Hewlett-Packard's (HP) chairwoman ordered monitoring of its directors' phones to determine the source of news leaks, prompting a furor in which one director quit and another rebuffed efforts to oust him, the company said on Tuesday.
The dispute is to be laid out in documents that HP was to file with the US Securities and Exchange Commission (SEC) yesterday.
The concern over leaks began in the months preceding Carly Fiorina's ouster as chief executive last year, the company said.
But the confrontation within the board unfolded this year after an internal report identified George Keyworth II, Hewlett-Packard's longest-serving director, as a source of disclosures.
The company said the report was based on monitoring of board members' calls from home phones and cellphones in January, an effort authorized by Patricia Dunn, the chairwoman.
BOARDROOM DISPUTE
When the report was presented at its meeting in May, the board asked Keyworth to resign, but he refused, saying he had been elected by the shareholders, a company spokesman said.
The company also said that the attempt to oust Keyworth had prompted Thomas Perkins, the founder of the venture capital firm Kleiner Perkins Caufield & Byers, to resign.
A company spokesman, Michael Moeller, said that because Perkins did not say that he was resigning out of disagreement with the board, the company did not disclose the events relating to the investigation when it reported his resignation to the SEC.
"He's changed his mind," the spokesman said of Perkins, and because he has a dispute with the company, that prompted a further disclosure to the SEC.
Hewlett-Packard, which is expected to hold board elections in March, said Keyworth would not be renominated for his seat.
Keyworth and Perkins did not respond to requests for comment on Tuesday evening.
The HP board began an investigation into news leaks after forcing Fiorina to resign in February last year.
AUTHORIZATION
The board dispute was reported on Tuesday in an article on Newsweek's Web site by David Kaplan, who is writing a book about a yacht that Perkins recently had built.
The article said Dunn, who was named chairwoman after Fiorina's ouster, had authorized a team of independent electronic-security experts to monitor the phone communications of the 10 other directors.
HP said its legal counsel had advised her that the surveillance was legal and proper.
The company said that it began the investigation last year after news reports quoted directors about dissatisfaction with Fiorina's management.
But the Wall Street Journal's Web site reported on Tuesday evening that it was a report last January on the CNET Web site about an off-site management meeting that provoked Dunn's ire.
The Newsweek article said that Perkins had provided documents to the SEC revealing how the investigation was conducted and that he had not been allowed to review and approve the SEC filing the company made in May regarding his resignation.
The article said Perkins had asked other government agencies to investigate the surveillance of HP directors.
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