Hewlett, a luncheon speaker at the Council of Institutional Investors' semiannual meeting in Washington, D.C., urged shareholder activism and outlined steps directors could take to gather information outside of that provided by company executives.
"It is my hope that the experiences of the past several months will come to be viewed as a turning point in the evolution of accountability and transparency in the governance of corporations," said Hewlett, according to transcripts of his speech. "Despite the fact that billions of dollars and the future of great companies are at stake, standards of corporate governance are neither robustly developed nor rigorously examined or enforced. To be blunt, the stakes are high; the standards are not."
In the world of mergers and acquisitions, industry observers say it's highly unusual for directors to publicly oppose a merger--especially when it does not involve a third-party bidder. And they note it is equally rare for institutional investors to take a public stand on issues relating to companies in their portfolio, given a concern for affecting the price of those particular stocks.
Hewlett effectively broke with tradition through a five-month proxy contest against the company his late father co-founded. He also persuaded several large institutional investors to publicly state their opposition to the deal.
Last week, HP and Compaq shareholders voted on the proposed merger of the two companies. Although HP hasa win in the contentious proxy battle via preliminary figures, an official tally will not be known for several weeks.
One obstacle on the path toward good corporate governance is board members' reliance on information supplied by executives and fellow directors, rather than that gleaned from company shareholders, employees and customers, Hewlett said. He advocates a system where directors at companies contemplating mergers would have access to legal and financial counsel that is separate from that of the company and management team.
"At the very least, boards must be pried loose from the grip of management and their hired hands," Hewlett said. "Despite more than 200 years of political practice in the United States, democracy remains an ideology strangely alien to many corporate boardrooms. And too many corporate executives still fail to distinguish dissent from disloyalty...Above all, too many corporate managers too readily forget who owns the company--the shareholders."
Hewlett, along with trusts and foundations held by his family members and members of the co-founding Packard family, retains an 18 percent stake in HP. The late founder's son speculates that HProughly $150 million of shareholders' money on the proxy fight and that his family's Hewlett Trust is a "significant contributor to financing both sides of this fight."
Despite the recent battle, Hewlett said he remains confident the company is well situated for the future.
"I've known and worked side by side with the HP directors for many years," Hewlett said. "We share a common interest in stability and stockholder value. I am confident that the directors and officers of HP will move forward rapidly to protect the assets and value inherent in the company."