In yet another high-level executive departure, top-level content exec Luke Beatty, the founder of the Associated Content unit that the Silicon Valley Internet giant bought several years ago for $90 million, is departing, according to sources.

Beatty’s move comes as Yahoo is preparing large-scale layoffs and a massive restructuring, which several sources said will begin mid-week.

It’s another blow for the company, given the entrepreneurial Beatty was the kind of exec that Yahoo desperately needs to keep if its media aspirations are to remain innovative.

While Associated Content — now called the Yahoo Contributor Network — has been integrated into the media offerings at Yahoo, other upcoming cuts in Beatty’s areas of management could be decimating.

The changes are due to a new initiative from new CEO Scott Thompson to turn Yahoo around after years of lackluster performance. The situation has been tense at the iconic company, made worse by an increasingly nasty proxy fight that is also looming.

According to sources, AOL will be announcing that it is making cuts of up to 40 employees in its communication products teams, specifically its AIM instant messaging and AOL Mail units. As part of the changes, its SVP of business operations, Eric van Miltenburg, and AIM head Jason Shellen will be leaving.

[UPDATE: AOL confirmed those moves to be several hours after this post appeared.]

Shellen is a particularly high-profile departure, having sold his start-up Thing Labs, maker of the Brizzly family of Web-based social software, to AOL in 2010. The Thing Labs team, headed by the Google and Blogger vet, had been integrated into AOL’s AIM and other similar offerings.

Van Miltenburg, a former Yahoo exec, had headed up business operations for the now-shifted consumer applications unit.

The departures are among a number of exits by AOL execs who had come to the New York-based Internet company, which has struggled to turn itself around in recent years under CEO Tim Armstrong. The company is now facing a challenge from an activist shareholder, one of the reasons for a renewed focus on cost-cutting and other restructuring.

According to sources close to the situation, AOL’s CTO Alex Gounares is leaving the New York-based Internet company.

At AOL, he was in charge of all of AOL’s vast technical operations. He is among a number of execs who have been hired by CEO Tim Armstrong and then have departed.

Gounares came to AOL from Microsoft in May of 2010. He was corporate VP of Advertising Research and Development and CTO for the software giant’s Online Services division.

Sources said Gounares wanted to move back to the Seattle area.

His departure is certainly bad timing, in any event.

AOL has recently been targeted by activist shareholder Starboard Value, which put up an alternate slate of directors last week in a brewing proxy battle.

An AOL spokeswoman declined to comment.

A little more than a week ago, Morgan Stanley kneecapped Demand Media’s stock by downgrading the Santa Monica, Calif., online content company’s prospects.

Some worries: Pressure from algorithm-tweaking Google, upon which Demand relies heavily for traffic; worrisome drops in said traffic due to said tweaking; and not enough uptake on higher-quality, premium stories the company had promised in the fall.

Demand shares fell 6.5 percent that day, to close at $5.93.

It has recovered a bit to $6.13 today, but is still off almost 8 percent since the beginning of the year, and 71 percent from a year ago.

One irony to the tough call by Scott Devitt, of course, was that Morgan Stanley was the investment bank that had taken Demand public in January of 2011, at $17 a share.

In addition, the recent departure of three of the company’s six founders has also worried investors.

All this will presumably be on display today when Demand reports its fourth-quarter earnings. Wall Street analysts are expecting Demand to earn seven cents a share on an adjusted basis on an expected $81.95 million in revenue.

We’ll see after the market closes, as well as what its execs have to say about the key metrics of costs and traffic.

For someone who is still mulling things over about what to do about his more than five percent investment in Yahoo, hedge fund investor and activist shareholder Daniel Loeb has been very busy lately getting his arsenal ready.

While deciding whether to mount a proxy fight — a potentially nasty public fight with the Silicon Valley Internet giant that sources said could start much earlier than the expected February 24 filing date to make a board challenge — he’s also had at least one phone meeting with new Yahoo CEO Scott Thompson in the last week to talk about the company’s future.

Sources said the talk was cordial, although the pair were not yet discussing any kind of rapprochement, which presumably could lead to board seats for Loeb.

But how far Loeb will go and how far Yahoo will give are the big open questions that are about to be answered.

The earliest nominations for directors by outsiders like Loeb can be submitted is February 24. He then has a month after that to propose a competing slate.

Starting last fall when he started accumulating Yahoo shares, Loeb had aggressively called for the ouster of Yahoo’s Chairman Roy Bostock and director and co-founder Jerry Yang. Yang stepped away from Yahoo earlier this month and Bostock just announced his upcoming departure this week.

Despite the renewed communication with Yahoo, Loeb is still acting like he might opt to fight — or at least freak out Yahoo enough to cooperate.

