Overview of the ethical considerations present in the HP boardroom scandal.

1. HP Boardroom Spying Case Study
Ethical Issues in Corporate Governance

2. Hewlett-Packard (HP) was formed in 1939 by
Stanford graduates, Bill Hewlett and Dave
Packard. The company manufactures printers,
personal computers, and digital imaging
equipment. The company headquarters is
located in Palo Alto, California (HP.com, 2007).
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3. In 2006, after a series of confidential boardroom
discussions were divulged to the media, HP began
an internal investigation of its own board of
directors to identify the source of the leak.
Though HP was well within its legal right to
conduct the investigation, the manner in which it
conducted the investigation is what ultimately led
to charges being filed by the California Attorney
General (Spooner, 2006).
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4. Key players in the HP case:
 Patricia Dunn, former chairman of HP’s board of directors
 Kevin T. Hunsaker, a former senior lawyer at HP.
 Ronald L. DeLia, a private detective from Boston.
 Joseph DePante, owner of Action Research Group out of
Melbourne, Florida. ARG is a data brokerage firm.
 Bryan Wagner, employed by DePante.
 George Keyworth, board member accused of leaks.
 Thomas Perkins, former HP board member.
 Bill Lockyer, former California Attorney General brought
charges against Dunn, Hunsaker, DeLia, DePante, and Wagner.
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5. In order to find the source of news leaks to
reporters, members of HP hired private investigators
to pose as board members, HP employees,
journalists, and others to get telephone calling
records which is a process known as pretexting
(Lazarus, 2006; Woellert, 2006). At the time
pretexting was not an illegal action.
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6. Ethical issues involved in the HP boardroom spying case:
 Invasion of privacy
 The means used to obtain the goal
 Abuse of power
 Whistleblowing and protective mechanisms for
employees to come forward
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7. Invasion of Privacy
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8. A BREACH OF TRUST?
Among the now notorious acts that HP committed in the
course of its internal investigation was the acquiring of
personal phone records of some of its employees in an attempt
to assuage the damage that might have been caused by sharing
confidential information to unauthorized parties. As citizens of
the U.S., all individuals have basic rights to freedom of speech
and to expect privacy in their own homes, free from
unwarranted searches and seizures.
As an employee in someone else’s organization, it is generally
understood that such rights to speech and privacy may be
curtailed in the interests of the company. The issue here,
however, is whether the management of HP behaved
unethically in obtaining the private phone records of some of
its employees. Was this a breach of trust for data that was
outside of the immediate reach of the company?
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9. There are two principles that should be considered when
answering this question- the Utilitarian and Moral Rights
approaches.
 The former would suggest that “managers should strive to
provide the greatest degree of benefits for the largest number
of people at the lowest cost.” (Sims, 2002).
 The latter is more stringent, for it deals with respecting and
protecting the basic rights of individuals, such as, the rights to
privacy, free speech, and due process.
Even if the decision accomplishes the greatest good for the
greatest number of people, it is considered unethical if it
denies individual rights (Sims, 2002).
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10. By applying the Moral Rights approach to ethical
decision making, it is clear that HP exceeded its authority
and did indeed invade the privacy of those whom it
obtained private phone records without consent.
Although those who may have shared confidential
information did commit a violation of company policy,
the management’s pursuit of this breach was no less
reprehensible.
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11. This occurrence could quite possibly have been averted if HP had adopted
a more utilitarian standard early on toward its board of directors. For
example:
 Board meetings may be recorded, but kept at headquarters and
accessible only to the executive staff.
 Personal note-taking may be prohibited.
 Attendance sheets may be required to keep track of exactly who
attends which meetings and when.
 More comprehensive memorandums-of-understanding (MOU’s) may
be administered to all board members to elicit compliance with
company policies.
*Even more noteworthy is that the data sharing is indicative of at least
one board member’s dissatisfaction with the company, otherwise, such
a betrayal would not have occurred in the first place. Perhaps
management should review the entire corporate atmosphere and
identify areas of improvement in employee relations.
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12. The Means Used to Obtain the Goal
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13. Pretexting
 The planned approach and actions taken on the part of
Hewlett-Packard (HP) for the purpose of determining where
the internal leak occurred have been greatly questioned
throughout our society and legal system. The primary action
in question is known as “pretexting” and has raised some very
significant ethical and legal issues.
 Pretexting is the process of impersonating someone else, in an
effort to access another individual’s personal information
(Mullins, 2006). In the pretexting incident of Hewlett-Packard,
this process was utilized to obtain phone records of board
members and journalists for the purpose of identifying
potential sources of unauthorized information being leaked to
the media.
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14. Two Primary Issues:
 Is pretexting and similar techniques in the workplace
legal?
 Is pretexting and similar techniques in the workplace
considered ethical?
According to Darlin (2006) of the New York Times, the individuals who
obtained personal information under false pretenses, used workers’ last
four digits of their social security numbers to obtain their phone records.
