Hewlett, an HP director who opposes the $22 billionwith Compaq, released copies of minutes from a September meeting of the HP board's compensation committee. Hewlett sits on the committee, along with co-directors and committee members Sam Ginn and Phil Condit.
With the stakes for wooing shareholders increasing with each passing day leading up to the March 19 vote for HP investors, both camps are taking greater measures to make their cases clear. Hewlett, in releasing copies of board-related minutes, may be pushing the envelope, some corporate governance experts say.
"It's highly inappropriate and I would assume the information would be proprietary," said David Vogel, professor of business ethics at the Haas School of Business at the University of California at Berkeley.
Hewlett, however, believes he is defending his honor by providing the documents.
Hewlett is referring tohe and his advisers made Wednesday, regarding a combined $115 million compensation package that initially was supported by the compensation committee for HP Chief Executive Carly Fiorina and Compaq CEO Michael Capellas. The issue centered on shareholders having this information before the vote and the potential conflict of interest the CEOs may encounter in wanting to pass the deal to collect lucrative pay packages.
Hewlett's contention was that the executives' declining a combined retention bonus of $22.4 million was a drop in the bucket compared with the packages they could reap.
"HP has recently made statements that we are 'fabricating information solely in an effort to gain votes,'" Hewlett said in a statement. "HP's outside legal counsel has said that Capellas and Fiorina have merely 'floated some general terms for future pay packages.'"
Hewlett noted in his earlier statement and in copies of the minutes that the compensation committee--including Hewlett--had supported the employment agreements for both Fiorina and Capellas.
During a Sept. 20 compensation committee meeting to consider Fiorina's package, the minutes stated: "The committee reviewed possible performance metrics for the stock options. It was generally agreed that vesting should be tied to stock price growth in defined time periods and that value drivers associated with the deal would be an appropriate secondary metric. Discussion ensued regarding what share price growth should trigger vesting.
"To provide context for the discussion, Ginn recapped discussions over the last several weeks regarding the structure of the options, which are expected to be granted at the close of the merger," the minutes continued. "Following extensive discussion, the committee developed a framework for the (vesting schedule of the) options."
According to the minutes, as well as to previous comments from Hewlett, after the compensation committee meeting adjourned, the committee had "not agreed on the exercise price for the options, specifically whether the performance-based blocks would be priced at (fair market value) or premium prices. It was subsequently determined that the committee had not reached an agreement on the pricing terms of the option component of the package. Accordingly, all components of the package, which are interrelated, will be reconsidered at a future meeting."
Hewlett, however, previously said he was not aware the committee had tabled the issue until receiving a copy of the Sept. 20 minutes. He indicated he initially thought the matter had been resolved, which would then allow shareholders to receive the information when HP had issued its proxy.
HP's compensation committee directors were fuming with the latest round of attacks and counterattacks.
In a letter sent to Hewlett, Ginn and Condit wrote: "We are stunned by your blatant mischaracterizations of the actions of the committee. As you know, Walter, the three of us all unanimously agreed at our last compensation committee meeting that the executive employment terms previously discussed, including discussions at our prior meetings in September, were specifically rejected and that these terms would not serve as benchmark or minimum terms for any future employment arrangements following the merger."
They further added that the three-member committee concluded it would be best to have the board of the newly combined company decide the appropriate compensation terms for the executive officers after the merger.
And in a parting shot, Ginn and Condit noted: "You know that in order for our committee and the board to function properly, we must freely debate proposed strategies and ideas in our meetings. Yet you have put your personal agenda in front of the interests of HP and our shareholders."