FOUR HP DIRECTORS STEP DOWN IN WAKE OF EX-CEO FIASCO

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http://articles.latimes.com/2011/jan/20/business/la-fiw-hp-20110120

FOUR HP DIRECTORS STEP DOWN IN WAKE OF EX-CEO FIASCO
SAN
FRANCISCO (AP) — Hewlett-Packard Co. is trying to put a fresh face on
its scandal-scarred board, swapping out four directors in an extreme
leadership makeover at the troubled technology icon.The shake-up
announced Thursday comes as HP’s new leadership tries to dampen
shareholder anger over the handling of CEO Mark Hurd’s ouster six months
ago.

Hurd’s abrupt exit caused billions of dollars in
shareholder wealth to evaporate, and his generous severance triggered
lawsuits accusing HP’s board of squandering the company’s money. Hurd’s
immediate move to rival Oracle Corp., which earned him a rich new
employment contract, added to investors’ ire.The decision by four of
HP’s current board members to not stand for re-election at HP’s annual
meeting in March represents an unusually large exodus for a company of
HP’s size.HP would only say that it “continually looks to bring new
insight and perspective” to the company.”With our new leadership, it’s a
natural time to assess the composition of the board,” the company said
in a statement. “We thank our current directors for their outstanding
service to HP and welcome the opportunity to work with our new
members.”HP’s revelation came the same day that another technology
heavyweight, Google Inc., disclosed a surprise reshuffling of its own:
CEO Eric Schmidt is relinquishing the job to Google co-founder Larry
Page.

HP’s housecleaning comes less than three months after Leo
Apotheker, a former CEO of German business software maker SAP AG, took
over as HP’s CEO, and Ray Lane, a former Oracle Corp. executive who
famously clashed with Oracle CEO Larry Ellison, assumed the chairmanship
at HP.It also comes as HP is opening a new investigation into the
circumstances of Hurd’s departure and severance, in response to
shareholders’ demands.The investigation will be conducted by outside
lawyers and directors who joined HP’s board after Hurd left. Until
Thursday’s reshuffling, those new directors would only have consisted of
Lane and Apotheker. Lane has loudly supported Hurd’s ouster.Hurd was
forced out last year after a five-year reign in which HP’s market value
nearly doubled. He was accused of sexual harassment but HP’s board found
no evidence of that. Instead, he was ousted over inaccurate expense
reports for his outings with his accuser, a former HP contract worker
who helped organize networking events for executives, including Hurd.

Hurd
got a $12.2 million cash payout and soon after leaving filed papers to
sell some $30 million worth of stock that he got by exercising options
that were part of his severance.Spectators howled at the size of the
severance and the fact Hurd went right to work for Oracle. Hurd and HP
tangled again, and Hurd agreed to give back $14 million in restricted
stock to HP to squash a courtroom battle over whether he should be
allowed to work Oracle. Hurd is now co-president at Oracle.A spokesman
for Hurd declined to comment on the investigation. Hurd’s resignation is
also the subject of a Securities and Exchange Commission probe.Some
industry analysts say the changes to HP’s board are overdue given the
company’s inability in recent years to escape controversy. Among
incidents were the firing of Hurd’s predecessor Carly Fiorina in 2005,
an episode of spying on journalists and board members’ telephone calls
in 2006, and finally the handling of allegations of sexual harassment
against Hurd last year.

Of the board’s 12 current members, 10
were there when Hurd resigned in August. Four are now leaving: Joel
Hyatt, John Joyce, Bob Ryan and Lucille Salhany.Salhany and Ryan were on
the board for all three scandals. Hyatt and Joyce joined in 2007.HP is
replacing them and adding an extra seat to the board. The new board will
have 13 members.HP didn’t provide specifics about why each of the four
directors is being replaced. One person familiar with the matter told
The Associated Press that at least two of the directors were forced out
because of their handling of Hurd’s ouster.The person, who spoke on
condition of anonymity, said that Salhany and Ryan led the efforts to
have Hurd removed and were key in persuading other board members to go
along.The person, who requested anonymity because of not being
authorized to speak publicly about the matter, said that Hyatt and Joyce
initially supported Hurd but later voted along with the rest of the
board to have him removed.Messages left by the AP for the departing
board members were either not immediately returned or the directors
declined to comment. HP wouldn’t make any of them available.

The mass exodus raised some eyebrows.
“Four
directors going out at once is unusual,” said Charles Elson, director
of the Weinberg Center for Corporate Governance at University of
Delaware. “Boards should not have this much drama.”At 72 years old, HP
is one of the most storied companies in Silicon Valley, but its rise to
become the world’s biggest technology company by revenue has been
interrupted by the explosive management scandals.Gleacher & Co.
analyst Brian Marshall said the changes HP is making are positive in
light of the Hurd scandal.”HP got its teeth kicked in last year and
they’re going through a process of healing,” he said.Stifel Nicolaus
& Co. analyst Aaron Rakers said the board shuffle is more extensive
than he expected, but he doesn’t think it will really move the company’s
stock.

“It’s interesting, but is it a big catalyst? Probably
not,” he said.The new directors are: Shumeet Banerji, chief executive
officer of the consultancy Booz & Co.; Gary Reiner, former chief
information officer of General Electric Co.; Patricia Russo, former CEO
of Alcatel-Lucent; Dominique Senequier, CEO of AXA Private Equity; and
Meg Whitman, the former CEO of online auctioneer eBay Inc.Marshall with
Gleacher and Co. said he was most impressed with the addition of
Whitman, saying her leadership style is something HP needs.

Whitman
is a billionaire who spent more than any candidate for a statewide
office in U.S. history in her Republican campaign for California
governor last year. She spent at least $174 million, all but $30 million
of it her own money, but was handily defeated by former two-term
governor Jerry Brown in the November election.Marshall added that the
global telecom expertise of Russo will be important for HP as it grows
its computer networking business.Shares of HP, which is based in Palo
Alto lost 31 cents to $46.47 after the announcement on the board
shake-up. In regular trading earlier, it gained 46 cents, or about 1
percent, to close at $46.78 Thursday.

http://articles.latimes.com/2011/jan/20/business/la-fiw-hp-20110120

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January 26, 2011 at 8:19 AM