HP’s “Memogate” – This Could Happen to You

Insuring compliance with the SEC’s disclosure regulations is no easy feat especially for a company with more than 300,000 people such as Hewlett Packard.

By now, you may know that a number of memos meant for internal eyes only at HP leaked out and received considerable coverage by the media ahead of the company’s quarterly earnings release.  One of the memos in question was written by HP chieftain Leo Apotheker.  Dated May 4th the memo noted that HP was bracing for “another tough quarter” in the May-July period, and that management needed to “watch every penny and minimize all hiring.”

The situation apparently was enough to cause HP to issue its earnings report a day ahead of schedule given the impact the leak had on the stock.

Perhaps, the company will unmask the perpetrator (Mr. Apotheker has vowed “to get to the bottom” of the matter).  We may never know his or her identity or, for that matter, the motive for putting the company at risk (didn’t get that raise or promotion, I guess…).  I’d be interested in learning about this person’s level of knowledge of the securities laws, particularly those pertaining to inside information and disclosure.

HP’s “Memogate” highlights an issue that every company faces these days.  Those of us in the communications business know that information travels at the speed of a mouse click and, within the few seconds, a corporate reputation can be jeopardized.  Not to mention, the mad scramble such an occurrence could touch off as the company takes steps to remedy the situation as HP did by moving up the date of its earnings release (whether the company should have provided a profit warning is subject for debate).

What to do?

  • Foster a culture of compliance – Within every company you will find rogues, troublemakers and malcontents (Really… “I’m shocked,” as Captain Renault might say) and no matter what you do, you might never dissuade them from illegal activities.  However, it is important that every employee in the company understand the rules and the potential consequences.  It is in a company’s best interests to hold frequent seminars on how corporate information, particularly nonpublic information, is to be treated.  There are enough cases in the news these days (see the SEC v. Galleon) to provide real life examples.
  • Watch the timing of memos – Of course, Mr. Apotheker had no idea that his words would wind up in some scribe’s in-box; however, executives need to be sensitive to the timing of issuing memos, particularly around the time of reporting quarterly earnings.  It might have been better to brief them in person.  We may yet get to see the “Cone of Silence” (from the classic sitcom “Get Smart”) come to fruition and be deployed in executive offices and board rooms.
  • Inadvertent disclosure equals crisis – Check your crisis plan.  Does it cover inadvertent disclosure?  If it doesn’t now is the time to add that to the list of likely events and prepare accordingly.




  1. Matt Balfour on May 26, 2011 at 12:11 pm

    This event, Disney’s troubles, etc… are great learning opportunities for all IR practioners. Great, post thanks for sharing.

    Matt Balfour
    IR the Guy for NYSE:PRO

    • irthereforeiam on May 26, 2011 at 3:20 pm

      Hello Matt,

      Thank you for reading and taking the time to comment.

      I think it can only get worse given the age we live in. We all have to be extra vigilant.


      P.S. — I like your title!