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Other Voices

Four years after Congress cracked down on corporate scandals, some prominent boardrooms are backsliding.

Hewlett Packard Co., the software giant, is under criminal investigation for a bizarre tale of its chairwoman spying on her fellow board members, by fraudulently obtaining phone records.

Princeton-based drugmaker Bristol-Myers Squibb Co. fired two executives after accusations that they deceived board members about their actions in an antitrust case.

And, although it's a dispute of a different kind, Philadelphia-based drugmaker GlaxoSmithKline has added to the atmosphere of mistrust as the target of the largest-ever case of U.S. tax avoidance. GSK this week agreed to pay the IRS a whopping $3.4 billion to settle a complaint that it had underpaid its federal, state and local taxes as far back as 1989.

These examples underscore the continuing need for strong watchdog agencies to monitor corporate behavior and enforce laws on corporate conduct.

Laws can't force people to be ethical, though. In corporate boardrooms, where ethics have improved, directors must think even harder about ethical standards.

A trend to be resisted would be any reconsolidation of power in chief executive officers. One factor in many of the corporate scandals of recent years was a concentration of power in the figure of a chairman-chief executive officer. Another was boards whose members were picked largely on the basis of friendship and support for the CEO.

The Hewlett Packard fiasco shows that gross ethical lapses can occur even at companies with sterling reputations. Chairwoman Patricia C. Dunn was demoted on Tuesday after admitting she authorized spying and lying to uncover the source of media leaks among HP board members.

The company hired private investigators, and helped them to impersonate HP directors and journalists so as to obtain their personal phone logs from AT&T. In May, Dunn accused one board member of being the leaker, resulting in resignations and a criminal probe by the California attorney general.

Dunn's punishment — she retains a seat on the board — is far too mild. She may well have authorized breaking the law, and her continued presence on the board suggests that other board members realize their complicity in what transpired.

At Bristol-Myers Squibb Co., the board fired chief executive Peter Dolan and general counsel Richard Willard at the urging of a federally appointed monitor. A former federal judge has been overseeing the company since 2005 as part of a deferred prosecution agreement.

The monitor said the two executives did not keep the company's board fully apprised of their efforts to negotiate with a competitor to delay the introduction of a generic alternative to Bristol-Myers' best-selling drug, Plavix. Given the company's legal jeopardy, how in the world could the board have offered such lax oversight?

The settlement between Glaxo and the IRS involves a long disagreement over the taxable value of intellectual property and research. This IRS victory on the contentious issue of "transfer pricing" by multinational corporations is an encouraging sign that big business will be told to pay its fair share of taxes.

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