HP focuses on forward looking pathways and policies // by JON HOAK
In 1938, in a Palo Alto, California, garage serving as workshop, research lab and manufacturing facility, Bill Hewlett and Dave Packard launched the business that would become HP. More than technology came out of that garage, which is now considered the birthplace of Silicon Valley. In addition to the oscillators and countless other innovations that followed, Bill and Dave developed a corporate culture, “The HP Way,” that includes always conducting business with uncompromising integrity.
In the decades since, HP has been recognized as a leader in many facets of corporate responsibility- from environmental stewardship to employee development to philanthropy to privacy and to diversity in the workplace. HP also built a world-renowned reputation for holding ourselves to the highest standards of ethical business conduct. We are proud of this legacy and have made these principles integral to the way we conduct business. And it is because of this legacy that the events of last year were particularly surprising and disappointing to everyone at HP.
What began as a well-intentioned exercise in risk management- an investigation into leaks of confidential information by members of our board- grew into something that no one wanted or anticipated. The resulting fallout was a clear wake-up call that, as good as HP’s ethics policies and systems were, they weren’t good enough. Our well-publicized misstep led HP to take a hard look at our practices, policies and procedures and to renew our commitment in the areas of governance, ethics and compliance.
The original HP values are still at the heart of everything we do, and they underscore our commitment to conducting business with uncompromising integrity. These values are reflected in HP’s Standards of Business Conduct (SBC), and together they form the ethical foundation that guides the actions and decisions of everyone at HP. The SBC covers relationships among our employees and between our employees and suppliers, partners, customers and competitors, addressing issues such as conflicts of interest and the handling of sensitive information.
As we learned the extent of the pretexting issue, we took swift and comprehensive action. First, we accepted responsibility, as a company, for the actions of certain employees and individuals working on behalf of HP. We personally apologized to the nine journalists and their families, two current HP employees and seven former or current HP board members and their families who were affected. We severed all ties to the private investigation and consulting firms who carried out the pretexting activities, and we condemned pretexting and expressly called for the practice to be made illegal. We stated this publicly and in meetings with policy-makers, who subsequently passed legislation to that effect in Congress in late 2006. We also accepted the resignations of our previous chairwoman of the board, general counsel, and chief ethics officer.
Concurrently, we appointed Bart Schwartz, the former head of the criminal division of the U.S. Attorney’s Office under Rudy Giuliani, to conduct an independent assessment of our systems and practices related to investigations. As a result of Schwartz’s work and our internal assessments, a number of changes to policy and reporting structure have been implemented.
We appointed a new independent director of our board who is responsible for reviewing and reporting to the board on HP’s compliance with legal and ethical requirements related to the conduct of investigations. We established a new senior executive post (the position I hold), to address ethics and compliance issues across all the businesses and functions on a global basis. This new position includes an expanded and more comprehensive portfolio than HP’s previous ethics officer. And, as HP’s new chief ethics and compliance officer, I have been reporting directly to the CEO, the independent director responsible for HP’s compliance with legal and ethical requirements related to the conduct of investigations, and the entire board regarding HP’s investigative practices and ethics and compliance program.
We expanded the role of HP’s chief privacy officer to include review of HP’s investigative processes to ensure that they appropriately address matters related to privacy and ethics. The chief privacy officer also continues to work on assuring the privacy of information obtained by HP in the normal course of business.
We formed a new compliance council, which I head as chief compliance officer. The council includes the chief privacy officer along with senior representatives from the company’s legal and ethics functions and the businesses. Our charter is to guarantee that ethics and compliance programs have sufficient resources and are operating properly to mitigate risks to HP.
The audit committee of HP’s board serves as a guide to our ethics and compliance program and to me personally in my role as chief ethics and compliance officer. I am actively engaged with them in a two-way dialogue. The audit committee reviews the results of compliance risk assessments and ensures that the ethics and compliance program has sufficient resources.
We expect our business partners to adhere to HP’s ethical standards. To that end, we monitor vendor selection processes, our agreements with vendors and our ongoing relationships with them, all to make sure they understand and follow legal and ethical standards applicable to the conduct of investigations, among other things.
We launched a wide-ranging and ongoing internal communications campaign to keep HP employees updated on the pretexting investigation, to reinforce our Standards of Business Conduct, and to remind employees of the ethics standards we expect of ourselves and of those we hire. More recently, we have expanded our training in ethics and privacy at all levels- from new hires to the board of directors.
Clearly, we have learned from our mistake and continue to implement a number of changes to company policy and to our internal systems to ensure that we never again experience such breakdowns. That said, it’s unlikely that HP- or other companies who have learned from our experience- will make that same mistake again. Rather, the next ethics challenge will almost certainly take some new shape or form, possibly in an area no one has fully considered. Preventing that from happening to HP is what my team and I are tasked with, and it’s what keeps me up at night.
Like any large global company, we must constantly navigate through a complex set of local laws, sometimes conflicting regulations, shifting priorities, and different business customs and norms. In 2006, we addressed the challenge of achieving consistency with ethics and compliance rules and expectations in over 170 countries. We conducted employee focus groups in seven of our larger markets (including Japan, China, Singapore, Germany, Switzerland, the United States and the UK), conducted ethics surveys to determine awareness of ethics resources and program effectiveness, and used annual all-employee survey data to assess the company’s ethics and compliance performance. These activities, along with analyses of alleged ethics infractions, help shape the direction of our future ethics programs and priorities.
Our ethics program emphasizes that every person at HP should be an ethical leader, regardless of title or job responsibilities. Our goal is to provide all employees with ethics training each year. In 2006 we achieved more than 95% participation. For 2007, we expect not only to top our 2006 participation levels for the general training, but to expand ethics and compliance training across individual businesses and regions with specialized training in key areas such as privacy and data protection, public sector sales, global trade and procurement issues. Also in 2007, we will expand our specific ethics and compliance training to employees engaged in investigations for HP. Our stepped-up efforts are not foolproof. Every large organization is susceptible to employees who are trying to cut corners or bend the rules. We are working hard to stay vigilant, however, and to be as progressive and innovative as possible in our policies and our internal controls and systems. When confronted with unethical behavior, we will take swift and decisive action to address the situation.
Trust and respect have always been the cornerstones of HP’s success and they always will be. Mark Hurd, HP’s chairman, CEO and president, has pledged that HP will regain its reputation as a model corporate citizen known for the highest ethical standards. The HP board has committed to lead our efforts to promote a culture of integrity and accountability throughout our company. They have made it clear to me that HP must develop a world-class ethics and compliance program to support that vision. We are well on our way to achieving our goal of regaining our position as a leader in the area of corporate ethics and ensuring that all of HP’s stakeholders- from our employees to our shareholders to our customers- see this through our words and our actions. It is how we are maintaining the legacy of the HP Way well into the 21st century.