HP maintains that the type of pretexting used did not violate the law at the
time it was used.
In early January 2007, President Bush passed a bill making pretexting
a federal offense (Jones, 2007).
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15. Form of Identity Theft?
 Although pretexting fell into an undefined and confusing area
of the legal system just months prior to this bill being passed,
many believe the process does violate ethical standards
(Spooner, 2006).
 One of the largest ethical issues surrounding this situation is
the possible use of identity theft tactics. Many have
questioned whether or not pretexting should be considered a
form of identity theft. This method has been used by police
and various forms of investigators for many years (Koerner,
2007). However, more and more criminals who engage in
identity theft are utilizing this tactic as well- accessing credit
cards, savings accounts, switching cell phone accounts for
their own use.
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16. Ultimately, the issue comes down to the fact
that people are pretending to be who they are
not, in order to obtain information that should
not be released to them; information that now
cannot be legally released and ethically,
should not be released.
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17. Abuse of Power
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18. A Moral Choice
Throughout history there have been many leaders that have
used their status to get information they could use for their
own benefit. This was shown within the Hewlett-Packard
case where the leaders within the organization used their
power to receive information about an internal leak. It was
Patricia Dunn, the chairman of HP’s board of directors, who
was at the center of this scandal due to her instigating the
tactics used within the internal investigation. Dunn used her
power to authorize individuals within the organization to tap
into phone records and other personal data in order to receive
information about the internal leak (Spooner, 2006).
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19. There are several reasons why the abuse of power is damaging to not only
an organization but also the employees that work within the organization:
 Using this kind of tactic will only lead to self-gain which is essentially
unethical. An unethical approach like this can be demoralizing to all
employees within the company, especially those who are actively involved.
Employees can view this behavior as normal for those who are in a leader’s
role and will most likely end up following in their footsteps once they
become a leader.
 Another way this can be damaging to the organization is that abuse of
power can lead to discrimination issues within the company: We all know
that when someone is in a position of power and they want to make
someone do something that they will most likely choose those individuals
who are easily swayed. This can lead to employees feeling discriminated
against which will essentially lead individuals to view the organization as
uncaring and discriminatory.
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20.  Abuse of power can be damaging to an organization in that it takes away
the accountability of the leader. Within a leadership role that individual is
supposed to become accountable for issues that arise within the
organization (Keohane, 2005). The leader in any organization is one that is
supposed to be responsible, ethical, and respecting. When a leader takes
their position of authority and uses it to make employees do things they
normally would not do, this can essentially make employees lose respect
for their leader. If something should happen within the organization the
leader should find out what happened but this should be done in a way that
is still respectable and ethical. Abusing power is not the way to get to the
bottom of problems.
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21. In order to have an organization that is motivated and
successful there has to be a respectable leader that employees
trust. Before there is any talk about methods of operation,
lines of communication, definition of goals or structure of a
team, a leader must present himself or herself with a high code
of ethics that prevents any abuse of power. Robbins and Judge
(2007) identify that leadership effectiveness needs to address
the means as well as the content of any goals. Having this
characteristic will allow an individual to become a more
effective leader in the workplace.
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22. Ways to avoid the abuse of power:
 Hire or appoint a leader with high ethical standards.
 A leader must set a good example for their organization and
their employees.
 Leaders should treat their employees with the utmost
respect.
 Leaders should have a trusted advisor in the organization,
one outside the organization, and an independent board to
go to for counsel (Gardener, 2007).
 A leader should approach trouble in a fact-finding mode and
not in an accusatory fashion.
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23. Whistleblowing and Protective
Measures for Employees to
Come Forward
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24. In the HP spying case, Thomas Perkins, a member of the HP board,
resigned in protest believing his private communications had been
monitored and requested an external investigation of the tactics used
by the members involved in the spying activities (Spooner, 2006).
The HP boardroom spying tactics found George Keyworth was the
person who shared information on the board's activities without
authorization (Woellert, 2006). Thomas Perkins identified with the
victim of the spying investigation, George Keyworth, his friend and
fellow board member.
Thomas Perkins is what is known as the “whistleblower” in the HP
boardroom spying scandal and shows that HP may not have had
protection measures in place for employees to report improper
activities.
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25. Whistleblowing in the workplace is when a
person or persons comes forward and
reports illegal, immoral, illegitimate, or
unethical acts performed by employees or
employers of an organization (Alford,
2001; Miceli & Near, 1994).
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26. Whistleblowing, depending on the culture, can be perceived as a negative or a
heroic action:
 The British hold a negative view on whistleblowing. Conflict should
be avoided.
 China values loyalty, and whistleblowing is a direct threat to a loyal
relationship between employees and their employers.
 France, Italy, and Russia favor an anonymous reporting system.
 In America, children learn at an early age that being labeled a tattletale
or snitch is bad. This attitude often follows into adulthood.
 In Ireland, slightly less than 50% would blow the whistle on improper
acts in an organization. Only 3 % would expose a friend’s improprieties.
