Fortune Magazine
Fast Forward
And now the heat's on Hurd
HP's CEO managed for a while to stay above the fray of the egregious leak investigation and its aftermath. Not anymore.
By David Kirkpatrick, Fortune senior editor

NEW YORK (Fortune) -- Ever since the news broke that HP has been spying on journalists and its own board members, one question has been hanging over the company: Where was CEO Mark Hurd? Now investors are getting an answer - and Hurd may be at risk.

The news today that Hurd may have been well-apprised of details of the company's spying pushed down HP's (Charts) stock by more than 4 percent at mid-day. It also may suggest a sad answer for why Hurd has been so silent in the face of this maelstrom.

hurd_mark_hp.03.jpg
HP CEO Mark Hurd

Company executives and some analysts up to now took heart that the stock hadn't moved in the face of the growing controversy over unethical spying on directors, journalists, employees and others. They seemed to assume it didn't really mean that much and it was only a matter of pesky journalists dragging this company through the muck.

Well, thank goodness for the persistence of journalists, especially those at the New York Times, Wall Street Journal, Washington Post and CNET, who have been covering this story obsessively and daily revealing extensive details from internal company e-mails that increasingly point to a role for Hurd.

One Silicon Valley luminary told me two things the other day: that if he had been in Hurd's shoes he would have spoken out immediately; and that the fact that Hurd hasn't only suggests that what he would have to say might not sound good. That seems more likely in the face of today's revelations.

Similarly, a senior HP manager expressed shock that Hurd hadn't said anything right away to fully explain the company's view, and said it made this person wonder if Hurd had what it takes to be CEO of a company this large and important.

Now HP has scheduled a press conference Friday after the markets close. Will Hurd finally take charge, as a CEO should, and stop letting a steady drip, drip, drip of leakers - presumably from law enforcement agencies - determine the prominence and progression of this story?

If he does not do a significant mea culpa and deliver a compelling argument for why HP did what it did, one will inevitably be left with the impression that Hurd has something to hide.

It's too late to keep the story off the front pages, and it has attracted the attention of Congress, which will hold hearings next week. Board Chairman Patricia Dunn, HP Chief Counsel Ann Baskins and outside counsel Larry Sonsini are among those scheduled to testify in what will inevitably be a full-blown media circus. I wouldn't be surprised if Hurd were now added.

The story's details paint a very unflattering picture of HP, and make one almost laugh at the claim, made by Chief Privacy Officer Scott Taylor in testimony before Congress in June, that "privacy is a core HP value." If so, what do values mean at HP, given how much we've now learned about an apparent desire to tread on the edge, and sometimes over, the line of ethics and to show a blatant disregard for the privacy of directors, employees and journalists?

It's amazing to see the seeming disconnect between corporate blather and reality. For instance, check out this HP Web site for the HP/IAPP Privacy Innovation Award, created "to recognize and foster world-wide leadership in privacy protection and practices." (IAPP is the International Association of Privacy Professionals.)

How could a company with such a strongly-stated set of values fail to have its employees abide by them? And how could it not punish those employees - immediately and publicly - for their blatant failures?

It's painful to write this way about a company with the stature of HP. But the more I think about it, the more the entire issue raises questions about the state of values, and of leadership, at the company.

For instance, the company's chief ethics officer and lawyer Kevin Hunsaker, who oversaw the spying episode, is coming across in the press accounts as more interested in figuring out how far he can bend ethics than attempting to sustain them.

In one stunning exchange quoted by the Times, Hunsaker asked an internal company investigator how the outside contractors were obtaining personal phone records. The investigator replied that his agents "call operators under some ruse." He added: "I think it is on the edge, but above board. We use pretext interviews on a number of investigations..."

Hunsaker's entire e-mail response, according to the Times: "I shouldn't have asked..." (That ellipsis suggests that even he was wondering what a so-called chief ethics officer was doing immersed in such a stupid unethical mess.) The Times also reported that Hunsaker received reports of "feasability studies" for the infiltration of the Wall Street Journal and CNET offices.

Aside from telling HP's side of the story, Hurd has another huge mandate - to aggressively reaffirm, if it is true, that privacy really does matter to the company. Then he will have to outline exactly what steps he intends to take to demonstrate that both inside and outside the company. They will have to be big ones.

We need to know what Hurd did, what he knew, when he knew it, and what he intends to do now. The future of HP, its CEO and its stock may hang in the balance.

______________