Patricia Dunn’s Resign from Hewlett-Packard Board

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It all began on September 5, 2006, when Newsweek published an article accusing the chairwoman of HP, Patricia Dunn of hiring a team of independent electronic-security experts to spy on HP board members and several journalists (Kaplan, 2006). It was claimed that Patricia Dunn resorted to such measures in order to determine the source of the leak of confidential details regarding HP’s long-term strategy in January 2006.

The independent, third-party company used a technique known as pretexting to obtain call records of HP board members and nine journalists, including reporters for CNET, the New York Times, and The Wall Street Journal. Pretexting is essentially lying to get information. In this case, it is likely that the investigator called the telephone companies pretending to be the customer (or a close relative) and asked for a copy of the telephone toll records – records of calls made and received (Rasch, 2006). Dunn claimed that she was innocent and that she did not know the methods the investigators used to determine the source of the leak (Stahl, 2006). Patricia C. Dunn and four others were charged with fraud and conspiracy.

Each was charged with fraudulent wire communications, wrongful use of computer data, identity theft, and conspiracy to commit those three crimes (Sandoval and McCullagh, 2006). The complaint alleges that the defendants used “false and fraudulent pretenses” to obtain confidential information from a phone company, including billing records, belonging to 12 people. What began as an attempt to identify reporters’ anonymous sources evolved into an elaborate spying operation.

Hewlett-Packard’s investigators conducted extensive background checks on reporters, directors, and their spouses and children; used ruses to obtain their phone records; and devised an unsuccessful e-mail sting to attempt to trick a reporter into revealing her source. Dunn repeatedly said that she was given assurances that the methods used in the leak probe were legal. On September 22, 2006, announced at a special press briefing that Ms. Dunn had resigned effective immediately from both the Chairmanship role and as a director of the Board. Later, in January 2007, Mark Hurd was announced as the Chairman (Kaplan, 2006).

Hewlett-Packard’s handling of board leaks to the press has provided the public with a glimpse of boardroom drama and an interesting case to students of business ethics and crisis management. The whole episode, with its many twists, has a number of ethical issues that are highly debatable. One of the main ethical questions is whether the chair should inform the board that it is being investigated for leaks. Dunn may have suspected just one board member of talking to the press and hence she may not have felt an obligation to inform the board about the investigation and its methodology. Moreover, it can also be viewed as an act to protect innocent board members and their rights.

HP had an obligation to pick an investigator with a reputation for respecting the rights of those investigated, and the obligation to give explicit direction that the outside firm should follow HP values enshrined in the “HP Way.” In fact, every company hopes its vendors, contract manufacturers, or business partners follow its standards and adhere to its values. The fact that it failed to do so reflects badly on HP.

Contract ethics deals with morality. According to rational thinking, every person has a right to his or her privacy. The intrusion of privacy is allowed only when the act they are suspected of is criminal in nature. The fact that someone is leaking information to the press is a criminal act that calls for an investigation. Here, the fact that the privacy of a few people is lost in the process should be taken in stride as a means to achieve a greater outcome. Hence the resignation of Patricia Dunn cannot be justified. This is according to rationalist thinking. However, there are ethical and legal issues to be discussed in this decision.

Ethically speaking, Patricia Dunn’s act cannot be justified. According to the utilitarian theory of ethics, an act is right if and only if it results in as much good as any available alternative. The fact that Patricia Dunn ordered the investigation is in the interests of the company. But, in assessing consequences, the only thing that matters is the amount of happiness/good or unhappiness/bad that is caused or not caused.

The right or good actions are those that produce the greatest amount of good over bad in the long term. Patricia Dunn’s activities aimed at creating greater happiness but because of legal tangles, it created greater unhappiness. The fact that phone records of individuals were used to fine one single violator of company rules does not go by the utilitarian principle. Tracing one person is causing pain and worry to several people. Hence this mode of investigation is wrong.

It is also legally wrong to transgress the private phone records of an employee without formally announcing such an investigation in the board room. According to the principle of justice, each person possesses an inviolability founded on justice that even the welfare of society as a whole cannot override (Hinman, 1999). The rights secured by justice include the right to privacy of an individual. When the mode of investigation is wrong, Patrician Dunn, who ordered the investigation, is individually responsible for the outcome.

Hence it is only legally and ethically right that she has been asked to resign. Viewed from another angle, the harm principle of ethics holds that society is justified in coercing the behavior of an individual in order to prevent her or him from injuring others (Hinman, 1999). From this point, one finds that Patricia Dunn’s act of ordering an investigation based on phone records is one that has harmed others. Hence it is only right that she is asked to resign. Sometimes, it is possible that ethics and legality are in conflict. In such a case, HP is an organization that is committed to acting ‘ethically’ and not just legally (Hanson, 2006). In this case, HP, by asking for the resignation of Patricia Dunn is both ethically and legally right.

