Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Another Advisory Firm Singles Out HP Director Babbio

A critical report by the advisory firm Institutional Shareholder Services concerning Hewlett-Packard wasn’t the first urging shareholders to vote against the re-election of directors.

While ISS advised shareholders to vote against the re-election of three directors Lawrence Babbio, Sari Baldauf, and Ken Thompson, a second report, this one from Glass Lewis, advised a vote against only one director: Babbio, the former vice chairman and president of Verizon, and currently an advisor to the private equity firm Warburg Pincus. (Pictured.)

It’s not the first time the firm has targeted Babbio. It made similar recommendations in 2007 and 2009. Its main concern is executive pay, and the way Lewis Glass sees it, Babbio as chairman of the board’s HR and compensation committee hasn’t worked hard enough to link performance to pay. According to the Glass Lewis analysis, HP paid its executives more than the median of 33 other similarly sized companies. “Overall the company paid more than its peers, but performed moderately worse than its peers.” On executive pay, Glass Lewis gave HP a D on an A-F scale.

The report also faults Babbio for the $35 million severance payout to former CEO Mark Hurd, now a president at Oracle. The costly agreement that has since triggered several shareholder lawsuits was executed on Babbio’s watch. “While it remains to be seen whether Mr. Hurd was truly terminated ‘without cause’ and therefor entitled to his severance payment, we believe members of the HR and compensation committee should be held responsible when severance payments trigger arguably unjustified payouts resulting in litigation,” the report says.

I’ve asked HP for a comment and will add one here when I hear from them. But from the way these advisory reports are reading, and depending on how influential these things usually are, it sounds like HP is facing the potential of a bit of a shareholder revolt. The annual meeting of shareholders is on March 23.

(I initially referred to the advisory firm as Lewis Glass and have now fixed that. Sorry about that.)


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