By John W. Schoen Senior Producer
updated 9/22/2006 6:47:22 PM ET 2006-09-22T22:47:22

Talk about a business soap opera.

The saga of Hewlett Packard’s wayward board of directors just keeps getting better. Or worse, if you happen to be an HP employee, vendor, distributor or shareholder.

What started as a botched investigation of information leaks is turning into the best business tragicomedy since Martha Stewart made a little phone call to her broker from a Texas tarmac on her way to some R&R in Mexico.

HP’s board, you’ll recall, has been making headlines for its bone-headed efforts to smoke out a leaker in its ranks who was spilling to the press details of a simmering civil war within the group. But this gang can’t shoot straight — even when they’re aiming at each other.

Among other tactics, the investigators hired by the company to conduct the probe reportedly impersonated board members, employees and journalists to get their phone records and spied on an HP director and a reporter. (Exactly who signed off on the plan still isn't clear.)

Thanks to the company’s Chinese-water-torture disclosure strategy (along with the fact that journalists were among HP’s targets), the financial press has been serving up a steady series of installments, including Friday afternoon's shocker that Patricia Dunn has resigned as chairwoman, effective immediately.

A day earlier, we learned that HP CEO Mark Heard has been, shall we say, less than candid   about his role in the botched operation; the Washington Post got its hands on internal company e-mails showing that Hurd approved an elaborate "sting" operation on a reporter.

Of course, the original leak investigation — certainly shady, possibly illegal, never mind sloppy — wouldn’t have been needed to begin with if the board had been able to leave their personal differences outside the boardroom for a few hours at a stretch. That, after all, is what HP shareholders paid them, collectively, $1.8 million in the latest fiscal year, to do. Instead, this bunch has displayed all the fiduciary responsibility and maturity of a pack of mean middle-school kids.

The real problem, of course, is that shareholders have little recourse when the group they entrust with their investment (nearly $100 billion in HP’s case, based on the current share price) devolves into dysfunction. New board candidates, hand-picked by the current board under the watchful eye of the CEO, rarely face any real opposition unless a rich investor with deep pockets is willing to embark on a costly proxy fight to challenge the status quo. Congress can pass as many laws on corporate governance as necessary to reassure investors. But until the process of choosing board members is truly reformed, there’s about as much “democracy” involved in electing corporate boards as there is in Thailand these days.

Through it all, HP continues to put on a brave face, right down to company spokesman Michael Moeller who, we learned in Sunday's episode, was himself a target of the leak investigation. On Wednesday, Dunn, the player at the center of the storm who took the fall for ordering the investigation, was inducted into the Hall of Fame of the Bay Area Council during her first public appearance since the story first broke.

Speaking of awards, as the extent of its snooping continues to unfold, HP is accepting nominations for the fourth annual Privacy Innovation award , which the company hands out in conjunction with the International Association of Privacy Professionals.

So, in that spirit, the awards committee here at What Were They Thinking hereby presents its Enron Governance Medal to the entire HP board. The committee's decision was split, but we're trolling everyone's e-mail accounts to find out who wouldn't get on board.

Old moves
As both Ford and General Motors race to see which automaker can lay off more workers, the two companies have apparently been considering an alliance or possible outright merger, according to published reports this week. (Both companies declined comment.)

There’s no doubt that with losses mounting and sales falling, GM and Ford need to get smaller — fast. But as our MSNBC.COM colleague Roland Jones pointed out this week , U.S. automakers need to spend more time designing and building cars that people want to buy.

As Lexus this week showed off a new model that can parallel park itself, Ford and GM are still trying to kick their addiction to the high-profit-margins they milked from light trucks and SUVs — built on the same platforms for over a decade. As a result, both are years behind Toyota in developing the higher-efficiency cars now popular with U.S. car buyers stung by surging gasoline prices.

Sure, sharing R&D or designing common components might help Ford and GM shave a few yards off Toyota’s lead. But merging two rapidly-shrinking, money-losing companies just creates a bigger, rapidly-shrinking money-losing company.

As they say on Wall Street: You can tie two rocks together, but they still won’t float.

'Green' bullets?
Never let is be said that people who make deadly weapons don't care about the environment.

According to a recent report in The Sun, British arms maker BAE Systems is coming out with a new line of 'environmentally friendly' weapons — including lead-free bullets.

The company said it decided to get the lead out because it "can harm the environment and pose a risk to people." Among the company's other plans for cutting-edge weaponry: "quieter" warheads that produce less noise pollution, "eco-friendly" rockets, bio-degradable explosives and grenades that produce less harmful smoke, the paper reported.

"Weapons are going to be used," BAE director Dr. Debbie Allen told the Sun. "When they are, we try to make them as safe to the user as possible to limit the collateral damage."

Not everyone was impressed. Campaign Against Arms Trade spokesman Symon Hill called the plans "laughable."

"They make weapons to kill people," Hill told the paper. "It's utterly ridiculous."

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