Read the Letter Launching the Campaign to Unseat Three HP Directors
You’ve probably read today about the campaign launched by a group of pension fund managers who own a big block of shares in Hewlett-Packard to shake up that company’s board of directors.
And if you haven’t here’s a rundown: A collection of pension funds led by the investment arm of the labor federation Change to Win — a.k.a. CtW — has decided to start a push to eject three HP directors who are standing for reelection at a meeting next month. The three in the CtW’s sights are Chairman Ray Lane (pictured), John Hammergren and G. Kennedy Thompson.
CtW owns about 7.8 million shares, which amounts to less than one half of 1 percent of HP shares outstanding, so the chances of the group succeeding are pretty small. But the larger group behind the effort is said to own about 135 million shares, or nearly 7 percent of HP’s equity. That’s enough proxy oomph to get HP’s attention, so the company is taking the effort seriously; a delegation from the board, including Lane, was to meet with representatives of the group today.
Below is the group’s original letter outlining certain problems and demands for changes that it wants from HP. Among them is a request for an “independent special master” who would be appointed to investigate the circumstances leading up to the $11 billion acquisition of the British software firm Autonomy. That deal, you’ll recall, famously went south when HP announced that Autonomy assets would account for about $5.5 billion out of a total $8 billion write-down late last year.
The group also demanded that HP sever ties with its auditing firm, Ernst and Young. Specifically, it complains that HP has paid the firm too much in fees unrelated to auditing work, while those same fees at Dell and Apple have been falling, thus giving the appearance of a conflict of interest between different arms of that firm. It goes on to question other factors, such as whether or not Enrst and Young was paying enough attention to the acquisition of EDS, which itself was the target of another $8 billion HP write-down earlier in 2012: “The Audit Committee’s willingness to allow Ernst & Young to perform multiple and conflicting roles for HP severely undermines shareholder confidence in the ability of the Committee as currently constituted to steer an appropriate course in the future. As a result we believe that this relationship must end now, and that HP should immediately begin the process of finding a new external auditor,” the letter reads in part.
Here’s the letter from CtW in full.