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The financial press has been in a frenzy over allegations of improper methods employed in connection with investigations at Hewlett-Packard Co. into leaks of confidential company information. No doubt, many commentators will pontificate about how the investigations should have been handled. These events, however, provide an opportunity to review another important corporate-governance issue-namely, the obligation of directors to preserve the confidentiality of company information. Unauthorized disclosure of company information can lead to the end of a director’s tenure on the board and invite scrutiny from regulators, shareholders and litigants. New details continue to emerge about the H-P internal investigations. Reports to date demonstrate that H-P had a recurring concern about the unauthorized disclosure of company information. In January 2005, the Wall Street Journal published a front-page article discussing the details of H-P board deliberations that had transpired during a recent retreat. Suspecting that board members had leaked information, then-Chairwoman and Chief Executive Officer Carly Fiorina sought to identify the source of the leaks. Fiorina reportedly questioned the directors and later retained outside counsel to interview them, yet no one confessed. In February 2005, the board fired Fiorina as CEO and she resigned as chairwoman. The board appointed Patricia Dunn as nonexecutive chairwoman and Mark Hurd as CEO. The majority of the board instructed Dunn in the spring of 2005 to conduct a more intensive investigation. This one also failed to identify the source. After the Wall Street Journal and technology news outlet CNET published articles in January 2006 disclosing H-P business plans, the investigation ramped up and resulted in a finding that H-P director George Keyworth II disclosed confidential information to the media without authorization. The board then asked Keyworth, a 20-year board veteran, to resign in May. After initially refusing, he agreed to resign last month. The H-P events should serve as a stark reminder to directors of the need to guard company information carefully. Unauthorized disclosure is risky A director who discloses confidential company information without authorization risks breaching both legal duties and company policies. First, among legal duties, the duty of care requires directors, when conducting company business, to exercise the degree of care that an ordinarily prudent person would in similar circumstances. The duty of loyalty obligates directors to act in good faith and in the best interests of the company. Second, internal company policies commonly forbid directors from making unauthorized disclosures of “confidential” company information. These policies, which are posted on many public company Web sites, often broadly define “confidential” information as any nonpublic company information. Some policies advise directors that confidential information includes not only board proceedings and deliberations, but also all information a person learns in the capacity of a director. Most policies extend to information regarding outside entities, including clients, customers and suppliers. Often, policies claim that directors remain subject to a duty of confidentiality even after they have left the board. Regardless of the scope of a company’s policy, or in the event no such language exists, directors are well advised to obtain explicit approval from an appropriate corporate official before discussing company information with third parties, particularly the press. Directors who receive company authorization to speak to the press should adopt a practice of pre-clearing the information they expect to discuss and reporting back to the company afterwards. Keyworth’s comments suggest that he believed he had authorization to speak to the media in January 2006. In the Sept. 12, 2006, press release announcing his resignation, in which he also admitted being a source for the CNET article, Keyworth said that he “was frequently asked by H-P corporate communications officials to speak with reporters-both on the record and on background-in an effort to provide the perspective of a longstanding board member with continuity over much of the company’s history.” Despite H-P acknowledging in the same release that it had often asked Keyworth to have contacts with the press to explain H-P’s interests, and that Keyworth’s discussion with CNET was “an attempt to further H-P’s interests,” H-P nonetheless criticized him for not vetting his contact with the CNET reporter “through appropriate channels” at H-P. This illustrates that directors should not assume they have carte blanche to talk to reporters simply because the company authorized them to speak to the press on a prior occasion. Such a misunderstanding appears to have been a factor in Keyworth’s departure from the H-P board. Michael Rivera is a partner, and Adam Arkel is an associate, in the Washington office of Fried, Frank, Harris, Shriver & Jacobson. They are members of the New York firm’s securities regulation and enforcement and corporate departments.

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