A new book sets out to prove that Hewlett-Packard’s chief executive was as responsible for Spygate as its chairman. Kanika Datta reviews Anthony Bianco’s account of the saga When he started writing this book, Anthony Bianco could not have known that Mark Hurd would unwittingly vindicate his version of the Hewlett-Packard (HP) boardroom spy scandal. Just months after The Big Lie was published Hurd had to, in short order, resign as HP chief executive following a sexual harassment investigation and then defend a breach of contract suit for swiftly accepting Oracle President-ship.
That, at the very least, provides circumstantial evidence for the burden of Bianco’s argument: that Hurd, who emerged mysteriously unscathed from Spygate, was as guilty as non-executive chairman Patricia Dunn of suborning HP’s security apparatus to spy on board members and journalists. Dunn, then suffering from terminal cancer, took the hit, was forced to step down, publicly pilloried and indicted on four felony counts by a criminal court.
How did the CEO escape similar censure? It’s an obvious point that few journalists chose to explore in depth. The story Bianco unfolds is one of moral cowardice as much as turpitude, sharply at variance with Hurd’s positive public image.
When Hurd took over in 2005, HP’s top- and bottom-lines were under pressure and people were stampeding the exit door after the Compaq acquisition. On his five-year watch HP’s earnings and shares doubled, its market share overtook Dell and the company supplanted IBM as the largest IT technology company.
Bianco, however, makes the larger point that delivering good financial results is no longer an adequate measure of CEO success. “The point is not merely that moral character is as important to long-run success in business, government, or even sports as competency but that it is an essential component of competency. By this standard Hurd falls short as a corporate leader.”
Spygate was, ultimately, a product of the personalities involved and Bianco duly devotes nearly a third of the book to the protagonists, their backgrounds and how their relationships with one another panned out.
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Consider the cast:
In terms of personality Hurd was probably the least remarkable of the lot. His previous job was as CEO of NCR Corporation, America’s largest ATM manufacturer, where his frugal personal style and cost-cutting proclivities helped triple stock values in his two years in charge.
Spygate’s origins date to the second quarter of 2004 when HP reported “conspicuously disappointing results”. Fiorina blamed various subordinates but, as Bianco writes, “By now, it was apparent to most HP directors that Fiorina had neither interest nor aptitude for the hard, unglamorous work of managing a company day to day.”
The impulse for her removal came from Keyworth, who carried Dave Packard’s “celestial proxy in his pocket” and whom Fiorina had antagonised. His covert campaign began by co-opting his friend Perkins, an early Fiorina cheerleader, but it was a tough task, given that most board members were barely speaking to each other because of her.
The first public signs of the board’s disaffection with each other and Fiorina came from a story in the Wall Street Journal in early 2005 that HP was considering a reorganisation to curtail Fiorina’s powers, citing anonymous sources to recount details of the board’s innermost workings. That article pretty much sealed Fiorina’s fate, although the identity of the leaker was never established.
When the board voted to oust Fiorina, they also voted in Dunn as non-executive chairman, separating the powers of the top two posts. The atmosphere in the boardroom had, however, grown worse with “directors behaving like houseguests awaiting the drawing room denouement of an Agatha Christie whodunnit”.
Fiorina’s exit did not staunch the leaks. WSJ and BusinessWeek published several startlingly accurate reports on the CEO head-hunt, and inside stories of Fiorina’s sacking began appearing in the press revealing all manner of confidential information attributed to anonymous sources.
Although Dunn initiated the leak investigations and the first one pre-dated Hurd, Bianco suggests she was being manipulated by HP Global Security, “a cliquish fraternity of ex-cops, former military men and computer geeks”. More to the point, the chief of this unit reported to Hurd and his interim predecessor, so it is inconceivable that he was ignorant of either the investigations or the methods that were adopted. Bianco quotes several e-mail exchanges and minuted conversations between Hurd, Dunn, HP’s legal team and investigations to bolster his point.
If Dunn can be accused of anything, it is her inability to spot the danger signals – uncharacteristic in a stickler for minutiae, but understandable given her escalating health problems — when early reports spoke of “on-site inspections/pretext interviews” and “electronic surveillance”. Both Dunn and Hurd were being disingenuous when they insisted they did not authorise such methods. Their lack of reaction to such information, relayed in long, anodyne reports, was taken as assent.
Dunn also made a “dumb mistake”, naming the investigation Kona, after a district on a Hawaiian island on which she and her husband owned a condo. Kona I and Kona II, as another investigation that Hurd authorised was named, thus, inextricably linked her with HP’s Watergate-type scandal.
When the Spygate story broke, the technique that attracted the most criticism was ‘pretexting’. This is a form of social engineering that had investigators impersonating HP board members and journalists to obtain phone records from telecom service providers. The method wasn’t strictly illegal at the time but its legality was being widely debated, of which HP Security was well aware (pretexting has since been outlawed). Where it did transgress was in using board members’ social security to gain information and in their clumsy, almost comical, attempts to hack email accounts.
The story now develops two converging tracks. First, relations steadily deteriorated between Perkins and Dunn over a variety of issues, as much a product of the mismatch between Perkins mercurial, cowboy approach to business and Dunn’s stolid, rule-based consensual style. Second, the leaks gushed unabated — including of top-secret negotiations to buy Computer Sciences Corporation. It was, however, a CNET story that brought things to a head. That story revealed details of board deliberations and organisational changes at HP.
The internal investigations that followed revealed that Keyworth had given the CNET reporter an unauthorised interview. Although the CNET piece was mostly positive, the escalating scandal meant Keyworth had to go, a decision Hurd endorsed.
Keyworth’s dismissal infuriated his good friend Perkins and what followed was a boardroom meltdown that ended with a trade-mark Perkins walk-out. The matter might have ended there had Perkins not walked on to the board of Richard Murdoch’s NewsCorp and presented his Authorised Version of the events to a Newsweek reporter in which Dunn was cast as the rogue chairman. It was a giant public relations disaster, but one that was already out of control internally thanks to behind-the-scenes shenanigans by Hurd, who had by then been appointed chairman.
There are myriad sub-plots in this sprawling and complex drama but like all well-trained magazine journalists, Bianco, a former BusinessWeek reporter, has the ability to distill solid reportage and research into a credible and gripping story. The Big Lie is a cautionary tale, but in Bianco’s telling it could easily be made into a box-office hit too.
THE BIG LIE
SPYING, SCANDAL, AND ETHICAL COLLAPSE AT HEWLETT-PACKARD
Author: Anthony Bianco
Publisher: PublicAffairs
Pages: viii + 360
Price: Rs 987