The HP Saga: Focus on the Board

26 Sep ’06

Yesterday brought the news of increased scrutiny of the HP board; former chair Patricia Dunn has of course asserted that she kept the board informed, but so far, at least after early interest in the battle between Dunn and Perkins, the company’s officers and senior employees have garnered the lion’s share of attention. No more, it seems. The WSJ (sub req.):

Hewlett-Packard Co. should overhaul its board in the wake of the leak-investigation scandal, corporate-governance experts say, and four public pension funds are proposing a way for shareholders to help do that.

The four funds — representing public workers in Connecticut, New York, North Carolina and Washington, D.C. — said they filed a proposal asking H-P to change its bylaws to allow any shareholder group holding 3% of the company’s stock for at least a year to nominate one or more board candidates.

Backers of the proposal are the New York State Common Retirement Fund, the Connecticut Retirement Plans and Trust Funds, the North Carolina Retirement Systems and the American Federation of State, County and Municipal Employees Pension Funds. Their proposal relies partly on a recent appeals court ruling that sided with AFSCME.

The WSJ rounds out its coverage with the usual expert commentary about improving the board:

Mr. Hurd, who assumed the chairman’s role from Ms. Dunn, promised H-P employees earlier this month that he would try to improve the board. “You have a board here right now that is crippled in every way imaginable,” said Ralph D. Ward, a Michigan author who publishes a newsletter called Boardroom Insider.

Even before finding new directors, Mr. Ward said, the board should get outside assistance in thoroughly investigating what it did wrong in the leak investigation. He then proposes Mr. Hurd lay out a plan for giving up the chairmanship eventually to an outside director.

Meanwhile, the The House Energy and Commerce Committee panel has issued subpoenas to Hunsaker, Gentilucci and DeLia. The NYT reports on the subpoenas and on the California AG’s concerns that no immunity grants interfere with state prosecution. Meanwhile, lawyers are springing up in this case with breathtaking speed – almost all of them, it seems, working for HP:

As for Hewlett-Packard, the complexity of its position is reflected in its several sets of lawyers. Wilson Sonsini Goodrich & Rosati, Mr. Sonsini’s firm, remains the outside counsel. Manatt, Phelps & Phillips is advising the company and company officials at the Congressional hearings.

Mr. Hurd hired the Philadelphia firm of Morgan, Lewis & Bockius to represent management in any possible criminal proceedings. That firm is conducting an inquiry into spying operations authorized by the board. Mr. Hurd has also hired Bart M. Schwartz, a former federal prosecutor, to examine the way the company conducts investigations.

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