HP Board Members Survive Shareholder Challenge
Director Marc Andreessen got a 69.77 percent yes vote. John Hammergren had the smallest margin, receiving a vote of 53.91 percent in favor of his remaining on the board. Chairman Ray Lane got 58.88 percent of yes votes. G. Kennedy Thompson received a 55.15 percent vote in favor of his remaining on the board.
As proxy votes go this is about as close as you can come without actually removing a director. If nothing else, it’s hard for HP’s board not to have received the message loud and clear that shareholders were sending about the Autonomy deal and other difficulties the company has faced.
Here are some highlights from the day’s events.
1:59 pm: So it’s nearly 2 pm here in Mountain View, Calif., and we’re waiting for HP’s shareholder meeting to get under way.
Still waiting. The light FM jazz just stopped playing and now the audience is quiet. Aaaand just like that, onstage there’s Meg Whitman, Ray Lane, CFO Cathie Lesjak, chief legal counsel John Schultz and I think Rajiv Gupta from the board of directors.
Actually it’s not Rajiv Gupta, but a deputy general counsel whose name I don’t know.
John Schultz is speaking and is asking shareholders to observe meeting rules. He’s talking about the three shareholder proposals. Those who wish to speak in support or against the proposals can do so for only about five minutes.
More formalities to get the meeting going. A quorum is declared present. And the meeting can officially get started.
Now the slate of directors is up. All 11 directors are up for reelection to the board.
The second order of business is to re-appoint Ernst and Young as HP’s auditor. There are some proxy firms and other shareholder groups that are advising against that, in part because they blame Ernst and Young for failing to foresee some of the mess that was the Autonomy acquisition.
Other items of business is the say on pay proposal, a stock compensation plan and the formation of a human rights committee.
A shareholder is now speaking in favor of the human rights proposal. It deals with how HP does business in China and other countries with oppressive political regimes.
Schultz is speaking, and says that the creation of another committee to oversee human rights issues isn’t in the business of shareholders.
Another human rights proposal is up, submitted by a set of religious groups. A reverence whose name I didn’t quite catch is now speaking about it. “We have noted HP’s policies to human rights and related to supply chain and equal opportunity.”
2:20 pm: I’m paraphrasing what he says: He’s speaking on behalf of a proposal that would require HP to report in more detail on supply chain issues, making sure that workers employed by suppliers are protected. HP reports on a lot of this stuff already, but he’s pushing for a lot more detail.
Often, he says, confidentiality rules prevent HP from disclosing exactly how it evaluates its human rights policies with suppliers.
Schultz is speaking again and says the company opposes the proposal.
Now another shareholder proposal, this one about retirement plans.
Schultz is speaking again, opposing the latest proposal. And getting the voting under way.
2:32 pm: Okay, CEO Meg Whitman is speaking. Her remarks are starting with a video.
Meg again: “Most of you know that I’ve been CEO for 18 months. I’ve come to love this company.”
“I’ve now met with 300 or 400 customers around the globe, and they tell me they want HP to win.”
“Some of our customers have operations in 150 or 160 countries, and they want a partner that can match them every step of the way.”
Now on to innovation. “Did you know that HP was the top of the list for patents obtained in 2012 in Silicon Valley, and No. 50 worldwide.”
“But we have to do more, better, faster.”
“Third, I’ve found that HP has tremendous foundational assets, and talented and committed employees. And lastly despite what you may have read, we’re on a solid financial footing.”
“The biggest thing I’ve learned in the last year, is that together we truly make it matter.”
“There is still room for improvement. Fiscal 2012 results were not where they needed to be.”
Whitman: Partners are crucial to our future and we need to embrace them like never before.
Whitman is now revisiting the plan she laid out at the analysts meeting last year.
Whitman: The good news is, we said what we said we would do in 2012. We took action, and took our medicine, and met our guidance.
2:40 pm: Whitman: We expect 2014 will be characterized by recovery and expansion.
2:41 pm: In 2015 we expect you’ll see a rapid acceleration of growth and innovation.
Whitman is now reiterating the financial results.
Whitman: Net debt position has improved to $4.7 billion. But we’re not done. We have a long way to go.
First is creating solid product roadmaps that change how IT is designed and built.
We are reigniting the powerhouse of HP, which is the channel.
Whitman: Why I’m so confident about our strategy: We are living in a period of enormous change. Big shifts in how technology is consumed, used and paid for.
Whitman: It feels like a bigger change than what I saw at eBay.
Whitman: We will succeed because only HP can provide the solutions for the new style of IT. We are the only company that can bring our customers devices, services, software all at once.
2:48 pm: Whitman is closing her remarks.
It has essentially been a repeat of the same speech she’s been giving since HP reported its most recent quarter.
Whitman is closing with some nice praise of HP employees, who “continue to innovate through thick and thin.” She’s now wrapped up.
Time for a Q and A with the shareholders. I see about seven people queuing up to the mics from where I’m sitting.
A question about the data center business. Now about 15 people lining up for questions.
The questioner opines: Over the last two or three years I’ve lost lost half the value of my HP shares.
Whitman: One of the question you’re asking is if you’re better off with a vertical stack versus a commitment to open standards. One of the strengths of this company is the hardware business and the commitment to open standards and open architecture.
