Shareholders signal dissatisfaction with HP's board
Hewlett-Packard Co Chairman Ray Lane and several other directors narrowly kept their seats on the board as shareholders conveyed their displeasure over the botched $11 billion acquisition of British software firm Autonomy Plc.business Updated: Mar 21, 2013 15:14 IST
Hewlett-Packard Co Chairman Ray Lane and several other directors narrowly kept their seats on the board as shareholders conveyed their displeasure over the botched $11 billion acquisition of British software firm Autonomy Plc.
Lane, a managing partner at high-powered Silicon Valley venture capital firm Kleiner Perkins, fellow venture capitalist Marc Andressen and other board members have come under fire from shareholders for one of the company's costliest acquisition mistakes in years.
Director and activist Ralph Whitworth told shareholders at the company's annual meeting on Wednesday to expect "some evolution" in the company's board, but did not elaborate.
Lane, whom influential proxy firm ISS recommended voting against, won just 58.88 percent of shareholder votes. That was well below last year's 96-percent tally.
ISS and Glass Lewis, a governance analysis firm, had recommended voting against a roster of other directors.
ISS gave the thumbs-down to McKesson Corp Chief Executive John Hammergren and former Wachovia Corp CEO G. Kennedy Thompson, while Glass Lewis recommended shareholders vote to remove four directors: Andreessen, lead independent director Rajiv Gupta, Hammergren and Thompson.
Hammergren got 53.91 percent of shareholders' votes versus 81 percent last year, while Thompson had 55.15 percent, down from 81.2 percent previously. Andreessen garnered 69.77 percent, off from 82 percent last year.
Problems with the acquisition, spearheaded by former CEO Leo Apotheker during his tumultuous 11-month reign, came to light after HP last year accused former management at the British firm, including then-CEO Mike Lynch, of accounting fraud, which Lynch again denied on Wednesday.
HP eventually swallowed a multi-billion dollar writedown on the asset's value, enraging some investors. The misstep capped a tumultuous decade for the company that encompassed the infamous "pretexting" scandal of 2006, during which it hired detectives to pose as journalists and board members to obtain their phone records.
"Today's vote was a challenge to business as usual for the HP Board following a decade of failures at HP and the board's insistence on blaming recent missteps on the previous CEO," Dieter Waizenegger, executive director of the CtW Investment Group, said in a statement. "These votes are too high to ignore."
The firm, which advises union pension funds with roughly $200 billion in assets and has opposed the re-election of Hammergren and Thompson, wants the board to replace them.
Lead independent director Gupta last week warned shareholders that disrupting the board would destabilize the company during a critical turnaround period. Gupta was re-elected with 80.25 percent of shareholder votes.
"They need to better manage the business," said Michel Cohen, a shareholder from Sunnyvale who voted against some of the board members. "They (board) were part of the old school where they made big mistakes, big acquisitions. They have not created a stable environment."
Need some changes
Investor unrest comes at a bad time for HP and CEO Meg Whitman, who has embarked on a multi-year turnaround to resurrect growth at a company once synonymous with Silicon Valley but has since stagnated as its core personal-computing and printing business declines.
She has asked investors for patience while the company enacts layoffs and cost cuts and expands into areas with longer-term potential, such as enterprise computing services.
"Despite what you have read in the headlines, we are on a solid financial foundation. There is still room for improvement," Whitman told shareholders on Wednesday. She won re-election to the board with more than 98 percent of the vote.
Whitworth, who runs activist hedge fund Relational Investors LLC and was named to the board of the struggling Silicon Valley computing company in 2011, defended HP's board, saying it was among the best he had seen. But he acknowledged that HP's investors have "rightfully" questioned some of the transactions the company has made.
Whitworth, whose firm owned about $800 million worth of HP shares, said shareholders can expect some changes in the HP board in the near term.
"I think you can expect some evolution of the board over the coming years, months maybe," he said at the annual meeting held at the Computer History Museum in Mountain View, a few miles from HP's headquarters.
Lynch, who has repeatedly denied HP's allegations, on Wednesday demanded the board provide more details on its accounting-related allegations, reiterating that HP mismanaged the software company after buying it.
HP said it was cooperating with the authorities and "cannot disclose any information that would interfere with any of the ongoing investigations into this matter."
"We refuse to be a scapegoat for HP's own failings," Lynch said in a letter to shareholders.