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Boardroom leaks are HP’s original sin

Marketplace Staff Sep 28, 2006

KAI RYSSDAL: Commentator Knight Kiplinger’s been watching the HP saga unfold. And he says too little attention is being paid to the real scandal.

KNIGHT KIPLINGER: The original sin at Hewlett-Packard was corporate directors blabbing to the press about what goes on in their boardroom. That violates the time-honored ethical tradition of boardroom confidentiality — a written code at most companies.

There are good reasons for confidentiality. Boardroom leaks can unfairly damage the reputation of employees whose performance the board is evaluating. In public companies, leaks can play into the hands of stock manipulators, even if unwittingly.

When a new strategic direction is being discussed, boardroom leaks subject the directors to undue pressure from constituencies trying to influence the outcome.

Leakers always cast themselves as noble people who have the best interest of the organization at heart. But they’re typically self-serving egotists engaging in corporate infighting. When they can’t convince fellow board members to embrace their position, they use the press to drum up outside support.

There is only one kind of boardroom leak that is ethically acceptable — indeed, mandatory: blowing the whistle on improper behavior that the board isn’t taking seriously or is trying to hide.

When it comes to journalism’s role in all this, it’s natural for reporters to try to get board members to talk. I’ve done it.

But I’ve also served as a trustee and board chair of nonprofits, and I’ve had to tell reporters and other curious folks that I am ethically bound not to divulge boardroom discussion.

But what about the spirit of transparency? That’s fine. The board does owe the public an honest explanation of its decision — after the decision has been made, in private.

RYSSDAL: Knight Kiplinger’s the editor-in-chief of The Kiplinger Letter and Kiplinger’s Personal Finance Magazine.

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