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HP and Sarbanes-Oxley: Built to Last?

On the first page of the first chapter of Built to Last is a quote from cofounder William Hewlett: "As I look back on my life's work, I'm probably most proud of having helped to create a company that by virtue of its values, practices, and success has had a tremendous impact on the way companies are managed around the world. And I'm particularly proud that I'm leaving behind an ongoing organization that can live on as a role model long after I'm gone." How disappointed Hewlett would be if he were alive to see how HP's current board has disgraced the legacy he and his partner David Packard built. Clearly, HP's board is not setting the positive example Bill Hewlett had hoped.

The latest HP scandal points out a flaw in the law enacted to address corporate misbehavior. Business scandals were supposed to cease after the introduction of Sarbanes-Oxley. After all, the 2002 law gave corporation boards broad responsibility for keeping their companies on the straight and narrow. But just as foxes put in charge of guarding the henhouse can't be trusted, HP's board proved that directors need oversight, too.

A Congressional subcommittee investigating the very tactics HP's board used has called some of the company's current and former board members and executives to testify this week. Hopefully, Congress will recognize that SOX was not built to last--in other words, it's time for tougher legislation.
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