Silicon Valley celeb Tom Perkins is no stranger to the spotlight. An innovator of laser technology-turned-VC, he helped nurture AOL, Amazon, Sun Microsystems, Google and Genentech. Along the way he married-and divorced romance novelist Danielle Steel-and wrote a few books, including the novel Sex and the Zillionaire. Now he's back in the new-author circle with Valley Boy: the Education of Tom Perkins, an entertaining account of his adventures in tech startups, yacht racing and boardroom coups. In the interview to follow, Perkins talks to CE about his tumultuous tenure on HP's board and what CEOs can do to avoid boardroom warfare.
What has the changing dynamic between CEOs and boards meant for board composition?
The CEO faces a real problem. The kind of board he should have is by no means obvious. If I'm brutally honest with myself, I am not sure that I would strive to create the kind of board that I have recommended that all CEOs have if I were a CEO. A very active, involved board can be a real thorn in the side of the CEO. Life can be much easier if the board just rubberstamps, listens to consultants, has a couple of drinks at lunch, and goes away.
But I think that CEOs need a strong board that understands what he or she is really trying to do, encourages some risk-taking to get that done, and helps the CEO to realize that missing a quarter, while not good, is not the end of the world as long as the goal is right. Because eventually something goes wrong, and you have to report unexpected bad results. When that happens, you'd better have a board that has signed on to your strategy, or you'll be standing on your own and you'll be out over the course of a weekend. I condemn boards for turning on a CEO that way. It's shameful.
Are you saying Merrill Lynch turned on Stan O'Neal that way?
In my opinion, the board didn't fully understand these wonderful new products-the packaging of subprime [debt]- that had emerged in the last couple of years. Did they really understand the risks? I doubt it. Because if they did, and had encouraged it, they wouldn't have thrown Stan O'Neal out. They would have been-and should have been in my opinion-part of the problem. A board has to know what business the company is in at a basic level.
That was one of the problems with the Hewlett-Packard board. HP is in many markets, the technology changes every 18 months, and the competition is intense. The HP board replaced Carly because the company was falling behind. That was not easy. Carly had friends on the board, and there was a problem getting consensus. One director who I won't name said, "My only role on this board is to support Carly Fiorina." That's a rather strange view since a director's role should be to increase shareholder value.
But the consensus was achieved. Patty [Dunn], George Keyworth and I then found and hired Mark Hurd as CEO. I said to Mark, "You run this company. Don't worry about the board. I will deal with that. We'll get it sorted." I was chairman of the governance committee, so I thought I could bring on new directors who would be knowledgeable and helpful. But I was not able to do that because of the disagreement between Patricia Dunn and myself over the kind of directors we should have, what they should do, and what the board itself should do.
I'm sure everybody was amused by this conflict. I wanted to bring people from
On the other hand, she had her list of people whom I blocked. So this was not a happy situation. But eventually we had to have more directors, so Patty and I did agree on two. And I think if it hadn't been for the spying thing, we probably would have worked it out. [Editor's note: HP's investigator was accused of using "pretexting," or misrepresenting his identity to gain access to its directors' phone records.]
In your book, you say that the content of the spying did not necessitate the level of investigation that resulted. On the other hand, you expressed outrage that you were the victim of pretexting. Why the dichotomous view?
I am categorically against leaking from boards, and I was not involved in any of the leaks. The earlier leaks involving Carly Fiorina were damaging to both her and the company. Some, I'm sure, came from the board. Some came from management. I think some of it came from Carly herself. It was like a sieve. And you'll never stop it; it's human nature. But I'm not forgiving it.
The board was talked to by lawyers and took all this pretty seriously, and the leaks stopped. Then there was this so-called leak to CNET.com from, as it turned out, Keyworth. But calling it a leak is the wrong word, because a leak usually [refers to revealing] negative stuff that is [confidential]. There was nothing confidential, and it was positive. Patty was concerned about it, and I knew she was sort of doing something about it. I thought she was discussing it with each director and that if she found out who did it, we would get an admission, an apology and a promise not to do it again.
Instead, I discovered that there had been the acquisition of directors' phone records and that she was going to bring this whole thing up to the full board, going right around me. So I said, "I can't be part of this. I'm out of here," and resigned.
Maybe if I'd hung around, I could have fixed it. But I don't think so. Patty won that round, and if I hadn't resigned, she would have won the war. But she didn't win. I thought that the board of directors had to stop spying on people, investigate what had happened and take whatever action is necessary. I asked the board in a confidential letter to appoint a committee of independent directors to look into it. I said, "If you don't, maybe I'll have to go to the SEC." They stonewalled me. There was no answer, not even a phone call. So I told the SEC. And then the SEC took it public and the lid blew off.
At that point, in order to justify the spying, they threw Keyworth to the wolves. Keyworth, I think, was libeled and treated extremely badly by HP. But he's a big boy, and he can do what he needs to do.
Is it true that Carly Fiorina blames you for her ouster from HP?
She has it in her head that she would still be at HP if I hadn't returned to the board and led some sort of conspiracy to throw her off the board. That is just so wrong, and she should know better. On 60 Minutes, she said, "I have no idea why I was fired," which is incredible. The day she was fired, the stock went up about 8 percent. The employees were literally dancing in the parking lot. And before she got fired, a committee of directors went to her with a written five page agenda that she stonewalled. Then I came on the board and a month later, she's fired. I don't know how that gets constructed into me firing her.
The ridiculous thing is, I respect Carly. I think she did a great job up to a point. If she'd just delegated a little more and not tried to do absolutely everything, she'd still be there.
How can CEOs avoid these types of fallouts with their board?
A CEO just has to listen to the board. When the board unites and comes to you with a request, you ignore that at your peril. To give Carly credit, she encouraged the board to talk about strategy, competition, direction and all of that. And she started off with a COO, Michael Capellas.
My first run-in with Carly was when he quit, and I suggested that because HP was so big and complex she needed to put someone else into that job. I was basically thrown out on my ear. She got very angry and made it clear that directors had no business telling her how to run the company on a day-to-day basis.
So my advice to CEOs whose boards have pretty specific suggestions in certain areas is: You'd better listen and either come up with a pretty good reason why that's incorrect or do it. Otherwise, you end up at crossed swords with the board, and that's a horrible situation.
ROSE A well-deserved bouquet to TIFFANY, SAKS, MACY'S, and ABERCROMBIE & FITCH for pitching well-off foreigners to travel to the States and take advantage of favorable exchange rates by spending their mountain of euros and stirlings on bargains on this side of the pond. THORN Just as ALAN GREENSPAN was rabbiting one about the increased likelihood of a recession on NPR, the Fed published industrial production data showing a stronger than estimated 0.3 percent rise in November, reversing an October decline. Alan, are you trying to hawk more copies of The Age of Turbulence?
THORNS & ROSES
A well-deserved bouquet to TIFFANY, SAKS, MACY'S, and ABERCROMBIE & FITCH for pitching well-off foreigners to travel to the States and take advantage of favorable exchange rates by spending their mountain of euros and stirlings on bargains on this side of the pond.
Just as ALAN GREENSPAN was rabbiting one about the increased likelihood of a recession on NPR, the Fed published industrial production data showing a stronger than estimated 0.3 percent rise in November, reversing an October decline. Alan, are you trying to hawk more copies of The Age of Turbulence?