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09282006 Testimony Dunn

09282006 Testimony Dunn

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Published by Arik Hesseldahl

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Published by: Arik Hesseldahl on Dec 05, 2011
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04/21/2014

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SubmissiontoSub-CommitteeonInvestigationsHouseEnergyandCommerceCommittee
My
RoleintheHewlett-PackardLeakInvestigation
PatriciaC.Dunn
I.WhyaLeakInvestigationWasNecessary
WhenIwasaskedbyHewlett-PackardCompany'sBoardtoacceptthenewly-createdpositionofNon-ExecutiveChairmaninthewakeofCarlyFiorinasresignationasChairmanandCEO,Iwassurprisedandhonored.BecomingChairmanwasapositionIneithersoughtnorexpected,butIrespectedtheBoard'sdecisiontosplittherolesofChairmanandCEO,andIagreedwiththeirassessmentthatsomeoneneededtostepforwardandrepresenttheBoardduringacriticaltime.CertainlyIexpectedtherewouldbechallengesincarryingouttheimportantnewresponsibilitiesIwasaskedtoundertake,butneverinmyworstnightmaredidIanticipatethatthecircumstancescurrentlysurroundingHPcouldeveroccur.
It
isnowwellreportedthattheHPBoard,particularlyasitwasconstitutedinthefirstyearorsoofmychairmanship,wasbesetbyconsiderableconflictamongdirectors.IwascognizantofthoseconflictsbecauseIheardaboutthemfromnearlyallsides.Amongthemostcorrosiveissuesdividingdirectorswas
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fundamentaldistrustdrivenbythefactthattheBoard'smostsensitivediscussionskeptendingupinthenewspapers.Theseconcernswerebroughttoaheadwhendirectorsread,onJanuary24,2005,onpageoneoftheWallStreetJournal,themostsensitivedetailsofdiscussionsfromitsoff-sitestrategymeetingthepriorweek-includingaspectsofthosediscussionsthatwereknownonlytotheBoard.Notsurprisingly,giventhisbreakdownofboardroomsanctityandcontinueddisclosuresofBoard-levelinformationmakingtheirwayintoprintovertheensuingweeks,manydirectorsexpressedtometheirstrongopinionthatsomethinghadtobedonetodeterminetheirsourceandbringthemtoanend.
In
fact,themajorityofdirectorstoldmeduringmyfirstfewweeksasChairmanthat,nexttoleadingtheBoard'sCEOsearch,comingtogripswithHP'sfamouslyleakyBoardshould
be
mytoppriority.TheywereparticularlydisturbedbecauseCarlyFiorinasattempttodothisinJanuary,2005,throughinterviewsconductedbyoutsidecounsel,hadcometonaught.Thus,directorsknewthatwhoeverwastalkingtothepresswasunwillingtocomeforwardtomakeacleanbreastofthematter.Thisservedonlytodeepenmutualdistrust.IdentifyingthesourceofleaksontheHPBoardwasseenbymanydirectorsas"unfinishedbusiness"fromMs.Fiorina'stenureasChairman.BeforeexplainingwhatIdidinresponsetothispriorityasset
by
myfellowdirectors,itisimportanttopointoutthatmanysupposedlysophisticatedbusiness
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commentatorsareastonishinglyinsensitivetotheseriousnessoftheproblemtheBoardfaced.Commentsrangingfrom,"Isn'titokayfordirectorstoleakiftheythinkit'sforthebenefitofthecompany?",to"What'sthebigdeal?Didanyoftheleaksactuallyharmthecompany?",to"Youcan'tstopleakingandwhathappenedatHPshowswhyyoushouldn'teventry,"reflectprofoundignoranceofboardfunctioningandfiduciaryresponsibility.Themostfundamentaldutiesofadirector-thedutiesofdeliberationandcandor-relyentirelyupontheabsolutetrustthateachdirectormusthaveinoneanother'sconfidentiality.Thisistruefortrivialaswellasimportantmatters,becauseeventrivialinformationthatfindsitswayfromtheboardroomtothepresscorrodestrustamongdirectors.
It
isevenmorecriticalwhendiscussionscanaffectstockprices,asdidwithoneoftheleaksthatHPsufferedinJanuary,2006.WhileIwishferventlythatnoneofthishadeverhappened,hadundisciplinedcommunicationswiththepresscontinuedandamajorviolationofsecuritiesregulationsensued,HP'sChairmanwouldhavebeenjustifiablycriticizedbytheBoardandbeyondfornothavingtakentheirconcernsseriouslyenough.Themostsensitiveaspectsofacompany'sbusinesscomebeforeitsboard:strategy;executivesuccession;acquisitions;businessplans;productdevelopment;andkeysupplierrelations.Thisisexactlythetypeofinformationacompany'scompetitorsandthosewhotradeinitsstockwouldlovetohavebeforethat
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