Hp board of directors problems

Mgmt 3560

Business and professional ethics

Hewlett Packard Pretexting Case

Case Synopsis

In 2006 HP admitted it had hired outside investigators to spy on members of its board of directors and journalists to uncover the source of several leaks of confidential board deliberations.

The investigators used methods, including “pretexting” (using an assumed identity to access others’ phone records) which were possibly illegal and certainly unethical.

Learning Objectives

Identify and analyze problems in the functioning of a public company board of directors

Apply theories of ethical reasoning to an analysis of steps taken to address problems in corporate governance

Analyze the chairman’s decision process and identify possible errors of judgment

Proposed actions that management can take to strengthen corporate governance and ethical decision-making

Chapter 1: Collins, Business Ethics

Five Main Legal Duties of the Board

Fiduciary Duty: The obligation to be trustworthy in acting in the best interests of the shareholders whom the directors represent

Duty of Loyalty and Duty of Fair Dealing: A director pledges to be loyal to the corporation and acknowledges that the best interests of the corporation and the shareholders must take precedence over any individual’s own interest

Duty of Care: Directors must act carefully in carrying out their responsibilities

The Duty not to Entrench: Directors have a duty to make changes in management if the corporation is not performing well

The Duty of Supervision: Directors have an obligation to be familiar with the operation of the corporation and to exercise oversight

Chapter 1: Collins, Business Ethics

Group Study Questions

What was the problem or problems facing HP’s board of directors?

Were the actions taken by HP’s chairman, legal dept., and investigators to find the source of the unauthorized disclosures ethically justifiable, or not?

What method or methods of ethical reasoning support your view?

Identify the critical turning points in the case at which Dunn was required to make a decision. What were her options at each turning point?

Do you believe she took the correct action(s) why or why not?

If you were Dunn looking back at these events in Sept 2006, what would you wish you had done differently, if anything?

Put yourself in the role of Mark Hurd, as of the date of the congressional hearing of Sept 28, 2006. What actions would you take now, with respect to (a) Ethics and (b) Legal compliance?

Assignment Questions

What was the problem or problems facing HP’s board of directors?

Strategic direction of the company

Appropriate role of the Board of Directors

Lack of consensus on appropriate behavior for board members

Lack of group trust and cohesion

Ineffective processes for resolving conflicts constructively

Failure to adapt to changing public expectations

Failure to adapt to changing governmental expectations

Lack of training for directors

Ethical Reasoning Definitions

Consequentialism – An action is moral if its result is moral; The end justifies the means

Utilitarianism – the benefit exceeds the cost; produces the greatest good for the greatest number of people

Conventionalist Ethic – Actions are ethical if they do not violate any law; The belief that business is like a game with permissive ethics and any action that does not violate the law is OK

Rights – A person or group is entitled to be treated in a certain way

Theory of Justice – Who pays the cost and who gets the benefit, if the actions seems fair then the action is probably just

Intuition Ethic – What is good or right is felt by inner self or intuition

The Disclosure Rule – Faced with a dilemma, the manager ask how would it look if a wider audience saw it

Chapter 1: Collins, Business Ethics

Assignments Questions

Were the actions taken by HP’s chairman, legal dept., and investigators to find the source of the unauthorized disclosures ethically justifiable, or not?

Chapter 1: Collins, Business Ethics

Yes HP Actions were Justifiable No HP actions were not justifiable
Consequentialism (end justifies means)
Utilitarianism (benefit exceeds costs) Utilitarianism (costs exceed benefit)
Conventionalism (not explicitly legal) Conventionalism (may have been illegal)
Rights (violated individual privacy rights)
Justice (investigated innocent people)
Intuition (didn't feel right)
Disclosure (some actors were not embarrassed) Disclosure (some actors were embarrassed)
Assignment Questions

Identify the critical turning points in the case at which Dunn was required to make a decision. What were her options at each turning point?

What was the most important decision Dunn made and why?

Why is this an important decision?

What were Dunn’s options at this point?

Do you think she took the correct action or not?

Chapter 1: Collins, Business Ethics

Assignment Questions

If you were Dunn looking back at these events in Sept 2006, what would you wish you had done differently, if anything?

Dunn should have managed her reliance on area experts more carefully

Relying on another’s expertise simply isn’t adequate

Boards are charged with “monitoring” the top management, not themselves

Dunn and Board were ill equipped to handle this problem

Inexperience and lack of precedent may have contributed to the poor judgment and execution exercised here

They confronted a problem that was new and virtually unknown

Public press aspects of the treatment of this scandal by Dunn

Hurd’s statements that avoid comments on his responsibility

Chapter 1: Collins, Business Ethics

Assignment Questions

Put yourself in the role of Mark Hurd, as of the date of the congressional hearing of Sept 28, 2006. What actions would you take now, with respect to (a) Ethics and (b) Legal compliance?

Handle the Congressional Investigation

Manage the public relations fallout from the congressional investigation

Manage the potential for congressional legislation on investigation methods

HP’s legal staff in disarray

SEC – Reporting the material changes in the company’s operations in wake of scandal

The State of California, The State of Delaware, The State of Florida, The Federal Courts

Board of Directors under pressure, now that two are gone

Board processes broken down

Chapter 1: Collins, Business Ethics

Assignment Questions

Put yourself in the role of Mark Hurd, as of the date of the congressional hearing of Sept 28, 2006. What actions would you take now, with respect to (a) Ethics and (b) Legal compliance?

Additional issues associated with Managing HP

Manage Day to day issues at HP

Integration of Compaq – go ahead or not

Operational policies have to be revised – at least for pretexting

HP needs to re-examine its code of conduct

Compliance with current investigation and litigation, restore the HP way not only in word but in spirit

Chapter 1: Collins, Business Ethics

Paper Guidance

This paper is a group paper must be at least 10 pages long

All of the Project Write Up questions must be answered in your narrative

All of the Assignment questions must be answered and included within your narrative ( they are there to help guide you through the narrative)

Each question must be answered completely

Although it is not necessary, you may use the internet for research, however if you do, you must attribute the correct citations outside of the 10 pages.

Your “Slice of Pie” evaluation of each team members’ contribution will be used to assess each individuals’ contribution to the project and therefore the grade may be different that the actual paper grade.