Synthesis

1939

1957

2001

2005

2006

2010

2011

1939, January 1: Electrical Engineers Bill Hewlett and Dave Packard founded
the Hewlett-Packard Company
1957: HP became a publicly traded company. All employees with six months of
service received an automatic stock grant and qualified for a stock option
program
2001, September 3: Then-CEO Carly Fiorina announced a merger with Compaq,
a personal computer company.
2005, April 1: HP announced the arrival of Mark Hurd, replacing Carly Fiorina
as the CEO of HP.

2006: HP made headlines when it admitted to the use of pre-texting in its

internal investigation to discover the source of leaked board room discussions.
2006, August 25: Mark Hurd was alleged to have sold US$1.4 million worth of
HP stock, shortly before HP announced the details of the board spying scandal.
2007, January 18: Hurd took over Patricia Dunns role as Chairman of the
Board.
2007: HPs annual revenue reached a high of US$104 billion and HP overtook
its long-time rival IBM.
2009: Hurd was named one of the TopGun CEOs by Brendan Wood
International.
2010, June: Jodie Fisher, a contractor of HP, made a claim of sexual harassment
against Hurd. Fisher was a marketing consultant with HP for the past two years
and was assigned to organize company functions for high-value of customers.
2010, August 6: HP announced that Mark Hurd will resign from his position as
Chairman, CEO and President with immediate effect.
2010, August 12: Shareholders filed a derivative lawsuit against HPs board,
accusing the directors of breaching fiduciary duties in the way they had handled
Hurds resignation.
2010, September 6: Oracle Corporation announced it had appointed Mark Hurd
as the companys co-president and director, slightly more than a month after
Hurds resignation as CEO of HP
2010, September 30: HP appointed Lo Apotheker, former CEO of SAP, as CEO
and President. The board also elected Ray Lane, Managing Partner at Kleiner
Perkins Caufield & Byers, as non-executive Chairman of the board.
2011, September 22: Apotheker was fired and Meg Whitman, the former CEO
of eBay and a current board member of HP, replaced him.

Point of View
The viewpoint on this case belongs to the Board of Directors (BOD). They are
at stake on how they will give resolutions to the aftermath left by the scandal of
Mark Hurd.

Statement of the Problem

What measures should the BOD do in shaping the right culture and ethics in
the company?

Objective
The objective of this case is to give solutions to scandal discussed on the case
such as ethics, the role of the board in developing and enforcing the right culture,
and the challenges faced by a board in holding the CEO to account.

Alternative Course of Actions

Alternative No. 1: HP need changes in the legal regimen to force boards
to evaluate management on its business strategy and performance, as well
as corporate compliance with legal obligations.
Pros:
Strict compliance within the company will rule
Hecklers will be afraid to do such misbehavior or crimes
Prevention of unlawful act

Cons:
Directors had little involvement in strategy
HP can quickly become entangled in an all-consuming web of legal
proceedings
Risk of litigation and liability

Alternative No. 2: Form an audit committee rule in formulating strategies

of the company/ Engage internal and external auditors.
Pros:

Improve transparency and lead to increased investor and other

stakeholder confidence in the company and the committee

Company will be positioned into tight internal control
Ensures disclosure and regulatory developments of the company

Cons:
Exposure to risks e.g. fraud risk, audit risk
Decrease audit quality by focusing the committee on reporting
rather than actual oversight duties
Inspire meritless litigation attributable to the additional
disclosure

Alternative No. 3: Create a culture dashboard

Pros:
Increases employee engagement
Offers immediate signs of achievement and progress
Corporate culture is the board priority
Cons
Overseeing culture can be difficult
Problematic corporate culture can create reputational risk
Emerging conflicts, bureaucracy, unproductivity and disunity

Recommendations:
Corporate culture is emerging as an important consideration for boards and
audit committees, touching as it does every aspect of a company, from strategy to
compliance. It is successively emerging as a board priority nowadays, as many dont
want to fall on the shadow of some large companies who had already experienced
major turmoil before. So, I think it would be best to recommend Alternative No. 3
with the given pros and cons above. The case is mainly on the issue of ethics --- about
power. The idea of creating a culture dashboard can be use to assess and monitor
company culture. There are strong correlations between scores on various
measurements. One can look a lot of things to assess the culture. HP company could
build a process for monitoring indicators so they can examine the outliers. Example of
items that could be included in a dashboard are: 1) employee survey results; 2)

employee hotline calls; 3) management performance appraisals; and 4) data from

specific culture areas. These monitoring indicators can make sure that good data is
going into the dashboard. Hence, it is important for the board not to let the company
get complacent about culture and to query management about it often to keep it on
the minds of everyone. Culture needs to become a standing agenda item for the board
to make sure complacency doesnt become an issue and that a strong culture remains
a focus of management and employees. To help oversee that monitoring, members see
a dashboard with cultural indicators from across the company as a useful tool. Having
either internal audit or a separate culture team monitor culture and feed data into
the dashboard can be also a practice.

HP: The Mark

Hurd Saga
(Case Analysis)

Submitted by:
Angelo Jade M. Dayag
BSA V

Submitted to:
Professor Amir T. Auditor

July 7, 2016