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HP was founded on a few simple beliefs:

• Trust, respect and integrity really matter.
  
• How we do things is as important as what we do.
  
• While a company’s objective is to make a profit, it must also make a contribution.
  

These beliefs underpin our commitment to conducting business with uncompromising integrity. They are reflected in HP’s Standards of Business Conduct (SBC), the foundation of our ethical behavior that guides the actions and decisions of everyone at HP, including board members. The SBC covers relationships with employees, the community, suppliers, partners, customers and competitors, and addresses issues such as conflicts of interest and sensitive information. In early 2008, we updated the SBC with more straightforward language and linked it more closely to our company values and objectives.

We strive to foster a culture of ethics and compliance that is recognized and respected around the world. Our objectives for 2007 were to:

• Raise awareness of the importance of ethics and compliance
  
• Mitigate ethics and compliance risks by improving ethics and compliance processes, providing training in key risk areas, conducting investigations and taking corrective action
  
• Improve collaboration between corporate, business and regional teams
  
• Ensure ethics and compliance processes are transparent
  
• Revise the ethics and compliance governance structure
  

Below we describe our organizational structure supporting our ethics and compliance objectives as well as the key measures we have taken to achieve our objectives.

	Board responsibilities

The board of directors is charged with five primary responsibilities relating to ethics and compliance:

• Provide oversight of ethics and compliance at HP
  
• Set and enforce the “tone at the top”
  
• Encourage a company culture of ethical conduct and compliance
  
• Establish procedures and a forum for review of significant ethical complaints
  
• Help implement the agreement made with the California attorney general following the events of September 2006
  

The board has ten members, with Mark Hurd serving as chairman, chief executive officer and president as of September 22, 2006. The other nine members are “independent directors,” as defined by the listing standards of the New York Stock Exchange and HP’s Corporate Governance Guidelines. John Joyce and Joel Hyatt were elected to HP’s board in May 2007.

The Audit Committee of the board serves as a guide to HP’s ethics and compliance program and as a direct resource for the chief ethics and compliance officer. Richard Hackborn serves as the lead independent director. Additionally, G. Kennedy Thompson serves as the independent director responsible for reviewing and reporting to the board on HP’s compliance with legal and ethical requirements related to the conduct of investigations.

See also information regarding HP’s director independence, board committees and composition, corporate governance guidelines, and director compensation.

	Chief ethics and compliance officer and organization structure

HP’s chief ethics and compliance officer, Jon Hoak, oversees our ethics and compliance program. He reports directly to the general counsel, the independent director responsible for HP’s compliance with legal and ethical requirements related to the conduct of investigations, and to the board’s Audit Committee on HP’s investigative practices and ethics and compliance program.

The chief ethics and compliance officer also chairs the Ethics and Compliance Committee, which comprises senior HP executives and guides the design and implementation of HP’s ethics and compliance program. Its objective is to ensure that the company is committed to the SBC, our core value of uncompromising integrity, and the development of an ethical and compliance-based culture.

	External review

HP appointed Bart M. Schwartz, a former U.S. prosecutor, to assess our current ethics and compliance practices and develop future best practices. Based on his review and HP’s internal assessments, we have implemented changes to our investigative policies, processes and reporting structures. HP has committed to implement all of Mr. Schwartz’s recommendations, including a new Integrated Investigator Procurement program. This will cover areas such as investigative consultants’ qualifications, accountability, oversight and supervision, performance assessments and training to ensure investigations are conducted lawfully and ethically.

	Risk assessment

In 2007, we began a global review of risks arising in our business with public sector customers. This review involves an internal audit process, with assistance from experienced external third parties. Its objective is to ensure our exemplary management of ethics and compliance, which we believe will enhance our competitive position in this sector. We plan to implement a more general ethics and compliance risk assessment process in 2008. This will ensure that we prioritize the most critical risks, understand fully the current state of our risk and compliance processes, and develop effective plans for controlling risks. We will report the risk assessment results to all levels, from the Compliance Council up to the board of directors.

	Communication and training

Our ethics program emphasizes that every person at HP can be an ethical leader, regardless of title or job responsibilities. Every year, we provide SBC training to all employees, including new employees and those of newly acquired companies, and this training is cited as good practice by the American Society for Training and Development. In 2007, 96 percent of employees received SBC training, slightly more than the 95 percent in 2006. We expanded ethics and compliance training across individual businesses and regions, with specialized training in key areas such as privacy and data protection, public sector sales, global trade and procurement, conflict of interest, and the U.S. Foreign Corrupt Practices Act.

We introduced new elements to our ethics training program in 2007, including a course on ethical leadership and specific training for new employees, and we developed a contingent worker code of conduct. We trained country managers worldwide in conflicts of interest, the U.S. Foreign and Corrupt Practices Act, contra-revenue marketing (such as discounts), procurement practices, and handling confidential competitive information. Country managers are also issued an SBC Reference Guide, which they can refer to if unsure of the best course of action on key ethics and compliance topics. We have also introduced a quarterly ethics bulletin containing real-life case studies for managers to use in discussions with their teams.

We include questions on ethics and compliance in our annual employee survey. In 2007, 93 percent of employees surveyed said they seek guidance from management, other HP resources or our Ethics and Compliance Office when unsure of the appropriate legal or ethical action to take. And 90 percent expressed they believe their manager is open, honest and ethical in their dealings on behalf of HP.

In January 2007, the board of directors and members of senior management were trained on how to handle conflicts of interest that may arise when external attorneys represent the board or any of its committees as well as HP. The board also received training on hiring independent counsel and conducting investigations. The Ethical Leadership Group, a Chicago-based consultancy, helped HP prepare and deliver the training.

Also in 2007, HP adopted a new code of conduct and guidelines for external investigative firms. As a result, we have expanded our ethics and compliance training to include not only HP employees performing investigations, but also employees of firms retained to conduct investigations on our behalf.