Update: Hurd to replace Patricia Dunn as HP chairman

The move follows a boardroom scandal at the company

Hewlett-Packard Co. announced today that Patricia Dunn will be replaced as HP's chairman on Jan. 18, 2007, by CEO Mark Hurd.

The move follows a scandal related to a company probe of leaks from HP's board of directors, and it comes after meetings of the board over the weekend and yesterday to discuss the situation.

"I am taking action to ensure that inappropriate investigative techniques will not be employed again," Hurd said in a statement. "They have no place in HP."

Mark Hurd

Mark Hurd will replace Patricia Dunn as HP chairman on Jan. 18.

In the statement, Dunn said, "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. 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 with third parties, included certain inappropriate techniques," she said. "These went beyond what we understood them to be, and I apologize that they were employed."

Dunn went on to say she is "very proud" of the progress the company has made during the past 18 months. "During the remainder of my tenure as chairman, I look forward to completing the transition that is under way, including expanding the board, continuing to improve our corporate governance standards and bringing the current issues to resolution."

Dunn has been under pressure to step down as chairman since 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 to the 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 those reporters' telephone records.

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.

In a separate move related to the controversy, board member George A. (Jay) Keyworth II announced his immediate resignation and confirmed that he was a source for leaks to news organizations. He also was critical of the tactics used to determine where the leaks came from.

"The invasion of my privacy and that of others was ill conceived and inconsistent with HP's values," Keyworth said in a statement. "I acknowledge that I was a source for a CNet article that appeared in January 2006. I was frequently asked by HP corporate communications officials to speak with reporters -- both on the record and on background -- in an effort to provide the perspective of a longstanding board member with continuity over much of the company's history.

"The comments I made to the CNet reporter were, I believed, in the best interests of the company and also did not involve the disclosure of confidential or damaging information," he said.

Keyworth stressed that it is important for the company to move beyond the current "morass."

"While I intend to remain a member of the HP family and to advise Mark [Hurd] where I can help, it is best for the company that every aspect of this unfortunate matter be put in the past," Keyworth said.

Hurd said the company hopes to put the current controversy behind it quickly.

"HP holds itself to the highest standards of business conduct, and we are accountable to these standards for everything that we do," he said. "The company will work to put these matters behind us so that we fully resume our focus on the business and continue to earn the trust and support of our customers, employees and stockholders."

Rob Enderle, an analyst at Enderle Group in San Jose, said that he is "a bit surprised" that Dunn will be stepping down as chairman, since no hard evidence has yet been introduced to show that she was directly involved in the phone pretexting scandal.

"But given the firestorm, I think she did the right thing," he said. One concern, he said, is the amount of responsibility on Hurd's shoulders, given that he will continue as CEO and chairman. His predecessor as CEO, Carly Fiorina, once held both posts, but later in her tenure the duties were split -- an arrangement that many industry watchers think is better, he said.

"That's one of those things that you'd like to see in a company -- that separation of powers... so the roles don't get blurred," Enderle said.

Computerworld's Todd R. Weiss and the IDG News Service contributed to this report.

See more coverage:

  •  HP says chairman has no plans to resign over leaks investigation

  •  HP: 'No Surprise'

  •  Opinion: A demand for immediate and full disclosure

  •  Reporters' phone records accessed by HP during leak probe

  •  California AG probing HP boardroom leaks

  •  SEC filing shows board infighting, leaks at HP

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Copyright © 2006 IDG Communications, Inc.

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