No drama seen for HP annual meeting
Ho hum. The auditor approval and social and environmental proposals on the agenda at HP's shareholder meeting won't compare with this week's courtroom drama.
The annual meeting, which is expected to pale in comparison to the high courtroom drama of the past several days in which HP faced allegations of vote buying, calls for investors to cast their votes for re-electing HP directors, approving HP's auditor, and taking up two shareholder proposals on environmental and social issues.
But more significantly, the annual meeting will conclude with no member of HP's founding families serving on the board for the first time in its history--at least for one year.
Walter Hewlett, son of one of one of the HP co-founders and a board member who has led a highly contentious proxy battle to oppose HP's pending merger with Compaq Computer, will not be up for re-election. Earlier this month, HP directors voted to forgo re-nominating Hewlett, after he filed a lawsuit against the company to halt the merger.
HP has already claimed victory based on a preliminary proxy count, but the merger is far from a foregone conclusion. The vote tally is extremely close and Hewlett, in the lawsuit, is seeking to invalidate the results.
Because the merger is not expected to officially close until later this month or early May, HP shareholders will be re-electing eight HP directors, rather than a board for the combined companies. Directors up for re-election include Phil Condit; Patricia Dunn; Sam Ginn; Dick Hackborn; George Keyworth II; Robert Knowling Jr.; Bob Wayman, chief financial officer; and Carly Fiorina, CEO.
If and when the merger gets approved, a larger board consisting of candidates forwarded by HP and Compaq will be installed.
Although the families are off the board this year, the tables may be turned in 2003. HP directors are elected to serve a one-year term. The families, their trusts and foundations hold an 18 percent stake in HP, and that's enough under HP's bylaws to get a write-in candidate put on the ballot.
Further, because of the intricacies of HP's cumulative voting regulations, the families have enough votes to elect one board member if the merger goes through and two if HP fails to acquire Compaq.
Family members, although consistently requesting anonymity, have said they deserve a representative because of the size of their holdings.
"When you have two families with 18 percent of the shares, you should have one person on the board who will represent the point of view of the families...It doesn't necessarily have to be a family member, but it should be someone who represents their views," one member of the founding families previously told CNET News.com.
Other large investors are using HP's cumulative voting procedure to take a stand. The California Public Employees' Retirement System (CalPERS), the nation's largest pension fund, said it planned to withhold its re-election votes for the four HP directors who sat on the audit committee: Dunn, Hackborn, Keyworth and Knowling.
"The mentioned directors are members of the audit committee that has authorized the auditor to perform non-audit services," stated CalPERS, which holds 11.1 million shares. CalPERS' decision comes on the heels of the greater scrutiny investors are giving companies' auditors since the Enron debacle. CalPERS has taken similar action with such companies as IBM, Georgia Pacific and Eastman Kodak.
HP contends the practice of allowing the auditor to perform non-audit services is proper, providing that dual role is disclosed in the proxy, said an HP representative, who noted such information was included in the company's proxy.
Ernst & Young served as HP's auditor last year and is up for shareholder approval this year.
Other issues investors will be voting on include two shareholder proposals. One shareholder proposal, which garnered more than 3 percent of the votes last year but failed to pass, calls for HP to follow 11 principles of human- and labor-rights standards for China. A second shareholder proposal calls for HP to prepare a report on the feasibility of taking back computers and other products for recycling. The company currently charges a fee, but the proposal states it considers the fee a "significant" disincentive for consumers to recycle.