 In Western cultures, the media tend to portray the whistleblower as the
model employee and their actions as heroic.
(Appelbaum, 2006)
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27.  Most wrongdoing is reported internally first.
 It is the response or lack of response to the complaint that forces
the whistleblower to report the wrongdoing externally.
 If the complaint is based on theft, or involves harm to the
employees or the public it is more likely to be reported externally.
 The level where the wrongdoing occurs can cause external
reporting if the whistleblower feels that he or she has no one in a
higher position to go to.
(Miceli & Near, 1994)
Whistleblowing can be reported internally or externally and can come from an
employee or someone outside the organization such as a journalist or a member
of a watchdog group.
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28. The Decision to Report Wrongdoing
 Belief that something will be done in response to the complaint.
 Strong sense of morality.
 Sense of duty required by the job to report any wrongdoing.
 Does not let the fear of retaliation influence the decision to report the complaint.
(Alford, 2001; Uty, 2000; Miceli & Near, 1994)
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29. The Decision Not to Report Wrongdoing
 Nothing will be done by the management or the organization.
 Fear of retaliation in the form of job loss or lack of promotions.
 Social isolation at work.
 Media attention for employee and his or her family.
 Sense of loyalty to the organization.
 Seriousness of the wrongdoing.
(Alford, 2001; Uty, 2000; Miceli & Near, 1994)
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30. Whistleblowing is a clear way for an
employee to separate himself or herself
from the wrongdoing, assert personal
values, and establish personal integrity
in the work place (Uty, 2000).
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31.  Prevention of ethical issues from occurring in the first place.
 Clear ethical and legal guidelines for the organization and its employees to follow.
 Ethics office or manager to report incidents to or provide clarification (Chang, 2002).
 Ethics training for all employees to establish what is and isn’t ethical conduct.
 Clear procedures set in place for investigating any reported misconduct.
 Anonymous reporting procedure for those employees who don’t feel comfortable coming
forward publicly (Chang, 2002).
Protective mechanisms to put in place for employees to report
unethical or illegal behavior:
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32. Conclusion
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33. In order to prevent ethical problems, both leaders and employees
of an organization need to ask a series of questions before
proceeding with a course of action.
 Is it legal?
- “The law merely specifies the lowest common denominator of acceptable behavior”
(McDonald, 2007)
 Does it feel right, or are there some feelings of reservations?
- The feeling of reservation is a warning sign that needs further analysis.
 Could it hurt employees or shareholders?
 Would the action be viewed as responsible leadership?
 If the details come out in the media, could it jeopardize the organization’s name,
cause a risk of liability, or the loss of customers?
 If this were done to you, would you feel okay about it?
- A good rule to follow is “to treat others as you would like to be treated”.
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34. Legal Case Follow-up
 Patricia Dunn – All charges were dismissed. Dunn is currently fighting advanced late stage
ovarian cancer (Poletti & Harris, 2007).
 Kevin T. Hunsaker, Ronald L. DeLia, & Joseph DePante pleaded no-contest to fraudulent wire
communications and the charges will be dropped upon completion of 96 hours of community
service and possible compensation to the victims (Poletti & Harris, 2007).
 Bryan Wagner pleaded guilty to fraud charges and is awaiting sentencing (Poletti & Harris,
2007).
 Anti-pretexting laws have been adopted which make it illegal to use deception to obtain phone
records (Poletti, 2007).
 Hewlett-Packard admitted no guilt, but will pay $14.5 million dollars as a settlement to the
state of California, $650,000 in civil penalties, and $350,000 dollars toward the attorney
general’s investigation costs (Woellert, 2006).
 Hewlett-Packard agreed to appoint a new independent director who will act as the compliance
watchdog for the board of directors and will expand the duties of the company’s privacy
officer (Woellert, 2006).
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35. References
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Chang, J. (2002). Breaking the Silence. Sales & Marketing Management, 154 (12), p 54. Retrieved
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Darlin, D. (2006). Hewlett-Packard Spied on Writers in Leaks. New York Times, 09/08/2006.
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Jones, K.C. (2007). It’s Official: Pretexting is Illegal. Retrieved from
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36. Keohane, Robert O. (2005). Abuse of Power: Assessing Accountability in World Politics. Retrieved
from http://hir.harvard.edu/articles/1338/.
Koerner, B. (2007). Pretexting. Retrieved from
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News, pp. 1C, 4C.
References (continued)
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37. References (continued)
Poletti, T., & Harris, S. D. (2007). Why the HP Case Fell Apart: Negotiations Lead to Outcome in
Court. San Jose Mercury News, pp. 1A, 11A.
Robbins, S. P., & Judge, T. A. (2007). Organizational Behavior (12th ed.) pp 441-442. Upper Saddle
River, NJ: Prentice Hall.
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Spooner, John G. (2006). HP Chairman Could Fall in Boardroom Scandal. eWeek, 9/8/2006. Retrieved
from http://www.eweek.com/article2/0,1895,2013948,00.asp.
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