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By Michael Kanellos, 28 February 2007 08:35

NEWS

Former HP chairman Patricia Dunn won the battle over control of HP's board, said former director Tom Perkins, and so did mediocrity.

In a lunchtime speech at the VentureOne Outlook Conference in San Francisco, Perkins aired his side of the story in the HP spying scandal which led to the resignation of board members Dunn, Perkins and Jay Keyworth, as well as a lot of bad publicity for HP.

In Perkins' view, HP's board was split between two types of directors: "guidance" directors like himself who wanted to spend board meetings concentrating on ways to beat Dell and IBM, and "compliance" directors who were obsessed with the Sarbanes-Oxley Act, social responsibility campaigns and regulatory issues that were less germane to the company's survival.

The scandal was the final act in a plan by the compliance directors to oust the guidance directors, he said. The fact that HP hired investigators to get the phone records of reporters and board members is a red herring in the whole drama, he said. Dunn was mostly after control, he added.

Perkins said: "In spite of being indicted on four counts by the California attorney general, it is clear that former chairman Patti Dunn won the battle. I see this embarrassing public mess as a culmination of a war over the control over the board of the company."

Although he said he personally likes Dunn, Perkins did not paint a glowing portrait of his former antagonist on the board. Dunn lobbied to eliminate the board's Technology Committee, which Perkins sat on, he said. Board members complained the Technology Committee looked into issues that were too complex for other board members to understand, he said.

Perkins, though, credits the committee for engineering the ousting of former CEO Carly Fiorina and paving the way for HP's recovery.

Dunn also had the board's various committees meet in a serial fashion, rather than hold simultaneous meetings. This was done so that she could sit in on all the committee meetings, he said.

He advised other chairmen not to do this sort of thing. "It might cause a person to get labelled a control freak," Perkins said.

Dunn and Perkins, however, were allies for a time. He said: "It had to do with replacing Carly Fiorina."

The tension between guidance directors and compliance directors is spreading throughout corporate America, he added. The seeming victory of the compliance side is a bad thing, said Perkins, because it is leading to boards that don't understand the underlying business. That could lead to more, rather than fewer, scandals because directors won't be able to recognise warning signs, such as increases in accounts receivable or channel inventories.

Michael Kanellos writes for CNET News.com