Among his recent activities, according to many sources:

* Attempting to assemble an alternate slate of directors — including trying to persuade high-profile entrepreneurs such as David Goldberg and Max Levchin to join his board. Loeb has been to Silicon Valley several times to stir that pot.

* Meeting with a spate of powerful tech execs, here and elsewhere, in order to gain support for his battle and search for his own preferred leaders for Yahoo. A favorite is Hulu CEO Jason Kilar.

* Working on hiring a top outside crisis communications firm to handle the expected onslaught of media mudslinging that is sure to take place.

* Buttonholing large Yahoo investors to join him and getting, sources said, more support than expected from bigger ones. That’s no surprise: Capital Research Global Investors and Capital World Investors, Yahoo’s biggest institutional shareholders, voted against the company’s board in its last proxy battle and has been much disgruntled with the latest Yahoo stumbles.

* Recently reaching out to top Yahoo execs, including both Yahoo’s Chief Product Officer Blake Irving and Americas head Ross Levinsohn. Irving was so spooked by Loeb’s hello-there, several sources said, that he sent an email to Yahoo’s top staff about the contact attempt, noting he did not return the call (teacher’s pet alert!).

These are, of course, classic activist tactics by Loeb, aimed at getting the changes he wants made at Yahoo by applying real and perceived pressure.

Loeb had previously criticized the company’s talks with private equity investors, saying the prices being discussed were too low, which helped scuttle those talks.

Yahoo has also tried to gird itself and to assuage other shareholders and the media, as it can hardly stand what a proxy fight will do to its already battered image.

Some recent moves to look like it is on the move include: Loudly negotiating with its Asian partners for a big payday; making significant board changes; and hiring Thompson. Next up, as I previously reported, a large-scale restructuring and the inevitable cost-saving layoffs.

Who wins — and who blinks — in this Loeb versus Yahoo face-off, though, is still to be determined.

Earlier today, I had reported that Yahoo Chairman Roy Bostock was stepping down.

He is, and the full letter he just released saying so is below.

Bostock did not say in the missive who will be Yahoo chairman in his place. Intuit CEO Brad Smith has a full-time job, and the newly installed Weather Channel CEO David Kenny does, too. Among the current directors, that would leave Sue James, Patti Hart and newly installed Yahoo CEO Scott Thompson — or one of Yahoo’s new board members.

In the letter, Bostock outlined the departures of four board members and the addition of five more directors (two of which were just named); did a little back-patting of his recent efforts to turn Yahoo around (after presiding over the board that got the Silicon Valley Internet giant into this mess); noted that the Asian talks to sell Yahoo’s stakes there are proceeding (it’s coming!); gave Thompson a thumbs-up (go, Scott!); and delivered kudos to Jerry Yang, the co-founder who left only weeks ago.

“Working with Jerry was always a delight,” wrote Bostock.

(Me, not so much, I would guess! Bygones?)

All kidding aside, Bostock has been the subject of a lot of criticism about Yahoo’s troubles, both deserved and undeserved, most especially for the non-sale to Microsoft several years ago. Many, including activist shareholder Daniel Loeb most recently, have called for his resignation.

It has not been an easy job, to be sure, so it must be a bit of a relief for the longtime advertising exec, who serves on other prominent boards, to finally pull away from the Yahoo black hole.

So, who’s next?

One interesting line in the letter, which everyone already knew, was that none of the various bids from outside investors have passed muster.

Wrote Bostock: “We have engaged with potential investors and reviewed proposals concerning an equity investment in the Company, although at this time there have not been any proposals which have been deemed by the Committee to be attractive to our shareholders.”

Here’s the Bostock letter:

Yahoo! Releases Chairman’s Update for Shareholders

SUNNYVALE, Calif., February 7, 2012 – Yahoo! Inc (NASDAQ: YHOO), the premier digital media company, today released the following shareholder update from its Chairman Roy Bostock.
February 7, 2012

Dear Fellow Shareholders:

I write today to update you on the actions the Yahoo! board has taken, and the actions it is pursuing, to increase shareholder value and position the Company for growth. These actions result from a process I initiated about six months ago in a special meeting of the independent directors in which we analyzed the reasons why Yahoo! was not meeting either our own expectations or those of our shareholders.

The board decided then to move aggressively on three fronts to position Yahoo! for future success: one, we initiated a search for a new Chief Executive Officer with a vision and set of skills to lead Yahoo! into the future; two, we undertook a comprehensive strategic and structural review of the business; and three, we decided to assess the composition of the Company’s board of directors relative to its ability to enhance the prospects for Yahoo!’s future success. We have made progress on all three fronts.

