Despite severe blows to Hewlett-Packard’s image as a well-run company and the resulting steep fall in its stock price -- although there has been a recent upswing -- shareholders yesterday resisted a campaign by dissidents to throw out several members of the board who were up for re-election at the annual meeting. The campaign has been marked by unusually strident public statements and website postings by usually buttoned-down rabble-rousers, marked by acrimony usually contained to schoolyards.
The board members may have been “rebuked,” as the Bloomberg Businessweek hed puts it, but chairman Ray Lane (59%), G. Kennedy Thompson (55%) and John Hammergren (54%) eked out enough support to continue. Other directors fared better and shareholders narrowly seemed to endorse CEO Meg Whitman’s sentiment: “Certainly the last three or four years have been tough. My view on the board of directors is they are helping turn Hewlett-Packard around.”
But the status quo will be short-lived if some observers are correct in their assessments.
“If the company wants to put on more than a cynical charade of listening to its stockholders, the directors will resign. Negative votes in the 30 and 40% range are a giant ‘no confidence’ message,” Erik Gordon, a professor at the Ross School of Business at the University of Michigan in Ann Arbor, tells Bloomberg’s Aaron Ricadela.
“Anger had been building over the last couple of years at a board that at times has struggled to escape a reputation for being less than competent,” writes Chris O’Brien in the Los Angeles Times. “Among the perceived sins: The mishandling of the departure of [former CEO Mark] Hurd amid allegations of sexual harassment; the hiring and abrupt firing of CEO Leo Apotheker after less than 11 months; failing to advocate a strong strategy; and signing off on large acquisitions that resulted in billions of dollars of write-downs.”
That brings us to Autonomy. In November, HP announced that it was “in effect … writing down close to 90% of the value” of the acquisition it had made just the year before due to what it claims were “serious accounting improprieties, disclosure failures and outright misrepresentations,” as Forbes’ Connie Guglielmo reports. HP “confirmed that it has formed a special board committee to investigate” its $11 billion acquisition and $8.8 billion writedown, she writes.
Mike Lynch, the former CEO of Autonomy and the architect of the deal that made it an non-autonomous division of HP rather than what some say he anticipated as being the opposite, yesterday asked shareholders to “raise such issues,” as the New York Times’ Quentin Hardy summarizes them, “as how the board came to make its allegations against Autonomy, how Hewlett came to its impairment charge figure and whether Autonomy executives told Hewlett management early on that the merger was having problems.”
In December, Lynch “intensified his public battle with HP over allegations of accounting improprieties by setting up a website to rebut the claims,” as the [U.K] Telegraphput it at the time, and that is where he posted yesterday’s manifesto.
According to Lynch, “HP has acted in an aggressive and unusual manner throughout this episode, making highly damaging public accusations without providing any supporting evidence, either to the public or to the people they have accused.”
HP responded with a statement, quoted by Harvey, that it is cooperating with relevant regulatory agencies in the U.S. and U.K. and could not “disclose any information that would interfere with any of the ongoing investigations.”
“While shareholders expressed discontent with HP’s share price during a question and answer session, there were no direct questions about Autonomy, although Calpers, the largest public pension fund in the U.S., led calls for board changes,” Chris Nutall and Bede McCarthy report in Financial Times.
Other dissenters include New York City Comptroller John Liu, who announced on March 8 that the city’s pension funds would vote against reelecting directors John Hammergren and G. Kennedy Thompson, “members of the board’s Finance and Investment Committee, which bears primary responsibility for oversight failures that led to HP’s disastrous 2011 acquisition of Autonomy Plc.” The statement also took the directors to task for “approving HP’s ill-advised acquisitions of EDS and Palm, and for the board’s hasty decision to hire Apotheker, whose short-lived tenure as CEO ended shortly after the Autonomy acquisition that he engineered.”
Liu, it may not surprise you to know, is running for mayor of NYC -– a job he admitted the other day that he has had his eyes on “probably from the moment I got elected comptroller,” reports CapitalNewYork.com’s Azi Paybarah.
CEO Whitman, meanwhile, was upbeat. "We need to get revenue growing again," she admitted. "We have to execute better."
“But,” writes the San Jose Mercury News’ Steve Johnson, “she added that the Palo Alto corporation was making strides in many areas and that ‘despite what you may have heard, innovation is alive and well at Hewlett-Packard.’”