Embattled Dunn and Keyworth step down at HP

Mark Hurd, HP's chief executive officer and president, will also take on the chair's job

Hewlett-Packard has announced that Patricia Dunn, the company’s embattled chairwoman, will be relieved of those duties after the board’s January 18, 2007, meeting, but will continue as a director. Meanwhile, board member George Keyworth has resigned, effective immediately.

The announcements came after extraordinary meetings of the board. Mark Hurd, HP’s chief executive officer and president, will also take on the chair’s job. Richard Hackborn, who has been on the board since 1992, has been chosen as the lead independent director from January.

Dunn has been under intense pressure to step down as chair after it came to light in recent weeks that the board of directors carried out an investigation to determine who among the board leaked confidential information to journalists.

The board admitted in a filing with the US Securities and Exchange Commission (SEC) that the internal probe involved “pretexting”, where employees of an investigative firm hired by the company pretended to be reporters to gain access to the latter’s telephone records.

The investigation identified Keyworth as a leaker of the information. When Keyworth was asked to resign, in May, he declined. However, fellow board member Tom Perkins quit in protest over the way the investigation was being handled and has been outspoken in calling for Dunn to resign.

Federal authorities, including the US Department of Justice and a congressional committee, are questioning the board’s conduct in the probe and California’s attorney general says that charges are likely to be filed.

“The recent events that have taken place follow an important investigation that was required after the board sought to resolve the persistent disclosure of confidential information from within its ranks. These leaks had the potential to affect not only the stock price of HP but also that of other publicly traded companies,” Dunn said in a written statement released by HP.

“Unfortunately, the investigation, which was conducted by third parties, included certain inappropriate techniques. These went beyond what we understood them to be, and I apologise that they were employed.”

In a statement, Hurd pledged to take action to make sure that such “inappropriate investigative techniques” are not used again. “They have no place in HP,” he says.

For his part, Keyworth acknowledged he had leaked information. But he says he had been asked by HP to talk to reporters on the record and on background. In a sign that HP is marshalling efforts to make peace among current and former directors on its board, Perkins issued a statement in an HP press release, saying “I believe in HP. I believe in Mark Hurd. I applaud Jay Keyworth for his courage in stepping down today and thank Patricia Dunn for her grace in letting HP move on.”

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