HP Chairman to Step Down Amid Scandal

In a day of executive shakeups intended to put its boardroom scandal in the past, Hewlett-Packard today announced that Chief Executive Officer and President Mark Hurd will replace Patricia Dunn as chairman, and that board member George Keyworth has resigned, effective immediately.

The announcement came today, following meetings of the board over the weekend and Monday. Hurd will also take on the chairman's job. Richard Hackborn, who has been on the board since 1992, has been chosen as the lead independent director as of January.

Dunn had been under intense pressure to step down as chairman after it came to light last week that the board of directors carried out an investigation to determine who among the board leaked confidential information to journalists. The board admitted in a filing with the U.S. Securities and Exchange Commission (SEC) that the internal probe involved "pretexting," where employees of an investigative firm hired by the company pretended to be reporters to gain access to their telephone records.

Under Investigation

Federal authorities, including the U.S. Department of Justice and a congressional committee, are questioning the board's conduct in the probe and the California attorney general has said that charges are likely to be filed.

Although HP executives said they hope the shakeup puts the boardroom infighting behind them, the investigations may provide more embarrassments. A House committee has asked HP to identify the private investigative firm that probed the board leaks to news media and the subcontractor also hired, which used controversial methods known as "pretexting" to check the phone records of directors and journalists who cover HP.

HP declined Tuesday to identify the contractors.

When and how we provide information is between us and the regulatory agencies," said Ryan Donovan, an HP spokesman.

But eventually the names will come out, said Chris Hoofnagle, senior counsel at the Samuelson Law Technology and Public Policy Clinic at the University of California at Berkeley.

"It will come out and it will result in another round of news stories and embarrassment for the company," said Hoofnagle, an advocate for privacy rights.

Dunn's Statement

"The recent events that have taken place follow an important investigation that was required after the board sought to resolve the persistent disclosure of confidential information from within its ranks," Dunn said in a written statement released by HP. "These leaks had the potential to affect not only the stock price of HP but also that of other publicly traded companies."

"Unfortunately, the investigation, which was conducted by third parties, included certain inappropriate techniques. These went beyond what we understood them to be, and I apologize that they were employed."

For his part, former board member Keyworth acknowledged today that he had leaked information. But he said that he had been asked by HP to talk to reporters both on the record and on background.

In a statement, CEO Hurd pledged to take action to make sure that such "inappropriate investigative techniques" do not happen again. "They have no place in HP," Hurd said in the statement.