Some of HP’s investors are deeply disturbed by the company’s “ill-advised acquisitions” and want to fire at least two board members at the company’s annual meeting later this month, according to documents filed with the SEC.After markets closed on Friday, New York City Comptroller John Liu announced that the New York City Pension Funds will vote against the reelection of two of HP’s directors: John Hammergren and G. Kennedy Thompson. The pension fund owns 5.5 million shares of HP, a stake of less than 0.3 per cent, reports the AP’s Michael Liedtke.
Last month, four of HP’s board members, including chairman Ray Lane, met with about 20 of its biggest investors in the hopes of calming an investor revolt. The meeting was spurred, at least in part, by a campaign lead by activist shareholder Richard Clayton, research director of CtW Investment Group, which advises union pension funds. He wants HP’s shareholders to vote out Ray Lane and one or two other directors.
It’s common for activist shareholders to file proposals. It’s uncommon for those proposals to gain much traction unless the company’s board approves of them.
In this case, HP has recommended all of its board members be retained. An HP spokesperson previously told Business Insider, “We feel we have the right board in place to turn HP around.”
Obviously, the pension fund’s vote won’t be enough to fire Hammergren and Thompson, but it could embolden other angry shareholders to follow its lead.
Here’s the full text of Liu’s letter:
NYC COMPTROLLER JOHN C. LIU, PENSION FUNDS
TO VOTE AGAINST HEWLETT-PACKARD DIRECTORS
Board Members Failed to Safeguard Investors from Company’s Costly Missteps
NEW YORK, N.Y. — City Comptroller John C. Liu today announced that the New York City Pension Funds will vote against two Hewlett-Packard (NYSE: HPQ) directors because of their failure to protect investors from costly, misguided acquisitions. The vote will take place at the company’s annual shareowner meeting on March 20, 2013.
The directors, John H. Hammergren and G. Kennedy Thompson, are 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. As the two longest-serving directors, they also bear responsibility for approving HP’s ill-advised acquisitions of EDS and Palm, and for the board’s hasty decision to hire Leo Apotheker, whose short-lived tenure as CEO ended shortly after the Autonomy acquisition that he engineered.
“The Autonomy debacle is the latest and most expensive in a series of ill-advised acquisitions and boardroom fiascos that have destroyed tens of billions of dollars in shareowner value,” Comptroller Liu said. “While the board now appears to be taking steps to improve oversight, it will be unable to restore investor confidence without swiftly replacing these two directors.”
HP, which paid $11 billion for Autonomy in 2011, wrote off $8.8 billion of its investment in 2012. HP has attributed $5 billion of the write-off to improper accounting at Autonomy that inflated its pre-acquisition revenues and earnings. HP took additional impairment charges of $9 billion in 2012 in connection with EDS and nearly $1 billion in 2011 that related to Palm.
In approving the Autonomy acquisition, the board and its Finance and Investment Committee ignored the opposition of the company’s own CFO, who believed it cost too much. The Committee also failed to challenge management’s decision to have those responsible for the acquisition’s due diligence report to the strategy group, rather than to the CFO, as is considered best practice. The board also reportedly assumed more revenue growth as a result of the combination than it normally assumes in acquisitions.
HP’s shares are down 61 per cent from their 2010 peak. The company, whose performance is in the bottom quartile of its peers over the past three and five years, was among the worst performers of the S&P 500 in 2012.
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