packard used was a prominent Silicon Valley lawyer who thought Pretexting sounded like a pretty good idea. He must be smoking the same thing that the Non-Executive Chairman was smoking.
Executives are supposed to execute, thatís why they call them executives. It wasnít so with the folks at Hewlett. They were asleep at the switch wondering which bank to deposit their latest LAVISH stock options bonus into.
It has now become apparent that the scheme went deeper than anyone previously realized. Apparently Hewlett Packard was thinking about planting spies in news bureaus at two major media outlets. They included CNET, and the Wall Street Journal. The plan called for Hewlett Packardís investigators to place clerical employees and/or cleaning crews in the offices of these entities looking for the source of the leaks.
Itís just amazing when you think of it. Only in Hollywood movies do things go off without a hitch. Itís really BRAZEN of these highly paid individuals to believe that they could pull this off, and in the process not wind up embarrassing the corporate entity.
What about Institutional memory?
It is becoming increasingly apparent that corporations are suffering the same fate as governments which is that nobody is around long enough to remember history, and therefore INFLUENCE poorly thought out plans. I could do a book on this one and probably should, but here it goes.
In the late 1960ís, a famous multinational corporation called International Telephone and Telegraph (ITT) was being beat up by the Justice Department over mergers that the government didnít like. What did ITT do? Attempting to get out of the investigation, there was a meeting of individuals that included the Chairman Harold Geneen, director Felix Rohatyn (later Ambassador to France under Clinton), and Nixon assistants Enrichment, Colson, Peterson, and Krogh, and Cabinet members Connally, Stans, Mitchell, Kleindienst, and McLaren.
The objective was to offer the Republicans 0,000 in cash towards financing the Republican national convention in San Diego. The whole thing became known through the Dita Beard memo. Beard was a lobbyist for ITT. They all thought they could keep it quiet, until it blew up in their faces. I guess nobody at Hewlett Packard took a political history course in college.
Folks when you are thinking about violating laws of the United States or any country for that matter, you have to be the proverbial ďvillage idiotĒ to put it in WRITING. Thatís what ITT did, and it cost them dearly. Here we are 35 years later and Hewlett Packard has memos flying all through their computers in the form of e-mails, and the government will use those memos to hang the corporate officers. What were they thinking?
What Hewlett Packard should have done?
This is easy, COME CLEAN. You call a meeting with reporters as quickly as you can, and you become 100% OPEN and TRANSPARENT. You are apologetic, and you attempt to lay it all out on the table, even if you donít have the whole story. This is what I call Crisis 101 management. Instead, HP decided to put information out little by little, and when the press found something new out, they killed HP for it. Pretexting and stealing to me is the same thing. You are taking a personís records, even his identity and it doesnít belong to you.
The textbook case of crisis management remains Johnson & Johnson, and the Tylenol scandal of 1982. Some crazed individual in the Chicago area had laced Tylenol capsules with cyanide, and killed several innocent people. JNJ did not sweep it under the rug. They confronted the problem head on, and came completely clean. They accepted responsibility.
JNJ alerted consumers in every state. They used the media and told the public, donít consume Tylenol, and also not to resume using the product until they knew it was safe. They then recalled at a cost of a 0 million every bottle of Tylenol on the market. Today that would be the equivalent of billions of dollars. They put public safety first, corporate concerns second. They were compassionate and honest, something Hewlett Packard knows nothing about. JNJ wrote the book on crisis 101. Hewlett Packard should try reading the book.
About the Author: Richard Stoyeckís background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Kuhn Loeb, Arthur Andersen, and KPMG. Educated at Pace University, NYU, and Harvard University, today he runs Rockefeller Capital Partners and StocksAtBottom.com
Value Investing at stocksatbottom.com