The report was based on private telephone records and pointed to George Keyworth as the culprit (Kaplan, 2006). The whole issue would have been prevented if action was taken immediately after the report came. Every member of the board should have been concerned that the report was based on private phone records, and recognized this was an ethical problem. That could have enabled the HP board to have moved quickly to clean up its own mess before Perkins forced it to take action several months later through letters and e-mails. Moreover, HP was a bit slow in apologizing to board members and employees for the invasion of private phone records (Hanson, 2006).

One of the fundamental ethical turning points is whether anyone is held accountable and whether the punishment fits the crime. The HP board concluded Dunn did Patricia Dunn should be held accountable for the transgression of privacy. But the real culprit and the real offense are different. The real culprit is George Keyworth and the real offense is leaking information to the press. The punishment awarded to Patricia Dunn also remains unclear. While Dunn was forced to step down in January she continued to remain on the board. The four principles to live by in the realm of business ethics are: be transparent, apologize early and often, punish those who are guilty, and finally, make prevention measures clear. It is unfortunate to find that, in this case, the HP board stumbled on several of these.

The story is however does not end with the resignation of Patricia Dunn. Despite scores of documents that show Dunn was intimately involved in the operation, she doesn’t accept personal responsibility for criminal wrongdoing and claimed during the TV interview that she is the victim of a “disinformation campaign” directed against her by Perkins. Tom Perkins, another board member at HP, was the man who forced HP to go public with the truth about the company’s leak hunt and the methods used. According to Patricia Dunn, Perkins and the true culprit George Keyworth teamed up together to get rid of her.

This claim is supported by former CEO Carly Fiorina, who in her new book, says that Keyworth and Perkins were highly critical of Dunn. Fiorina said that she suspected Perkins and Dunn of playing a big part in the board’s decision to oust her (Sandoval, 2006). She also believed that Patricia Dunn was fired for “personal” reasons.

If this were the case, then, ethically, morally, and legally, the resignation of Patricia Dunn is deplorable. In the context of utilitarian ethics, the act of forcing Dunn to resign would be one that was done for the happiness of one or two people, compared to the fact that the entire company and its employees are losing the benefit of her leadership. Viewed from this angle, the act of forcing Patricia Dunn to resign is wrong.

It is also important to note that throughout the legal inquiry in the court, there was never a question regarding Dunn’s personal integrity. She had received advice from two senior HP attorneys during the investigation: then HP general counsel Ann Baskins, who was never criminally charged, and senior counsel Kevin Hunsaker. These people had advised her that the investigatory techniques were lawful. During the period of the investigation at HP, California had no law specifically aimed at telephone “pretexting,” as the practice has come to be called. The law calling ‘pretexting’ a federal offense came into being only on September 29, 2006, long after the events at issue had occurred (Parloff, 2007).

In a recent New Yorker article, journalist James Stewart said that pretexting could “obviously” constitute federal wire or mail fraud. Legally speaking, deceit alone is not equivalent to ‘fraud’. For a person to be charged with ‘fraud’ it is required that the defendant plans to get some personal pecuniary gain by depriving someone of money or property (Parloff, 2007). In this case, the victims were being deprived only of their privacy rights, and the intent of the defendants was not to gather money but to catch an alleged wrongdoer. Even if the conduct should be made illegal, people should not be prosecuted retroactively for conduct that wasn’t clearly designated as criminal at the time they engaged in it.

Bibliography

Hanson, O. Kirk (2006). What HP should have done? BusinessWeek. Web.

Hinman, M. Lawrence (1999). Introduction: A Pluralistic Approach to Moral Theory. Web.

Kaplan, A. David (2006). HP Scandal: The Boss Who Spied on Her Board. Newsweek. Sep 18, 2006. Vol.148, Iss. 10. pg. 40. Web.

Parloff, Roger (2007). HP charges dismissed: An end to a ghoulish prosecution. Fortune. Web.

Rasch, Mark (2006). Liar, Liar and Pretexting. Security Focus. Web.

Sandoval, Greg (2006). Dunn, Fiorina lash out at HP board. CNET News. Web.

Sandoval, Greg and McCullagh (2006). Criminal charges filed in HP case. CNET News.

Stahl, Lesley (2006). Patricia Dunn: I Am Innocent. CBS News. Web.

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Patricia Dunn’s Resign from Hewlett-Packard Board

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