Whitman: Now she’s talking about Moonshot, the tiny servers using Atom or ARM chips and which use less power, and take up a lot less space. It’s disruptive innovation, she says.
Whitman is now talking about the 3Par storage business, which tends to simplify enterprise storage.
Whitman: We are actually sold out of our mid-tier storage product. We haven’t been sold out of a product in quite a long time.
Whitman: We are also the leader in software defined networking.
Question: What is the board’s thinking with regard to nominating an independent chairman?
Whitman: I came to HP at a difficult time. My view about the board is that they are helping to turn HP around.
Whitman: This group is helping me lead the transition. Once you decide how you’re going to run your company, you have to get everyone marching in the same direction.
Another question: Change to Win is up. Bill Patterson is speaking. “A strong opposition vote will be delivered to several directors who were involved in overseeing the Autonomy acquisition. In the event that some directors don’t receive a majority vote, the board should comment on that and what it intends to do going forward.”
3:02 pm: Patterson is still speaking. These shareholder rights are of limited value that the company can demonstrate that it has active independent directors. Will the board comment in the event of a strong opposition vote?
Meg just called on director Ralph Whitworth, the activist investor, who owns a lot of shares. He says that he bought the shares and approached the company. He offered himself as a director and Meg and Chairman Ray Lane were up for it. “You can expect some evolution of the board in the coming weeks or months.”
3:06 pm: Whitworth: I hope you will respect the results today and work with us to make this company stronger and more valuable.
More questions. SEIU union trust, a pension fund. Can you confirm that Whitworth has been appointed to a special committee to investigate the Autonomy acquisition. There’s a concern that directors who were involved with that deal not be on that committee.
John Schultz confirms a special committee has been formed. Whitworth, Gary Reiner and G. Kennedy Thompson are on it.
Schultz: The independence of this committee is passed on by a court of law. We believe the committee has the right scope of charter, and the members are the right ones in place consistent with the law.
The questioner is expressing “grave concern” that Thompson should not be on the committee.
A former HP employee, one who dates back to what he calls “the good old days,” would like HP to celebrate its 75 anniversary. Lots of applause.
Whitman: We have an employee committee on that.
Another question. Seven more people in the line. Latest questioner asking about human rights, surveillance in less developed countries. “Never ever admit that David Packard is most admired for cutting 10 percent off expenses, and cutting his own compensation.”
The questioner is suggesting the elimination of health insurance brokers somewhere in the employee benefit process.
Now 10 more people waiting in line to ask questions.
The “question” is more or less turning into a political diatribe about health care policy. Whitman is cutting her off and asking her to get to the point.
3:15 pm: She’s basically trying to get Whitman to support a single payer health insurance scheme.
Another question from a Presbyterian Minister. Something about never voting against the State of Israel. However, he says, HP is selling its products in a way that support the “occupation” of Palestine. He’s asking for transparency, which he says is lacking in the Proxy statement on how products are being used.
Whitman is pointing out an HP exec who is responsible for responses to questions like this, to address his concerns.
Another question from a shareholder and retiree. “My portfolio has taken a dramatic fall. Regardless of this, I marked a ballot to support everything the board recommends.” He’d now like to read something published in 1976.
He’s asking Whitman to stand up for the old HP Way. “It turns out its really hard to kill founder DNA. … We are at our core an engineering company.”
Question from a representative for the AFL-CIO fund. Can you address how the board expects the biggest vote against an S&P auditor in a long time? It’s a question about the proposal to dump Ernst and Young as an auditor.
Whitman: When we do an outside enterprise deal, we have to have someone certify the financials. To have someone other than our auditor do it, it’s not a good use of your money. It would be duplicative to have someone else do it.
Question: What other boards does Whitman serve on? How do you justify the time spent on other boards.
Whitman: After I lost the governor’s race [in California] I was asked to go on a lot of boards and I did. I have been reducing my committments to other boards. She used to be on the board of ZipCar and is now off that as the company has been sold. The remaining corporate board I sit on is Proctor and Gamble and that is good for HP. It’s good to see another big company struggling.
The same questioner is a fan of his HP 20S calculator. “It’s an example of the HP Way. I’d like to see that return.”
Whitman: I came to set this company up for the next 75 years. This company is an icon of American business. We are important around the globe.
One last question and then it’s time to announce the results of the vote.
Last question is from a guy who lived across the street from David Packard. Apparently,he’d like to sell a company to HP. Whitman is laughing.
Whitman is referring him to CFO Cathie Lesjak.
Proxy vote time.
This is the moment of truth. A few stragglers are still voting.
3:29 pm: Polls are closed.
Chairman Ray Lane is announcing the results based on the preliminary tally. Directors first. All have received at least 50 percent. All 11 directors have survived.
3:31 pm: And Ernst and Young has been renominated as HP’s auditor.
The directors and Ernst and Young were the two big items. We don’t yet know what the percentages were on the various directors who had been targeted by ISS, Glass Lewis, Calpers and others.
What’s left is the proposals on human rights committees. Less than 4 percent voted in favor.
It’s pretty much going as the company recommended. Patterson from Change to Win is asking for the percentages on the director votes.
Lane is declaring the business of the meeting concluded. That ends the meeting.
And we’re done!