Hewlett Packard's board continued to discuss its next move Monday, amid calls for the departure of Chairwoman Patricia Dunn in the wake of the week's bizarre snooping scandal.

Ms. Dunn, former chief executive of Barclays Global Investors, is known as a business leader who rarely gives interviews and closely guards her privacy. But Ms. Dunn was thrust into the headlines this week after ordering investigators to ferret out the source of a series of annoying boardroom leaks.

The investigation blew up in her face after it emerged investigators fraudulently obtained the phone records of directors and journalists. The snooping scandal now threatens to derail a career that has seen Ms. Dunn rise from a freelance journalist and receptionist to one of corporate America’s most powerful women.

“This is really a manifest lack of judgment; that’s something the CEO can do something about, but it would be much better if the board did something about Ms. Dunn first," said Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business.

In interviews with The Wall Street Journal and News.com, Ms. Dunn said she was “appalled” to learn that investigators had resorted to “pretexting”―or lying about one’s identity―to fraudulently obtain phone records. She also said she had no plans to resign, but would step down if fellow HP board members asked her to do so.

Surprising Support

Ms. Dunn has some surprising support from governance and experts who have long been critical of HP’s dysfunctional board. Jeffrey Sonnenfeld, a professor at Yale School of Management who has been one of the most vocal critics of HP’s directors, said Ms. Dunn had been urged by fellow board members to find the source of an ongoing series of leaks dating back to January 2005.

Mr. Sonnenfeld pointed out that Ms. Dunn clearly informed the board that she was launching an investigation into the leaks. And after speaking with parties on all sides of the scandal, he sees no link between Ms. Dunn and the pretexting tactics used by investigators. “She’s an impressive woman,” he said. “If under the press of scrutiny, the board were to sacrifice her, it would be an act of cowardice.”

The daughter of a Las Vegas showgirl and vaudeville actor, Ms. Dunn tried her hand at freelance journalism until financial imperatives prompted her take a position as a secretary at Barclays Global Investors, the asset management arm of the England-based financial firm.

Those who know Ms. Dunn say her unassuming nature belies the strong determination and drive she mustered to succeed in the buttoned-down, male-dominated institutional investment world. She eventually climbed to the top of Barclays, until a bout of breast cancer forced her to step down in 2002. She has returned to Barclays in a nonexecutive role and is now focused on corporate governance issues and client relations.

Ms. Dunn, however, is more widely known as the nonexecutive chair of HP’s board, a position she assumed after the ousting of CEO Carly Fiorina in February 2005.

She is credited for trying to build consensus among HP’s divided board members and for overseeing the process that brought CEO Mark Hurd into the company. Unlike in the hiring of Ms. Fiorina, which was managed by a search firm and a handful of directors, Ms. Dunn made sure that all board members were given a chance to meet the no-nonsense Mr. Hurd before they were asked to support his hiring.

Background Figure

Following Mr. Hurd’s arrival, Ms. Dunn has largely stayed in the background, as the new CEO won accolades for turning around the once-beleaguered computer and printer company.

But divisions within the board remained and they were occasionally leaked to the press, a state of affairs that frustrated many HP directors. In a conversation this week with Nell Minow, a governance expert at the Corporate Library, Ms. Dunn explained that the board had urged her to find the source of the boardroom leaks. Unable to convince the leaker to confess, Ms. Dunn announced to her fellow directors that HP would initiate an investigation.

Mike Moeller, HP spokesperson, said the investigators who used pretexting to fraudulently obtain phone records were members of an outside company and not HP employees. Ms. Dunn insisted the investigation be conducted in a “generally lawful manner,” adding that directors were assured that would be the case.

Ms. Minow said Ms. Dunn also explained she took measures she felt would have ensured the investigation was fully consistent with the law. “I’m not a fan of this board, but I think she did the best she could have done,” said Ms. Minow.

Her best, in this case, may not have been good enough. Ms. Dunn is ultimately responsible for an investigation that has blown up into an embarrassing snooping scandal that has besmirched HP’s reputation and could yet force her departure from the board. It’s an ugly public episode for someone who so values her privacy.

Contact the writer: Editorial@RedHerring.com

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