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Friday, October 13, 2006

Hurd Running Herd over HP

By William Trent, CFA of Stock Market Beat

When you are mired in scandal and have senior executives fleeing left and right, it is important to set a firm tone by making sure your new ethics director is the best possible candidate for the position. After conducting what was clearly an exhaustive search, Hewlett Packard (HPQ) decided that the best possible candidate was someone who has known the CEO for years.

Hewlett-Packard Co. Chief Executive Officer Mark Hurd, working to repair the personal-computer maker’s image after a scandal over boardroom leaks, turned to his former company to find an ethics director.Jon Hoak, general counsel for NCR Corp. from 1993 until May 2006, took over as chief ethics and compliance officer yesterday, Hewlett-Packard said today in a statement. Hurd was CEO of NCR before joining Hewlett-Packard in 2005.

It is quite possible that Hoak was hired because Hurd knows from experience how truly tough he is on ethical issues. It is also quite possible that Hoak was hired for exactly the opposite reason. What is without question, though, is that the resignation of several top executives and outside board members has given Hurd the opportunity to stack the board and management ranks with cronies. Regardless of the qualifications of any particular member, that creates the appearance of potential conflicts at just the time Hewlett does not need them.

The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

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