The rise and fall of Carly Fiorina: an ethical case study

Journal of Leadership & Organizational Studies, Nov, 2008 by Craig Johnson

This study examines the controversial tenure of former Hewlett-Packard (HP) CEO Carly Fiorina using the ethical leadership construct. Fiorina rose quickly through the ranks at AT&T and Lucent Technologies to become the most powerful businesswoman in the United States when she took the helm at HP in 1999. She prevailed in a bitter proxy fight over the firm's merger with Compaq Computer. However, she was abruptly fired in 2005. Both the CEO and members of the HP board failed as moral persons and as moral managers, leading to Fiorina's ouster and the subsequent HP spying scandal. HP went from one of the world's most admired companies to the target of criminal investigations and public criticism. Implications for leadership ethics are drawn from the experience of HP, and limitations of the ethical leadership construct are identified.

Keywords: Carly Fiorina; celebrity CEOs; ethical culture; ethical leadership construct; Hewlett-Packard; pre-texting scandal

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Carleton (Carly) Fiorina was the most powerful businesswoman in the United States at the turn of the millennium (Nocera, 2006; Sellers, 1998). In 1999, she was hired as the CEO of technology giant Hewlett-Packard (HP), becoming the first woman to head a Dow 30 company. She starred in company commercials and joined with entertainment stars like Matt Damon, Ben Affleck, and Sheryl Crow to promote HP products at electronics shows (Stone, 2005). Her image appeared on the covers of business magazines and she was a regular at the World Economic Forum in Davos, Switzerland. She became known by her first name only, like Michael Jordan and Martha Stewart. To HP employees and outsiders alike, there was only one "Carly."

In 2005, the HP board of directors fired Fiorina. Yet, both Carly and HP continued in the national spotlight. Fiorina published a memoir, Tough Choices, and appeared on 60 Minutes and on college campuses to defend her performance at HE Fiorina's successor as board chair, Patricia Dunn, was accused of ordering investigations into board leaks that violated state and federal law (Robertson, 2007a).

What accounts for Carly's fall from the heights of corporate America? A number of explanations have been offered, including Fiorina's lack of operational skills, market conditions, recalcitrant employees, and gender bias. Although all of these may be contributing factors, in this article, I argue that her failure can also be explained from an ethical vantage point. Fiorina has never been charged with a crime, as were many of her CEO contemporaries like John Rigas, Hank Greenberg, Dennis Kowslowski, and Martha Stewart. Yet, the story of Carly Fiorina is a cautionary tale, revealing ethical shortcomings not only on Fiorina's part but also on the part of HP board members.

A Meteoric Rise and Fall

Few could have predicted that Carleton Fiorina would become one of the most visible and influential corporate leaders in America (Burrows, 2003). The daughter of a law professor, Fiorina attended Stanford University, majoring in medieval history and philosophy. She was a serious student who showed little of the dynamism that would later make her a charismatic leader. She abandoned her plans to become a lawyer after one semester at UCLA Law School and earned an MBA at the University of Maryland instead. Once she settled into a business career, she quickly became a superstar. Fiorina entered AT&T as a low-level sales manager and soon drew the attention of top management. She took on tough assignments and rapidly became "one of the great salespeople of her industry" (p. 95), rising to become president of North American sales. Fiorina played a key role in AT&T's spin-off of Lucent Technologies and was named to head Lucent's sales and marketing group. The firm's revenue and stock value rose dramatically during her time there. In 1998, she was first named as Fortune magazine's most powerful female American executive. She continued to top this list throughout her tenure at HP (Loomis & Ryan, 2005).

At the same time Lucent stock was soaring, HP was losing some of its luster. The company, founded by Bill Hewlett and David Packard in 1939, was one of the first to offer such benefits as profit sharing, flex time, catastrophic insurance, and tuition assistance to employees. Founders Bill and Dave believed that the company made money because they were good to their people. The company's strong culture was based on a set of values known as the "HP Way." These principles included treating everyone with respect, sound finances, trust in employees, technical excellence, teamwork, thrift, humility, and hard work. Following these principles paid off handsomely. According to journalist Peter Burrows (2003).

   HP had been wildly successful. It had never suffered
   so much as one annual loss in 63 years. But what
   made HP a management icon was how it achieved
   those results. For decades, the company had balanced
   stellar financial performance with unquestioned
   integrity, from how it kept the books to how it treated
   its employees and customers. It had plowed millions
   into the communities in which it did business, not
   only out of charity but out of a progressive self-interest
   in keeping them strong. Put simply, it seemed HP
   had figured out the magic formula for how to run a
   company. Everyone won--investors, customers,
   managers, and employees. (p. 14)