Blowin' in the Wind

Bob Dylan singing new song for CEOs?

The post-scandal laundry is still being put out on the line to dry as far as two high-profile California companies, Hewlett Packard (HP) and Apple Computers, are concerned.

I think it’s worth taking a closer look at the actions of these companies' top dogs to get a handle on the public relations’ ethics involved.

Ex-chair of Hewlett Packard, Patricia Dunn, was indicted this week by California Attorney General, Bill Lockyer. Her improper judgment in a board-authorized investigation led to her separation from HP. After this, Congress subpoenaed her to testify before an oversight and investigations subcommittee of the House of Representatives’ Energy and Commerce Committee. Although she could have refused to testify, as HP’s ex-counsel Ann Baskins chose to do, Dunn participated fully and, in her testimony, she made several recommendations to the committee on the issue involved, pretexting.

In deconstructing her actions, I see both utilitarian and communitarian threads woven in HP’s pile of clothes. For instance, her launch—albeit zealous—of an investigation of the board was motivated by her desire to protect the company, to “circle the wagons,” believing that finding a news leaker would protect HP’s proprietary data and thus, their position in the market. Once the actual circumstances of the investigation popped to the surface, however, the question of the methodology’s legality became a prime topic in the news. The company issued press releases that announced it was internally investigating the methods used.

However, Dunn ended up resigning from her chair position and from the HP board. Both resignations were utilitarian-based—again, protection of the company and doing what was in the best interests of HP. However, I see a shift in her perspective, beginning with the decision to testify before the committee. She made several recommendations to Congress in her written statement and in her testimony on the issues involved in pretexting, demonstrating the essence of communitarianism. Had she, like Baskins, chosen not to testify, then she would have been acting from a utilitarian base. The fact that her testimony may have caused Lockyer to issue indictments against her—and not Baskins—is truly ironic and, if this is the case, truly pitiful. If you believe her sworn testimony, Dunn has consistently said she relied on Baskins and Kevin Hunsacker, HP’s ethics counsel, for legal advice. A CEO is, after all, only as good as its company counsel.

The other honcho involved is Steve Jobs who has publicly admitted that he knew about options backdating at Apple. Besides being investigated by the SEC, the company conducted a three-month internal investigation, finding 15 instances of backdating between 1997 and 2002. Jobs has taken the unusual step of issuing a public apology for the illegal accounting at his company. And, very quietly, the company let go its CFO, Fred Anderson, and its chief counsel, Nancy Heinen—who promptly hired two criminal defense attorneys. Jobs’ actions seem, at this point, utilitarian-based. I suspect that not only is his purpose aimed at protecting Apple, it’s also aimed at protecting him. Although Wall Street analysts have been quick to breathe a sigh of relief, I don’t believe the public—or the SEC—is that ready to overlook his passive acceptance of the practice—so what that he bequeathed us the iPod? Already shareholder advocates are saying this is not the end of his culpability.

Given the special precedence of Dunn’s indictment, and the fact that several other CEOs have been indicted for options backdating, we’ll see how this plays out. But regardless, I firmly believe that Dunn actually thought she was doing the right thing in a legal way, and I know that Jobs allowed the wrong thing to be done in an illegal way. Which is to say, I don’t think that all Apple’s dirty laundry has yet been washed.

The results of these two scandals could mightily affect future public relations models which, at present, tend to respond quickly and transparently to all stakeholders. If, however, by doing so, CEOs become a target for legal actions, greater pressure will be brought on PR professionals to keep a company's doings in the dryer, away from public scrutiny. After all, how long do you think your career would last if your advice leads to your company's CEO blowin' in the wind?

Question of the Week: Do you think that Steve Jobs should resign based on his knowledge of options backdating?

Linda@the saltlick