Tuesday, September 12, 2006

The Dirty Air Up There

Business headlines today were led by two high profile resignations. Peter Dolan resigned as CEO of Bristol-Myers Squibb (BMY: NYSE) and Patricia Dunn announced she will be leaving the Big Chair at Hewlett Packard (HP: NYSE) at the beginning of next year.

The dirty air around Dolan was a topic of a previous post, “
Executive Chicanery,” in which we discussed the continued suspicious business conduct at BMY despite heavy fines by the SEC and a new corporate governance program at the company imposed by the State of New Jersey. Dolan is accused of entering into an illegal deal with a potential competitor, Apotex, relating to one of BMY’s top products, Plavix. A special government monitor, who is responsible for watching over BMY for the State of New Jersey to see that BMY adheres to good business practices, apparently decided he had had enough. He asked the BMY board to give Dolan the boot.

Dunn is in trouble for her role in a company investigation of information leaks from within Hewlett Packard, particularly leaks regarding the dismissal of another high profile CEO, Carly Fiorina. Third party investigators used illegal tactics to obtain phone records as a way to determine the origination of the leak.

Although Dunn’s investigation was successful in identifying the director with the loose lips, the use of illegal tactics says volumes about the character of HP leadership. Either they are unscrupulous scoundrels with no regard for the law or they are incompetent and unable to manage even the simplest project. Please choose your image, Ms. Dunn!

As to the director who was responsible for the leaks in the first place, he is no less an embarrassment. Where are his loyalties? Is he available to be chatted up by just anyone on any boardroom topic? Perhaps he would like to take a meeting just after the quarter ends and before earnings are announced.

These examples demonstrate very clearly that, no matter how high the stack of rules, persons in positions of responsibility conduct themselves according to their character and integrity (or the lack thereof). No threat or penalty is great enough if a corporate executive is bent on aggrandizing themselves with wealth or fame. I believe this is true no matter the company size - large-cap or small-cap.

For those who want to really understand what makes successful people do dumb, illegal things, I recommend Robert C. Soloman’s book called Ethics and Excellence. Solomon is a distinguish professor of philosophy at the University of Texas at Austin and offers a solid non-business viewpoint on business conduct. He takes a more scholarly approach to evaluate ethical behavior in the business world than my "dumb and dumber" view. Using images of cowboys and 15th Century bonfires, Solomon makes the discussion of cooperation and integrity in the business world a pleasurable read.

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