HP Adds Whitworth to Board

Hewlett-Packard added activist shareholder Ralph Whitworth to its board rather than risk more public conflict as it tries to bring 15 months of turmoil to a close. Whitworth is understood to have been among the investors who faulted HP for paying a 79% premium for UK software company Autonomy this year and for its just-abandoned exploration of spinning off its personal computer division, the world’s largest by volume.

Though its membership has changed, the divided board has come under repeated fire since last year. Many investors objected back then to the company’s firing of chief executive Mark Hurd, who had driven the revenue and stock higher, in the wake of a sex harassment claim that a board inquiry did not bear out.

HP and Whitworth negotiated an agreement that includes a two-year stint on the board and a promise by his Relational Investors not to engage in a proxy fight or acquire more than 9.9% of HP’s stock. The San Diego-based firm must maintain at least 0.5 per cent of its shares, which had lost more than half their value between Hurd’s August 2010 dismissal and last month.

The board last year replaced Hurd with European software executive Léo Apotheker, who announced the Autonomy deal and proposed PC spin-off, only to fire him after 10 months.

The HP directors failed to end the confusion immediately in September by appointing one of their own, Meg Whitman, the former Ebay chief executive, to succeed Apotheker.

Director Ray Lane, who at that point became executive chairman of HP, said after the US markets closed on Thursday that Whitworth “will bring a constructive voice and a track record of value creation into the boardroom.” The board also named two-year director Rajiv Gupta, a veteran in the materials industry, as lead independent director. (HP adds activist investor Whitworth to board, FT, 11/18/2011)

In a 11/17/2011 press release CalSTRS applauds the appointment of its longtime corporate governance partner, Ralph Whitworth, to the Hewlett-Packard Board of Directors.

CalSTRS is a long-term investor in HP, holding 6.25 million shares of its stock valued at $116.4 million as of October 31, 2011. Whitworth heads the Registered Investment Adviser and asset management firm, Relational Investors, which manages approximately $6.1 billion and has worked with CalSTRS since 2004 to improve the governance practices of many publicly-traded companies.  According to CalSTRS Corporate Governance Director Anne Sheehan,

The Whitworth appointment is a serious first step towards allaying investors’ concerns about Hewlett-Packard’s governance, board composition and recent performance. The addition of a large credible shareholder will bring a valuable perspective to the board’s deliberations and send a strong positive message to Hewlett-Packard shareholders that this iconic California company is serious about making positive changes in its leadership practices.

CalSTRS appears happy but will the appointment be enough to forestall a proxy access proposal or other action from shareowner activists? HP seems to have been a likely target. At least the board appointment is a proactive step in the right direction.

See also H-P Grants Activist Shareholder Board Seat, WSJ, 11/18/2011.

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