HP Update: “Conduct Unbecoming A Public Company Board Of Directors”

Remember Spygate, HP’s undercover operation against its own board and journalists? Well, now we have Hurd-gate, according to Mike Arrington at TechCrunch.

Stung twice, first by their abrupt dismissal of star CEO Mark Hurd for what appeared to most people to be a personal failing (his involvement with an HP marketing contractor) and second by their hiring of a failed CEO to lead the country’s largest technology company, the board has now gone on the offensive against business reporter Joe Nocera of The New York Times.

As I noted here a few days ago, Nocera pointed out the hypocrisy of the board for dumping Hurd for relatively minor ethical issues while hiring Leo Apotheker, whom SAP fired after 8 months as their sole CEO (he held a co-CEO position for longer).

Apotheker it turns out was CEO of SAP while SAP was stealing software code from competitor Oracle.

Nocera wrote an earlier column calling the HP board “the most inept in America.”

Unable to make the business case for the hiring of Apotheker, Arrington says the HP directors are going after Nocera instead, first through a guy named Ben Horowitz. Horowitz was CEO of a company called Opsware (formerly LoudCloud) which was chaired and co-founded by Marc Andreesen. Horowitz and Andreesen arranged the sale of Opsware to HP in the summer of 2007 for $1.6 billion. Andreesen eventually got appointed to the HP Board. Horowitz quit HP after a year and he and Andreesen formed a venture capital fund.

Horowitz has now run a column on his blog in response to Nocera that sounds like it was written by a PR firm hired by the HP board. It makes you wonder why Horowitz would have left such a wonderful company so quickly. Of course, it is widely known in the Valley that life is not a bed of roses at HP for employees of newly acquired companies. It looks like Horowitz got out as soon as his options vested. Not so clear if rank and file Opsware employees have been that lucky.

Since Horowitz’ new business with Andreesen depends on their ability as venture capitalists to guide other start up companies through the acquisition process, including possibly being acquired by HP, it is not unreasonable to question the objectivity of Horowitz’ views on the matter. And one has to wonder why he would be willing to do the bidding of the HP board and go after Joe Nocera at the Times.

But that was not all. When Nocera wrote his second column, the HP board sent its incoming new board chair Ray Lane into action. Lane penned an angry email to the Times defending once again the firing of Marc Hurd as a way of defending the hiring of Leo Apotheker. At this point Apotheker must be wondering if he really needs friends like this!

Lane’s defense of the Hurd ouster is that not only did Hurd violate the (very vague) HP standards of business conduct (in ways that have never been clearly explained) but he also “repeatedly lied” to the HP Board!  Well, this is new. It would have been nice if the Board had told us Lane was a serial liar in the first place. Surely that IS more serious than whatever problem there was (or was not) with the expense accounts.

Lane also contends that Leo Apotheker did not have supervisory power over the SAP division, called TomorrowNow, that SAP admits stole Oracle’s IP. The illegal downloads took place in 2006 and 2007. Apotheker was on the SAP Executive Board from 2002 to 2010, served as deputy CEO from 2007 to 2008 and became the co-CEO of SAP in April 2008! Clearly he was jointly responsible with other SAP executives for what was happening beneath him at the TomorrowNow division.

Is Lane saying that as HP CEO Apotheker will not have supervisory power over all of HP? That if HP is engaged in illegal activity, perhaps like that which may be found in the bribery, embezzlement and tax evasion probe of HP reportedly now underway by the SEC and Department of Justice, that he as CEO is not responsible? that the entire Board of Directors would not be responsible?

As I pointed out when reports of the Lane email first surfaced, the email from Lane also makes it appear Lane is in possession of material information about the Hurd dismissal that was not disclosed when Hurd was kicked out. HP should have shared that information with investors instead of leaving them in the dark. It is also a bit odd that Lane, who does not yet work for HP, is in possession of this information yet investors are not.

Oh, and one final twist. Instead of defending fellow journalist Nocera in this assault by HP, the Wall Street Journal’s All Things Digital bloggers Kara Swisher and John Paczkowski appear willing to act as a PR outlet for the feckless board.

First, they reposted the Horowitz paean of the HP board giving it much wider impact and credibility than it otherwise would have had. They did not fully explain the conflict that Horowitz clearly has in the matter. When I pointed this out in the comments section they professed to not understand what I was saying.

Then, Swisher was given the full text of the Lane email to the Times, no doubt by HP, which she in turn duly ran in full.

Finally, Paczkowski piled on saying Joe Nocera’s reputation had been “smeared” because he had a “conflict of interest” in reporting on the story at all. It turns out that Nocera’s fiance works for a law firm that represents Oracle in the SAP suit. Nocera was unaware of the law firm’s role in the lawsuit and his columns were factually accurate but that did not stop the Journal bloggers. They posted a link to the complaint with the law firm’s name on it, as if readers would not actually believe them otherwise.

Of course, whatever one thinks of Nocera’s ethics, that is hardly the point. The point is what the HP board is doing to HP.

The facts have not changed. Hurd was fired for what we were told were relatively minor personal problems. HP then hired a failed CEO who had overseen (ignored? mismanaged? was blind to?) a major theft of a competitor’s intellectual property.

This adds up to a board that is very much on the defensive as criticism of their weak leadership of an important public company spreads beyond the usual suspects like Oracle CEO Larry Ellison to Jack Welch and The New York Times.

The HP directors’ jobs and reputation are on the line, as they very much should be.

Conduct Unbecoming A Public Company Board Of Directors.