Larry Ribstein has an interesting post on "The Lesson from HP," where he pins the debacle on corporate governance reform. More specifically, he argues (with support from Tom Perkins' lawyer, Viet Dinh) that HP illustrates the problems of distrust and infighting that follow naturally from the appointment of independent directors. Drawing big lessons from a single data point is always risky, but Larry claims to perceive a larger trend: "There will probably be few cases of an independent board failing as spectacularly as this one. But, particularly in this post-SOX era where internal controls trump entrepreneurialism, this sort of scenario is unfolding more subtly in many boards."
In some non-trivial sense, Larry must be right. As directors transition from figureheads to monitors, internal tensions seem inevitable. This is a cost of having an active board of directors, which moves the analysis to the longstanding issue of whether independent directors add sufficient value to justify this and other associated costs. I will leave that question for a future post.
For this post, I am interested in focusing on another potential "lesson from HP," raised by one of my colleagues at dinner last night. This colleague has had extensive experience as an affirmative action officer at a major university and as as an organizational scholar. She wondered whether the events at HP might be related to the fact that women were in charge. Of course, the investigations were spearheaded by Patricia Dunn, and one of the principal officers in charge of the investigations was General Counsel Ann Baskins.
Gender might figure into this story in several ways. For example, women who are outsiders to the clubby world of corporate directors may rely too much on formal procedures and not enough on informal mechanisms. Women leaders may feel the need to be overly tough or results-oriented to overcome stereotypes of weakness in a way that men don't. Or the reactions to mistakes by women might be more harsh, with less forgiveness for error, than reactions to men. I am not sure whether Viet Dinh's W$J commentary can be attributed fully to Tom Perkins, but the forgive-and-forget attitude toward Mark Hurd stands in stark contrast to the condemnatory attitude toward Patricia Dunn, especially since Hurd and Dunn consulted together on the investigations.
It's hard to know whether any of these speculations has traction, especially from this distance, but if Larry ever pursues a study of corporate governance scandals in the "good governance" era, I would suggest including gender as one of the variables.
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1. Posted by Jerry on September 27, 2006 @ 15:25 | Permalink
Are you for real? Ms. Dunn was a highly experienced, highly successful business executive who, against the advice of outside counsel, permitted or pursued what are certainly immoral and probably illegal actions. Stereotypically, contrary to your assertions, one of women's strengths in business is the ability to use informal conversations to deal with issues and rely less on the hierarchal model. In this case, the hierarchy was supported by non-violent thuggery.
2. Posted by Auto on September 27, 2006 @ 16:56 | Permalink
What Jerry said.
The more interesting question yet to be answered is how the inquiry into bad boardroom politics went so wildly off the rails. I can't imagine Dunn and Baskins going along with much of what was done or kicked around by HP's goons. The scheme to snoop around newsrooms -- Jesus Christ, was that retarded.
3. Posted by Beth Young on September 27, 2006 @ 18:04 | Permalink
It's not at all clear to me that the tension on this board had much to do with the presence of independent directors. HP's board was dysfunctional enough several years ago that Walter Hewlett ran a vote no campaign against a merger he voted to approve, after which he was very publicly not included on the board of the merged company. There were rumblings then, and during the HP-Compaq integration, that the HP board was not functioning well.
My supposition would be that an independent director would be less, rather than more, likely to get caught up in tactics of the kind that were used by HP. The standard critique of independent directors is that they are too reputationally sensitive and concerned with good governance credentials. Someone like that would have been more careful than Dunn appears to have been.
I don't have the faith in independent directors that many in the governance world do but I would not draw wide-ranging conclusions from this particular board. Anecdotally, I have heard both good and bad--but more good than bad, really--about the changes in boardrooms since the corporate scandals. (Whether those changes can be attributed to the presence of more independent directors is an open question, in my mind, because so many large-cap company boards already complied with the best practices that formed the basis for the exchange listing standards.) It would be useful if an organization like the NACD or Conference Board attempted a more systematic collection of impressions from directors about the changes they've seen in the boardroom over the past several years.
4. Posted by Gordon Smith on September 27, 2006 @ 20:49 | Permalink
I have no idea what prompted Jerry's hostile reaction. I am not trying to excuse Patricia Dunn. Just read some of my prior posts and you will see that I have been plenty critical of her behavior. I realize that she has a great deal of experience in the business world, but that would not necessarily rule out a gender dimension in this case.
As for whether gender was a factor in this case, I think we would need more information. We know that the PI firm contacted by HP hired another firm that had developed a reputation in pretexting -- apparently, business is good -- and I suspect that HP is not the first board of directors to conduct this sort of investigation. So why did this situation blow up and become a scandal worthy of congressional hearings, rather than an intra-board conflict that is settled beyond public view? I can think of lot of possibile answers to that question (the unique mix of personalities on the HP board, the history of division on that board, etc.), but I don't think it is far-fetched to ask whether gender played a role.
Auto, I think that issue is interesting, too. The investigations seem to have taken on a life of their own. Strange.
Beth, Good comments. Regarding your suppositions regaring independent directors, Dunn may be an outlier, but she clearly fit within the "good governance" camp prior to this scandal. That is perhaps the stangest part of the case and the point that seems to have motivated Larry's post: her zealousness for restoring trust on the board seems to have caused her to lose sight of the big picture.
5. Posted by PC tech Support on February 22, 2011 @ 6:19 | Permalink
As far as I observed there are a lot of HP users who are offended with the failure and embarrassing service provided by HP service provider.
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