HP SCANDAL
Case Facts
In early 2005, Silicon Valley giant Hewlett-Packard found itself in murky waters with confidential company information being leaked from its Board of Directors (CIO, 2007). Former Chairman of the Board, Patricia Dunn, ordered an investigation into the Board room leaks which encompassed two phases: Kona I and Kona II (Morgan Lewis Counsellors at Law, 2006). Kona I started in early 2005 and was contracted to Security Outsourcing Solutions, Inc. (SOS) to perform this investigative work. The investigation concluded in mid-September 2005 without uncovering the source of the leaks (Krazit & Fried, 2006).
In late January 2006, again there were leaks of confidential information from a January 2006 Board meeting that appeared in a CNET story on January 23, 2006 (Yourish, & Stanton, 2006). After these further leaks, the investigation resumed Kona II. Over the next three months, regular updates were provided by members of the investigation team to Dunn (Morgan Lewis Counsellors at Law, 2006). In March 2006, the Kona II team prepared a draft report of the investigation that was addressed to Dunn, amongst others. The report identified the source of the leaking and outlined the investigative techniques employed including a method known as pretexting whereby someone pretends to be someone else in order to obtain information, typically over the phone (TechEncyclopedia, 2007). Dunn was assured that these techniques were legal.
On May 18 2006, Dunn told the board she had found the leak (Morgan Lewis Counsellors at Law, 2006). According to Tom Perkins, an HP director who was present, Dunn laid out the surveillance scheme and pointed out the offending director - George Keyworth. He acknowledged the claim and apologised. Keyworth was then asked to leave the boardroom, and did so, according to Perkins (Morgan Lewis Counsellors at Law, 2006).
Perkins says he was enraged at the surveillance, which he called illegal, unethical and a misplaced corporate priority on Dunns part (Mullins, 2006). After a divided board passed a motion asking Keyworth to resign, Perkins closed his briefcase, announced
his own resignation and walked out of the room. In media reports the next day, Perkinss sudden resignation was noted but without explanation and without any indication that his departure was a form of protest (Morgan Lewis Counsellors at Law, 2006).
Any time a director resigns from a US public corporation, the company is required by law to disclose it to the Securities and Exchange Commission (Newsweek Business, 2007). If the director resigned for reasons related to a disagreement with the company about operations, policies or practices, that too is also required. HP reported Perkinss resignation to the SEC four days after it happened, however gave no reason for the resignation, instead including only a press release thanking Perkins for his years of service (Allison, 2006).
It is clear that the Kona investigations included tactics that not only included pretexting, but also the review of HPs internal emails and instant messages, and the physical surveillance of an HP Board member and journalists (Sandoval, 2006). Evidence suggests that Dunn and other HP employees knew the outside investigators obtained phone records through false pretenses and facilitated the continued use of the illegal means to obtain phone records, making them culpable for the crimes. In the Board of Inquiry following the scandal Dunn told Congressman Walden that she thought anyone could pull up someone else's phone records (YouTube, 2007). Some of these case facts occurred after the ethical dilemma point, and should NOT be included.
Ethical Issues
It is at this point that the identification of the decision maker is quite clear; former Chairman of the Board, Patricia Dunn. This is because she was the Chairman of the Board who ordered the investigation into the Board room leaks and dealt with all of the correspondence between HP and SOS.
There are a number of ethical issues surrounding this case that arise from a number of decisions made by different parties. Firstly, the potentially illegal investigation techniques employed by SOS is the most obvious ethical issue. As is Dunns failure 2
to explicitly explain that the investigation would include all members of HP, including its Board of Directors and would entail the aforementioned techniques. Dunn also failed to act when she first became aware of the potentially illegal techniques used by SOS.
The ethical issues section should deal with the pressures that the decision-maker specifically is under.
Ethical Dilemma
This case does not look directly at the blatant violation of personal privacy or the potentially illegal means of investigation used by HP and their contractors as they are consequences of an earlier decision. During the Kona II investigation a draft report was delivered to Dunn that identified the source of the leaks and outlined the investigative techniques employed. At was at this point in time that Dunn had an ethical dilemma:
To change the methods of investigation employed by SOS OR To not change the methods of investigation employed by SOS
The first option is undesirable because to do so would hinder the investigation and potentially not find the Board room leak. However, the methods used would only include those within the law (which we note is the absolute minimum standard expected by society and by no means an ethical standard).
