Investment Initiatives » Apropos the Hewlett Packard board: What is wrong?

09.23.11

Apropos the Hewlett Packard board: What is wrong?

Posted in Blog at 10:40 am

The fact that most of the new members of the HP board were vetted by Apotheker himself, without following HP’s normal board recruitment procedures, probably didn’t help, but the real fault lies further back. HP was a company with a history of a strong indigenous corporate culture, and a board thoroughly in tune with that culture. The open feud between directors siding with William Hewlett and those supporting then-CEO Carly Fiorina, followed by the long-running director leaks scandal endangered that culture. The board fired chairman Patty Dunn, in what turned out to be an unjustified over-reaction, and brought in cost-cutter Mark Hurd as combined Chairman/CEO. This scattered the pieces.

That is when the real break occurred: Hurd essentially changed the culture of the company by trying to turn it from an engineering-driven hardware product innovator to a lower-cost follower of industry trends. When Hurd had to go, because of personal indiscretions, it seemed natural to the board to ignore corporate culture yet again, and bring in Apotheker, who tried to transform the company into a software house (not surprising given that he came from SAP, one of the leading software producers.) That, too, appears to have been a disaster.

The problem seems to be that this board acts as if they can move the pieces of the company around the board at will, like some sort of demented chess player who thinks he can exchange a bishop for a rook whenever he wishes, and occasionally add some additional squares to the board when he needs the extra room. In real life, you have to work with the material on hand, and changing a corporate culture is a slow and perilous business. Clichés like ‘think outside the box’ and ‘every company needs a radical infusion of fresh blood from time to time,’ are bandied about too casually in many boardrooms, especially by CEOs and ex-CEOs who may have an exaggerated impression of their own ability to exercise their will upon others.

Although we don’t of course know exactly what may have been going wrong inside, it also may not have have helped that the HP board seems to have become as impatient as the stock market. Shareholder-friendly corporate governance is one thing; running a company as if it were a marketing focus group is something else.

 

Comments are closed.