Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success

A Leaky HP Board

Earlier we focused on what the HP board did when it learned about CEO Mark Hurd's relationship with a consultant, and on lessons to be learned from those events. Not to be forgotten is a matter occurring a few years back, also at the HP board, providing different but equally important lessons. Here's what came out of news reports at the time.

The Leak

To refresh memories, evidence existed that confidential information was being leaked to the media by one or more HP board members. We can point to the leak itself as the first mistake, an egregious one that led directly to other major mistakes.

We know that directors owe a duty of loyalty to the company, which in brief means they must put the interests of the company and its shareholders above their own. Directors must act in good faith. Crucial to these responsibilities is maintaining in strict confidence any information about the company obtained in one's capacity as director. Doing otherwise undermines the ability of the board to deal forthrightly with company issues and can destroy the trust among directors necessary for effective board performance. At the risk of making light of a serious matter, boards need to operate like the ads for Las Vegas: What happens in Vegas stays in Vegas!

Leaking company information could subject a company to potential liability. One issue is whether the company, and perhaps the director, can be charged with circumventing the Securities and Exchange Commission's Regulation FD, which ...