HBS Working Knowledge
Lagace: You write that one inspiration for your new book was the unusual course you've been teaching for MBA students on moral leadership in organizations. What is a quiet leader? Is quiet leadership a topic you had been thinking about prior to the MBA course?

Badaracco: I don't think I really started thinking about it until just a few years ago. There were two things that prompted me to do so. One is that I had written a book called Defining Moments: When Managers Must Choose Between Right and Right (HBS Press, 1997) which is about big deal, high-stake, traumatic decisions. And there was a natural question: 'Is this all there is to writing about difficult ethical decisions?' Or put differently, what happens in between the big decisions—which don't come along very often? For some people they come along very, very infrequently. Does this mean these people are on vacation the rest of the time?

There's the age-old myth of Icarus trying to fly too close to the sun, and there is the suggestion that there is something dangerous about the pursuit of greatness. And at the same time while you read books and plays—Death of a Salesman is such a clear example, where Willy wants to be a great salesman and he wants his sons to be leaders of men. He pushes so hard he ends up committing suicide, is very disappointed in his kids—there are other characters, I noticed, who were what I came to call quiet leaders.

You also end up defining quiet leaders almost through a series of negatives. They're not making high-stakes decisions. They're often not at the top of organizations. They don't have the spotlight and publicity on them. They think of themselves modestly; they often don't even think of themselves as leaders. But they are acting quietly, effectively, with political astuteness, to basically make things somewhat better, sometimes much better than they would otherwise be.

Sometimes a few people were aware of what they did; sometimes nobody is aware of what they did. There aren't medal ceremonies and often the people involved don't think they would deserve one if the medals were being given out. But often they're people, I found…in the cases I looked at carefully, who find that some situation or problem or difficulty affecting a person, affecting an organization, is really bothering them; it gets under their skin. While other people would say, "Hey, why are you getting carried away about this?", they care about it. They commit themselves and keep working tenaciously, so that over a period of time they find some ways to get stuff done.

If you look behind lots of great heroic leaders, you find them doing lots of quiet, patient work themselves. —Joseph L. Badaracco Jr.

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CFO.com

More than half of companies surveyed hired independent counsel in the past year to help with internal investigations, a move widely believed to reduce any punishment regulators might later mete out.

A majority of companies have hired outside counsel to help with an internal investigation in the past year – a sign that companies are concerned about how their handling of problems will be perceived by regulators and the public.

About 63 percent of over 400 U.S. and international companies surveyed by law firm Fulbright & Jaworski undertook at least one internal investigation with the help of outside counsel.

The act of engaging outside counsel at least makes the investigation appear more rigorous. "[If] there is a concern that you appear as credible as possible, hire outside counsel to conduct [an investigation] so they can discuss their results with the Department of Justice or others and tell them what the corporation itself has found," explained Layne Kruse, a senior litigation partner at Fulbright & Jaworski. Layne says the current number of outside counsel engagements is much higher than usual.

All regulatory agencies have their own list of factors to consider when determining what type of penalty to give the company, notes William McLucas, former head of the SEC's enforcement division, and now a partner at Wilmer Cutler Pickering Hale & Dorr. Both the Department of Justice's "Thomson Memo" and the Securities and Exchange Commission's "Seaboard Report" outline the credit given to public companies when they cooperate with the government. Both of those documents "include the extent to which companies self-report and self-investigate," explains McLucas. (For CFO's analysis of the SEC's Seaboard Report, see "The Limits of Mercy."

Additionally, in this Sarbanes-Oxley era, companies are hiring outside, independent counsel to investigate all types of business issues from accounting to disclosure, observes McLucas. "The issue relates to the increased responsibility that audit committees have under Sarbanes-Oxley," he said. It also underscores the "overall heightened sensitivity of board members to the company's exposure to harsh government enforcement proceedings as well as the risk that the board itself could be subject to enforcement proceedings," added McLucas.

[CLB: Somehow this implies that the old-fashioned role of an external auditor wasn't sufficient, or that it is reborn anew. After Arthur Anderson, has anything actually changed?]

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New York Times

"For more than 20 years, Frederic W. Cook has developed innovative methods for creating lottery-size pay increases for top company executives.

You may not know Frederic W. Cook, but if you are a shareholder or employee who has watched executive pay rocket in recent years, you are likely to be acquainted with his work.

