Institutional Investors Come Up Short: Hewlett Packard Board Re-elected
Sadly and as expected (see “A Test Case For Corporate Activism Is Going to Fail: Hewlett Packard” [March 9, 2013]), all the directors of the Hewlett Packard board were reelected. Despite the opposition of the two largest proxy rating services and several large public funds, the three longest serving members managed to squeak through. I suppose there’s some solace in the fact that they got less that 55% of the vote. However, HP is probably one of the best cases for investors to cast a decisive vote of no confidence given the company’s dismal financial performance and disastrous acquisitions. The failure to oust even one director tells you just how meek and dependent on management most money managers truly are.
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Investors were rewarded with a 10% increase in the company’s dividend. From where I sit, this is actually a good thing. HP should dole out as much money as possible, so the company doesn’t have the financial wherewithal to make more ill -conceived acquisitions.
CEO Meg Whitman also announced that a special committee of the board would investigate the Autonomy and EDS acquisitions. The committee consists of Ralph Whitworth, founder of the interventionist money manager, Relational Investors, Ken Thompson, former Chairman of Wachovia, and Gary Reiner, former Chief Information Officer for General Electric. I suppose this committee is supposed to placate some of the more hostile investors. A report, however, is a poor substitute for real change. Moreover, a report produced by Ken Thompson, who was on the board for both transactions and presided over the demise of Wachovia, hardly inspires confidence.
The HP board vote demonstrates how deeply the ties run between corporate managers, their boards, and institutional investors. Perhaps as Mr. Whitworth suggested, there will be some changes in the governance of HP. However, those changes are going to come on terms that are acceptable to the insiders and not through shareholder democracy.