Just two years after a major board-room shakeup, Hewlett-Packard Co. on Wednesday is hoping to prevent the ouster of more directors accused of squandering billions of dollars on ill-conceived acquisitions.
With five of its 11 board members targeted for removal at its annual meeting, the event is widely viewed as a seminal moment for the Palo Alto, Calif., technology giant. HP has argued that reshuffling its directors again could undermine efforts to revitalize the storied corporation. But critics contend another board-level housecleaning is in order because of the company’s many missteps.
“I find it absolutely abhorrent,” said Stanley Morrical, an investor and founder of a San Francisco financial services firm who sued HP over its $11 billion purchase of software-maker Autonomy in 2011. Claiming it was hoodwinked about the firm’s value, HP has since written off $8.8 billion from the investment, prompting Morrical to respond, “My 12-year-old daughter has more accountability than that.”
It is uncommon for investors to seek the expulsion of individual board members, said Stephen Diamond, a Santa Clara University law professor. Given the prominence of those advocating the purge — including the powerful California Public Employees’ Retirement System and two influential stockholder advisory firms, Glass Lewis and Institutional Shareholder Services — HP’s meeting, he said, “will be closely watched.”
The board’s previous upheaval occurred in January 2011, when five new members were appointed in an attempt to heal divisions and bring on new blood after CEO Mark Hurd resigned over an unproven allegation about his relationship with a consultant. Hurd’s replacement, Leo Apotheker, was soon under fire himself and was replaced nine months later by Meg Whitman.
She has won cheers from Wall Street analysts for trying to get the company back on track. After plunging from more than $42 per share in early 2011, HP’s stock price has rebounded a bit recently, to just over $14 at the end of 2012. It closed Tuesday at $23.11. Nonetheless, many investors remain dissatisfied.
With its business heavily dependent upon the faltering personal computer market, its sales have flattened, its profit has slumped and it has begun laying off 29,000 employees to cut costs.
HP has been particularly lambasted for spending too much on other companies. Besides its
massive write-down for Autonomy — which has triggered about 10 lawsuits by Morrical and others — HP recently wrote off $8 billion for its 2008 purchase of Electronic Data Systems and nearly $1 billion for its 2010 acquisition of Palm.
Of the five directors targeted for removal, the two on the board the longest have come under especially heavy fire. They are John Hammergren, a director since 2005 and chairman of health care company McKesson, and G. Kennedy Thompson, a director since 2006 and a principal with the private equity firm Aquiline Capital Partners. The other three are Marc Andreessen, a director since 2009 and co-founder of AH Capital Management; Rajiv Gupta, on the board since 2011 and chairman of Avantor Performance Materials; and Raymond Lane, HP’s executive chairman since 2011.