HP Wins Dubious “Worst Footnote” Award for 2011
The readers of Footnoted, the Morningstar-owned blog that follows the surprisingly fascinating world of SEC filings, annually select its worst footnote of the year — in other words, the best/worst disclosure of 2011. Hewlett-Packard won.
And what prompted the voters to award the world’s biggest tech company this dubious distinction? Its severance payment to former CEO Léo Apotheker, who, according to Footnoted’s reckoning, walked away with $25 million to $33 million following an 11-month stint at HP’s helm, during which its market capitalization declined by more than 40 percent.
Footnoted’s Michelle Leder calculated that range, having dug through the byzantine details of Apotheker’s employment contract as well as the separation agreement that HP filed after he left, and concludes the amount was probably closer to $36 million.
Before he was let go, I had taken a stab at the terms of Apotheker’s contract myself and came to a similar range of $28 million to $33 million. Then, after Apotheker’s departure, I trimmed that estimate a bit based on an HP 8K filing. It’s a tricky business running the numbers on these things, but as Footnoted says, we’ll probably get a final accounting when HP files its annual proxy statement early next year.
Apotheker’s package was part of what likely prompted HP to revise its severance policies, as The Wall Street Journal reported earlier this month. From now on, senior HP execs who get pushed out will have to leave behind unvested stock options and grants of restricted shares.
It’s also worth noting that HP beat out rival IBM in the worst footnote selection. Big Blue was in the running for its disclosure of outgoing CEO Sam Palmisano’s $170 million retirement benefit package, which includes, among other things, a $30 million pension that pays $3.2 million a year for life.
But it’s not the first time that HP has taken fire for the size of its payouts to ousted CEOs. When Mark Hurd resigned in 2010, he walked away with a severance deal worth about $35 million, but then later gave some $13 million back by forfeiting a batch of HP shares as part of a legal settlement with HP that followed his joining Oracle as co-president.