Naughty: Hewlett-Packard's Pretexting

During this holiday season, some of us at The Motley Fool decided to help Santa Claus put together his annual "naughty and nice" list. Although Santa needed our list in by today, I hope he's able to accommodate a few more naughty late arrivals before his midnight run later this month.

Just in case Santa can't, I'm tossing in Hewlett-Packard's (NYSE: HPQ  ) whole board of directors -- that is, the pre-scandal bunch. Their whole naughty scheme began in January, after a news.com article reported strategic details from the company's annual retreat. Unfortunately, the information was used without authorization, leaked from an unnamed source. I can appreciate maintaining privacy regarding corporate strategies, and leaks should be not tolerated. But resorting to illegal means to stop those leaks is unacceptable, and definitely naughty.

Topping the naughty list is Patricia Dunn, the now ex-chairman of HP's board. The illegal practice of pretexting -- in which HP, in searching for the leak, gained access to other people's personal records under false pretenses -- occurred under her watch. Also on the list: George Keyworth, who is believed to be the source for the leaked information. Leaking information might be legal, but it's still naughty. I admit that some directors were probably less naughty than others, and maybe Tom Perkins should get a free pass, but as the saying goes, it only takes one bad apple to spoil the barrel.

And if you don't think my bad-apple theory is appropriate, look who just got back into the hot seat -- CEO Mark Hurd. He'd managed to stay above the fray until this week. It turns out that Congress is looking into the CEO's exercise of 100,000 options, less than two weeks before HP's disclosure of its pretexting issues. The timing implies that he could have traded on material nonpublic information, which is naughty with a capital N.

The corporate boardroom will always be a source of naughtiness and niceness. And as the number of independent directors on corporations' boards increases, the tension to play fair will only increase. A chummy board of directors playing nice and rubber-stamping management's desires doesn't work. Just look at some of the recent outrageous CEO payouts at Exxon (NYSE: XOM  ) and UnitedHealth Group (NYSE: UNH  ) . Nonetheless, even an independent board can wind up on the naughty list.

There's a whole world of naughty and nice out there!Take a lookat the rest of the bunch.

UnitedHealth Group is both aStock Advisorand anInside Valuerecommendation.To see why both Tom and David Gardner and value guru Philip Durell picked it for their lists of superior stock selections, follow the preceding links to try either newsletter service free for 30 days.

Fool contributor Matthew Crews welcomes your feedback -- really! He has no financial position in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.


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