The second option is undesirable because the methods employed by SOS are illegal and the logical result is that all those involved will be caught and prosecuted. However, the investigation wont be prolonged and chances of finding the Board room leak are much greater. Note to Students: You need only indicate how the ethical dilemma alternatives are undesirable for the decision-makernot a third party.
Utilitarian Analysis
There are a number of parties who are directly and indirectly affected by either potential action to be taken. These include Dunn, the Board of Directors, HP employees, Security Outsourcing Solutions, the Board of Directors families, the HP employees families, Dunns family, the telecommunication companies, the journalists and their families, and HP shareholders. There are the good and bad consequences in the short, medium and long term, for all parties for each possible action.
Let us first consider the consequences of changing the methods of investigation employed by SOS. Logically, HP employees and their families would not have their personal privacy violated, the Board of Directors and their families would not have their personal privacy violated and the journalists and their families would not have their personal privacy violated. Furthermore, the respective telecommunication companies would not have their systems exploited, SOS would not engage in further illegal activities, Dunn would not face any litigation, and her family would not face any embarrassment or financial hardship Note to Students: These are all nonsequences please only include consequences that WILL happen, not those that wont happen! On the other hand, HP shareholders may WILL suffer a loss as the Board room leak may take longer to find, if found at all, and hence the business decisions made by HP would be meaningless as their competitors would already be aware of those decisions and therefore the profitability of such decisions would be compromised.
Now, if we consider the consequences of not changing the methods of investigation employed by SOS, it is evident that Dunn would face litigation and potentially gaol, HP employees and their families would continue to have their personal privacy violated, the Board of Directors and their families would continue to have their personal privacy violated and the journalists and their families would also continue to have their personal privacy violated. The respective telecommunication companies would continue to have their systems exploited which, in the long run, may WILL affect their profitability as consumers may become aware of the insecure systems. SOS would continue to engage in illegal activities, and Dunns family would face 4
embarrassment and financial hardship. In the short and long term, HP shareholders would also suffer considerably as the reputation of the company would be destroyed and consumers would choose other products over HP. Note here that I will accept Would as an equivalent to Will in this analysis..
Evidently, for each of the possible actions to be taken the result for the HP shareholders is exactly the same; reduced profits in the short and long term. Given all of the other factors (in terms of quantity, duration, and productivity) the result that produces the most good (and hence least bad) is to change the methods of investigation employed by SOS. Therefore in order to maximise the greatest good for the greatest number according to the Utilitarian analysis, Dunn must choose to change the methods of investigation employed by SOS. Note to BMA2/391 Students: A more detailed explanation required in your opinion: what long term consequences outweigh the short term consequences? Why?
Kantian Analysis The section should begin with a statement about to whom the decision-maker owes their primary duty specifically. In this case, it would be to the Board members. Maxims are the ethical rules by which rational beings make decisions and do not consider any consequences. In this case the two maxims can be identified as:
To invade the personal privacy of others OR Never to invade the personal privacy of others Note that it is their personal privacy, as opposed to workplace privacy which essentially does not exist as employers have the right to monitor their employees at work. Given these maxims it is apparent that there is no clear prima facie case and hence the categorical imperative must be applied to ascertain the appropriate maxim the decision maker should have followed.
Let us consider the first maxim to invade the personal privacy of others. This maxim is not universalisable as it is self defeating; if everyone invaded the personal privacy of others, there would be no personal privacy. Furthermore, invading the personal privacy of others does not respect people as ends in themselves, but as a means to an end. In this case, the intent of the decision-maker to invade invading the personal privacy of HP employees was a means to finding the Board room leak. [State that this intent was selfish in nature]. Finally, this maxim does not respect the autonomy of rational beings as the intent of the decision-maker is to it does not give deny them [the Board Members] the choice to disclose personal information or not. Hence, this maxim does not pass the categorical imperative and therefore, under deontological theory, is unethical. Now, let us consider the second maxim never to invade the personal privacy of others. This maxim is universalisable as if everybody never invaded the personal privacy of others then privacy itself would remain in tact and hence it is not self defeating. Secondly, this maxim obviously respects people [the Board Members] as ends in themselves by not invading ones personal privacy, and hence they are not treated as a means to an end. Finally, by never invading the personal privacy of others you are giving them the intent of the decision-maker is to respect the Board Members the choice whether to disclose or not disclose any personal information. Hence, this maxim does respect the autonomy of others and passes the categorical imperative. Therefore, Kant would consider this maxim to be ethical.
