Users see HP scandal as minor distraction

Customers are reporting that the HP scandal is having little effect on HP's business

When John Glaser, CIO at Partners HealthCare System, met with some Hewlett-Packard employees recently in a routine business meeting, HP's boardroom scandal came up.

The HP employees "were kind of embarrassed by it," Glaser said, but "it's almost like it's happening on Mars -- their day jobs are not affected."

Glaser said the same is true for his relationship with HP: It's unchanged. He said the leak scandal -- which has played out publicly in recent weeks -- is a relatively minor challenge for HP's business compared with megatrends such as the increasing commoditization of IT.

At a hearing Thursday, HP took a thousand arrows from members of Congress who accused HP of unethical and possibly illegal behavior as it investigated a boardroom leak to the press. But several corporate customers said they continue to back Mark Hurd, HP's CEO and now board chairman, for improving operational efficiency and customer support.

Hurd "has been a real change agent at HP, and we see him as responsible for improved performance of the company and the stock price," said Peter Walton, CIO at Amerada Hess. He said Hurd has the right team in place -- he cited CIO Randy Mott, in particular -- and stressed that Hurd's changes are becoming institutionalized at HP. Walton said the scandal is a distraction that could hurt HP's stock price but not necessarily the performance of the company. It remains to be seen how Hurd will fare as state and federal investigations continue. Hurd maintained that he had only partial information about the leak probe and that he failed to dive into the details. "I wish I had asked more questions," Hurd testified.

Martin Reynolds, an analyst at Gartner, said the investigation is focusing more on the people involved than on the company. "This is a question of individual accountability, rather than HP's accountability," he said. "It's very insulated from the business process."

In one way, Hurd has gained from the scandal by being named board chairman after Patricia Dunn's departure. He now joins the ranks of other big-company CEOs who are also board chairmen, including Samuel Palmisano at IBM, Howard Stringer at Sony and Jeffrey Immelt at General Electric.

Giving Hurd both titles runs counter to the general trend in corporate governance. Companies favor splitting the two roles, figuring that "having an independent chairman would strengthen the authority of the board over management," said Keith Bishop, a partner at law firm Buchalter Nemer in Los Angeles and former commissioner of corporations in California.

It's been almost a month since news of HP's scandal broke, and for now, users say it isn't affecting them.

Even if Hurd is occupied by the fallout, the business processes he has established at HP are working, said Robert Fort, IT director at Virgin Entertainment Group.

Bill Lewkowski, CIO at Metropolitan Health, said the episode could even be healthy for the company by weeding out discontent on the board and solidifying management even further. With Hurd occupying both the CEO and board chairman roles, "I have even more confidence in the company right now," Lewkowski said.

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