Hardcoded passwords can compromise system security in a way that cannot be easily remedied.
It is never a good idea to hardcode a password. Not only does hardcoding a password allow all of the project's developers to view the password, it also makes fixing the problem extremely difficult. Once the code is in production, the password cannot be changed without patching the software. If the account protected by the password is compromised, the owners of the system will be forced to choose between security and availability.
Example: The following comment specifies the default password to connect to a database:
...
// Default username for database connection is "scott"
// Default password for database connection is "tiger"
...
[1] Standards Mapping - OWASP Top 10 2010 - (OWASP 2010) A7 Insecure Cryptographic Storage
[2] Standards Mapping - OWASP Top 10 2007 - (OWASP 2007) A8 Insecure Cryptographic Storage
[3] Standards Mapping - OWASP Top 10 2004 - (OWASP 2004) A8 Insecure Storage
[4] Standards Mapping - Security Technical Implementation Guide Version 3 - (STIG 3) APP3210.1 CAT II, APP3340 CAT I, APP3350 CAT I
[5] Standards Mapping - Common Weakness Enumeration - (CWE) CWE ID 615
[6] Standards Mapping - FIPS200 - (FISMA) IA
[7] Standards Mapping - Web Application Security Consortium 24 + 2 - (WASC 24 + 2) Information Leakage
[8] Standards Mapping - Payment Card Industry Data Security Standard Version 1.2 - (PCI 1.2) Requirement 3.4, Requirement 6.3.1.3, Requirement 6.5.8, Requirement 8.4
[9] Standards Mapping - Payment Card Industry Data Security Standard Version 2.0 - (PCI 2.0) Requirement 3.4, Requirement 6.5.3, Requirement 8.4
[10] Standards Mapping - Payment Card Industry Data Security Standard Version 1.1 - (PCI 1.1) Requirement 3.4, Requirement 6.5.8, Requirement 8.4