From the results of the Kantianism analysis, the maxim of never to invade the personal privacy of others is found to be ethical, and hence the associated ethical decision to be chosen is to change the methods of investigation employed by SOS.
Rights Analysis There are a number of rights at play in this situation which range from HP employees right to personal privacy, HPs negative right to confidentiality, and HPs [state the person, even if by title only] negative right to make business decisions. However, 6
only two of these rights clash; HP employees negative right to personal privacy and HPs negative right to make business decisions. We do not need to consider any right apart from these two. The employees right to personal privacy is a negative right that should never be taken away and by enacting this right it obligates others not to invade their personal privacy. On the other hand, HP has a right to make business decisions as it sees fit. This is also a negative right that should never be taken away and by enacting this right it obligates HP employees to not leak confidential company information that might compromise business activities and decisions. The most basic right at play is the employees right to personal privacy as if there was no personal privacy then there would be no privacy (as workplace privacy in itself does not exist as employers have the right to monitor employees at work), and if there is no privacy then no business decisions can be made. This is because the decisions would be meaningless as other businesses would know exactly what your next action would be, and likewise you would know theirs. Hence, the ethical choice associated with this most basic right is to change the methods of investigation employed by SOS.
Justice Analysis
As defined by the ethical dilemma, there are two potential set of actions that Dunn could take; to change the methods of investigation employed by SOS, or not to change the methods of investigation employed by SOS. Going behind the Veil of Ignorance, the worst-off party at the point the decision is being made can be identified as the HP employees who are having their personal privacy violated. They are the worst-off party not only because of this violation but also because they are completely unaware of it. You should firstly list the set of potential worst off parties for the reader to compare. The logical outcome of the choice to change the methods of investigation employed by SOS is that the worst-off party would not be subjected to further violations of personal privacy. 7
The logical outcome of the choice to not change the methods of investigation employed by SOS is that the personal privacy of HP employees would continue to be violated without their knowledge.
By applying distributive justice, it is evident that to improve the situation for the worst-off party, Dunn must choose to change the methods of investigation employed by SOS such that HPs employees would not be subjected to further violations of personal privacy without any knowledge.
Final Recommendation
In summary, this paper has reviewed the case facts and ethical issues of the HewlettPackard employee monitoring scandal before reaching the ethical dilemma faced by the decision maker, Patricia Dunn. Following this, application of Utilitarian theory found that to maximise the greatest good for the greatest number Dunn must choose to change the methods of investigation employed by SOS. Kantian theory then found that the maxim to be followed is to never invade the personal privacy of others and hence recommended that the ethical action to be taken is to change the methods of investigation. A Rights analysis found that the most basic right at play was the right of HP employees to personal privacy and recommended that the ethical action to be taken is to change the methods of investigation. Finally, a Justice analysis found that at the point the decision is being made the worst-off party is any HP employee who is having their personal privacy violated and recommended that the ethical action to be taken is to change the methods of investigation. It is evident that application of all four theories confirms that the action Dunn should have taken was to change the methods of investigation employed by the external security firm, Security Outsourcing Solutions. Note to Students: This conclusion is a POOR final recommendation. In your assignment (and any ethical analysis), you must provide a discussion of what action you recommend the decision-maker take, and HOW they should deal with the stakeholders who will be upset with their action.
REFERENCES
Allison, K. 2006. HP spy scandal extends to employees. US Financial Times. [Link] 09 September 2007. CIO. 2007. HP Spying Scandal. [Link] 10 September 2007. Krazit, T. & Fried, I. 2006. An HP time line. CNET [Link]. [Link] 24 September 2007. Morgan Lewis Counsellors at Law. 2006. Transcript of interview with Mike Holston, Mark Hurds Legal Counsel, [Link]/hpinfo/newsroom/press_kits/2006/boardconf/transcript_holston.pdf, 15 September 2007. Mullins, R. 2006. Dunn, Others Charged in HP Scandal. InfoWorld. [Link] 25 September 2007. Newsweek Business. 2007. Hewlett-Packard Sets Emergency Board Meeting. [Link] 05 September 2007. Sandoval, G. 2006. HP spying scandal: Fresh questions over CEO. [Link]. [Link] 07 September 2007. TechEncyclopedia. 2007. Pretexting Definition. [Link]/encyclopedia/[Link]?term=pretexting, 05 September 2007. Yourish, K. & Stanton, L. 2006. Tracking the HP Scandal. The Washington Post. [Link] 19 September 2007. YouTube. 2007. Patricia C. Dunn of HP Testifies. [Link] 19 September 2007.