Hewlett-Packard Board Members Resign Over CEO Hurd Departure
PALO ALTO (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.
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