[CLB: This is a fascinating editorial, and recommended.]

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globeandmail.com

Former Hewlett-Packard Co. chairwoman Patricia Dunn and four others are facing criminal charges in California, including identity theft and conspiracy, for their role in a covert hunt for a boardroom mole.

The charges, filed Wednesday by California Attorney-General Bill Lockyer, mark the latest blow for the venerable computer maker, which is also facing investigations by the U.S. Justice Department, the Securities and Exchange Commission and Congress.

“One of our state's most venerable corporate institutions lost its way as its board sought to find out who leaked confidential company information to the press,” Mr. Lockyer told a press conference last night. “In this misguided effort, people inside and outside HP violated privacy rights and broke state law.... Those who crossed the legal line must be held accountable.”

In addition to Ms. Dunn, who ordered the search for a director suspected of leaking secrets to reporters, California has also charged HP lawyer Kevin Hunsaker, the company's ousted chief ethics officer, and three outside private eyes — Ronald DeLia of Boston, Joseph DePante of Melbourne, Fla., and Bryan Wagner of Littleton, Colo.

The legality and ethics of corporate espionage has become a hot-button issue in both Canada and the United States in recent weeks.

Recently released court documents show that executives of WestJet Airlines Ltd. engaged in electronic spying in 2003-04 to get an edge on rival Air Canada.

The five defendants are each facing four charges: use of false or fraudulent pretenses to obtain confidential information from a public utility; unauthorized access to computer data; identity theft; and conspiracy to commit those crimes.

All four counts carry a maximum prison sentence of three years. The maximum fine for each of the three underlying felonies is $10,000 (U.S.). A conviction for conspiracy to fraudulently obtain phone records, or conspiracy to unlawfully access and use computer data, carries a maximum fine of $10,000.

Conspiracy to commit identity theft can bring a maximum fine of $25,000.

HP has admitted that its investigators impersonated board members to get their telephone records — a practice known as “pretexting” — spied on them, dug through their trash and planted spyware on reporters' computers during a covert operation to find the source of several boardroom leaks.

Last week, Ms. Dunn, 53, told a congressional committee that while she ordered the probe in 2005, she assumed investigators were acting within the law and didn't know what pretexting was until the scandal broke.

Appearing before the investigations subcommittee of the U.S. House of Representatives energy and commerce panel, Ms. Dunn said she's sorry for what happened, but denied responsibility for any of the tactics used by HP investigators.

It's been rough week for Ms. Dunn.

Her lawyer disclosed Wednesday that Ms. Dunn, who has survived breast cancer and melanoma, will begin chemotherapy treatments for advanced ovarian cancer Friday at the University of California, San Francisco.

Two other key figures in the corporate spy scandal have so far escaped legal jeopardy — chief executive officer Mark Hurd and Ann Baskins, HP's general counsel.

HP eventually identified director George Keyworth as the source of a leak to a CNET Networks Inc. reporter.

Mr. Keyworth resigned after the scandal broke in early September.

[CLB: For Ms. Dunn and others interested in pretexting, here is a 1999 article published by Rick Johnson Private Investigators: Pretext Investigations - Deception for Profit . In my search for a graphic to add to this captured article, 99% of the images pulled from the Google images engine were of HP. Perhaps the word has taken on new meaning with this debacle.]

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IT World

Last year, laptop theft cost U.S. organizations over US$4.1 million, according to the 2005 Computer Crime and Security Survey, a joint study by the Federal Bureau of Investigation and the Computer Security Institute.

Despite these compelling statistics, many Canadian organizations don’t seem to view mobile and wireless devices as a real threat to enterprise security. This is what IDC Canada found in its recent survey of medium and large-sized organizations in Canada, where 54.4 per cent of mid-sized firms and 35.4 per cent of large organizations tagged mobile and wireless tools as “no real threat” to corporate security.

[...] According to IDC’s Enterprise Security Survey: Threats and Issues, over 35 per cent of large organizations believe wireless and mobile devices pose “no real threat” to IT security, while only 27.3 per cent view these devices as a significant threat.

The discrepancy is even greater among medium-sized firms, where more than 54 per cent said these devices are not a real threat and only 14.7 per cent said they pose security risks.

Mitigating solutions (PAPPP):

• Review security policies - policy and audit
• User awareness strategies - people
• Centralize management - product and process

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