So long sweet summer. However, for the folks at HP, the past month has been anything but sweet.

Posted by Joe Gerard in on September 1st, 2010

So long sweet summer. However, for the folks at HP, the past month has been anything but sweet. In early August, HP announced the resignation of Mark Hurd following an internal investigation into sexual harassment allegations made against the now former CEO. As August ends, HP is making headlines again- this time following an investigation into alleged kickbacks paid by the company. HP agreed to a $55 million settlement, as the company was accused of paying kickbacks to the US government in exchange for business contracts. Here’s a look at the past month at HP, as well as some lessons the company should consider applying when rebuilding its corporate ethics:

Investigations, Lawsuits and Settlements…Oh My!

Sexual Harassment Investigation: August 6th- Late on a Friday afternoon, Mark Hurd resigns from his position of CEO at HP. The company received a sexual harassment complaint directed at Hurd and during the investigation, investigators discovered that Hurd had inaccurately completed his expense reports as a way to conceal his relationship with a female contractor occasionally hired by HP. Investigators felt that Hurd hadn’t committed a sexual harassment violation, but instead, claimed he violated the company’s standards of business conduct by falsifying his expenses. I feel like I share a similar opinion with many others when I say that there’s got to be more behind Hurd’s ousting.

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In a news release from Reuters, “HP After Hurd: We’re Looking Forward, Not Back,” James Niccolai writes:

“The seemingly minor nature of the offenses has led to speculation that there were other reasons for Hurd’s departure. New York Times columnist Joe Nocera suggested last week that the board was simply looking for an excuse to fire Hurd because he was deeply unpopular.”

Kickback Probe: August 30th- Based on a whistleblower report filed in 2007, HP is one of a few companies that have opted to pay a settlement with the US Department of Justice. The DoJ was investigating allegations that HP was paying kickbacks to gain business from federal agencies in the US. In a post on a Wall Street Journal Law Blog, “H-P Ends August With a Bang, Settling Kickback Probe for $55 M,” Ashby Jones provides an over of the accusations directed at HP:

“The Justice Department alleged that H-P knowingly paid ‘influencer fees’ to systems-integrator companies in return for recommendations that federal agencies purchase H-P products. It also alleged that H-P’s 2002 contract with the General Services Administration for computer equipment and software was defectively priced because the company provided incomplete information to contracting officers during negotiations.”

HP continues to deny any wrongdoing, stating the company didn’t engage in any illegal acts. In a statement made by HP’s interim CEO, the company simply wants to put these events behind them and move forward.

A Light at the End of the Tunnel

Sometimes, companies need to face the facts and own up to the actions of their staff. Siemens, Tyco and Johnson & Johnson are only a few of the many companies that have had to conquer the consequences of ethical lapses and the negative media that comes with it. In each of these three cases, there were actions taken that exhibit best practices in “ethics scandal recovery.” A lesson from each company’s experiences that could be applied at HP include:

1. Siemens: Ethics Training

Employees need to know what’s expected of them. After the bribery investigation was settled at Siemens, the company began working from the bottom up to rebuild ethics into each level of the organization. A state-of-the-art ethics and compliance training program was developed, providing employees with training tailored to their specific roles within the organization. At HP, it’s apparent that certain ethics topics could use some revisiting. HP should reevaluate the different risks faced by employees and use this information to ensure training topics are up-to-date with current ethics and compliance threats. Break information down into smaller sections. This makes it easier for employees to digest information and allows training to take place on a more frequent basis. Constant communication with employees is necessary in order to get them to make the necessary ethical changes.

2. Tyco: Tone at the Top

Tyco‘s ethical transformation began in 2002, after former CEO Dennis Kozlowski and former CFO Mark Swartz were given the boot for embezzling hundreds of million of dollars from the company. Tone at the top quickly became one of Tyco’s top weapons in fighting its way back from the dark side. Since HP has yet to find a permanent replacement for Hurd, HP should look for a CEO that demonstrates the ability to be an ethical leader, is passionate about conducting business in an ethical manner and who will hold employees accountable for their actions- regardless of their position in the company. Hurd admitted himself that he didn’t live up to his own standards of integrity and respect, therefore, how could he expect that of his employees? At Tyco, Ed Breen made it his mission to place ethics and integrity at the forefront of business at Tyco, the next CEO at HP should too.

3. Johnson & Johnson: Transparency and Communication

During the 1980s Tylenol recall, transparency and open communication with the public were Johnson & Johnson’s keys to success in responding to the crisis. The cyanide-laced pills were contained to a specific area and were the product of an individual tampering with the package. J&J could have just issued a statement saying they were not responsible for the cyanide entering the packages, but instead, the company launched one of the largest recalls to-date, replaced Tylenol purchased by consumers and developed an extensive media campaign to go along with the recall. The company chairman communicated regularly with the media, and in a press conference, gave a tremendously transparent overview of every detail related to the recall. The lesson to HP- open up to the public, don’t give them room to speculate. Thus far, the company has remained tight-lipped about the reasoning behind Hurd’s departure, and it doesn’t seem to be working in the company’s favour.

Joe Gerard
Joe Gerard

CEO, i-Sight

Spend my days showing off the i-Sight investigative case management software and finding ways to help clients improve their investigations. Usually working with corporate security, HR & employee relations, compliance and legal teams.

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