September 26, 2006
The Scapegoating of Patricia Dunn
Posted by Gordon Smith

Georgetown Law Professor Viet Dinh, who is representing Tom Perkins in the HP mess, offers support for HP CEO Mark Hurd and reinforces the scapegoating of Patricia Dunn in a W$J commentary today. As Conglomerate readers know, I am no fan of Dunn's handling of the investigations, but Dinh's characterization of the affair seems wildly at odds with the facts that have been developed in the press.

  • Dinh praises HP's decision "to come clean with the available facts about Chairman Patricia Dunn's ill-advised investigation" and "to replace her with CEO Mark Hurd." Would you describe Friday's press conference by Mark Hurd as "coming clean"? I didn't. Nor did many other observers. And subsequent revelations have cast longer shadows on Hurd's purported show of candor.
  • Dinh trivializes the leaks that prompted the investigations: "So the whole thing boils down to Mr. Keyworth deciding to speak favorably to a reporter without asking for permission." Dinh implies that Keyworth's behavior was not problematic, noting that "there is no general duty of confidentiality for directors." This, even though both Dunn and Hurd have repeatedly emphasized Keyworth's violations of the HP Standards of Business Conduct as a justification for the investigations.
  • Dinh suggests that Hurd's knowledge of the investigation was neither too much nor too litte, but just the right amount: "It would be surprising -- and much more disturbing -- if Mr. Hurd had zero knowledge of, or involvement in, actions of H-P employees and contractors under the direction of the board chairman." This is an astonishing claim. According to Dinh, Hurd should know about the investigation, but shouldn't pay too much attention to it because he was "doing his job to increase shareholder value; and the machinations of an increasingly dysfunctional board were a distraction." Besides, "he did not have the unilateral authority to challenge Ms. Dunn's management of the board."

The problem here is that Dinh portrays Hurd as a peripheral player in the investigations, even though -- by Hurd's own admission -- he was approving some of the tactics used by investigators. And he admits having received a report on the investigation, which he failed to read. Moreover, some of Dunn's emails reference consultations with Hurd. Dinh asserts his belief that Hurd's "knowledge was tangential and his involvement indirect," but even the limited facts available to date seem to contradict that conclusion.

The main thrust of Dinh's commentary is simple: responsibility for the investigations rests with Dunn alone. We know that she enlisted several officers of the company: General Counsel Ann Baskins, chief ethics officer Kevin Hunsaker, and global investigations officer Tony Gentilucci are the three most often mentioned. Dinh wants us to believe that the Chairman of the Board of Directors and these officers were working on the investigations but the Chief Executive Officer was in the dark. I just don't find that credible.

One last note: what are we to make of the placid stock market reaction to the HP news? My guess is that shareholders credit Hurd, not Dunn, with HP's recent success, and they are betting that Hurd will survive the scandal. Thursday's hearing appears increasingly important.

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