First, and most importantly, we have appointed Scott Thompson as CEO to lead our company. Scott is a capable and dynamic leader who brings the experience and expertise the Company needs to achieve robust growth and success in the marketplace. Over the coming months and years, Scott will lead an outstanding team of Yahoos to deliver engaging user experiences driven by innovative products.

Second, we have made significant progress on the comprehensive strategic review which is overseen by the board’s Transactions and Strategic Planning Committee, chaired by director Brad Smith, the CEO of Intuit. The Committee’s guiding principle has been to assess alternatives which would increase value for all Yahoo! shareholders, and the Committee has been open to any transaction or initiative that would serve this objective.

As part of this review, we have pursued a wide range of discussions with potential partners. We have engaged with potential investors and reviewed proposals concerning an equity investment in the Company, although at this time there have not been any proposals which have been deemed by the Committee to be attractive to our shareholders. We are also in active discussions with our partners in Asia regarding the possibility of restructuring our holdings in Alibaba Group and Yahoo! Japan. The complexity and unique nature of these transactions is significant. While we continue to devote significant resources to these discussions, we are not in a position at this time to provide further detail or to provide assurance that any transaction will be achieved.

Finally, the board has concluded that in order to accelerate the Company’s transformation, the combination of a new Chief Executive Officer with an enhanced team of independent directors would provide Yahoo! with the expertise and perspectives necessary to drive innovation and growth going forward. Therefore, Mr. Joshi, Mr. Kern, Mr. Wilson and I have volunteered not to stand for re-election at the next shareholders’ meeting.

Furthermore, the board today elected two highly qualified independent directors, Alfred Amoroso and Maynard Webb, Jr. Mr. Amoroso served as President and CEO of Rovi Corporation until December 2011 and, among other positions, had previously served as the President, CEO and Vice Chairman of META Group, Inc., the President and CEO of CrossWorlds Software, Inc. and as a member of the world-wide management committee of IBM Corporation. Mr. Webb, the Chairman of LiveOps, Inc., served as that company’s CEO until July 2011. Prior to that, Mr. Webb was Chief Operating Officer of eBay and Senior Vice President and Chief Information Officer for Gateway, Inc., in addition to management, leadership and board positions at several other companies spanning his 30-year career.

The board continues its search for additional independent directors. This search is being led by director Patti Hart, CEO of International Game Technology, Inc., who chairs our Nominating and Corporate Governance Committee. We anticipate announcing additional directors to round out the board as soon as this process concludes.

Separately, as previously announced, Jerry Yang has resigned from the board of directors and other positions within the Company to pursue his many interests outside of Yahoo!. Working with Jerry was always a delight. He is a visionary and a pioneer who contributed enormously to Yahoo! since he co-founded the Company in 1995. He will be missed. The board thanks him deeply for his service and commitment to the Company.

Thus, following this year’s Annual Meeting a majority of Yahoo!’s directors will be new to the board this year, and all directors will have joined the board since 2010. We believe that this reconfigured board, with a fresh set of perspectives and diverse set of skills, will enable the Company to move forward even more aggressively.

It has always been a privilege for me to serve as Chairman of Yahoo!. The employees of Yahoo! remain the heart, soul, and future of the company. And with Scott Thompson leading them, they are the reason why I believe Yahoo! will create significant shareholder value over the coming years.

In September, this board moved proactively and decisively to improve the performance of the Company for the benefit of its shareholders. These actions could not have been accomplished without the support and active participation of each director on the board. For that, I thank them. And I thank them for the knowledge, expertise, talents and commitment they have brought to Yahoo!. We all take pride in the fact that we are positioning Yahoo! for success in the future. Yahoo! is an incredibly strong brand with formidable assets. I have every expectation that under Scott’s leadership, working together with the reconstituted board, the Company will thrive for many years to come.

Sincerely,
Roy Bostock
Chairman of the Board

According to sources close to the situation, Yahoo has instituted a hiring freeze across the company and is considering a reduction in force in support units of the company.

While the details of any layoffs — which are expected to be small and selective for now — are still being worked out, sources said that the stricture not to fill hundreds of open positions is the first step toward significant cost-cutting initiatives across the Silicon Valley Internet giant, in the wake of what it expects to be another weak quarterly report next week and a looming proxy fight.

Yahoo reports its fourth quarter earnings Tuesday. While the company has managed to improve the results in the last part of the quarter, sources said they will still show continued weakness in its key businesses and consumer usage.

That’s as competitors such as Google and Facebook have been showing significant growth, especially in the display advertising market.

Thus, new Yahoo CEO Scott Thompson appears to be zeroing in on costs and managing for margins, said multiple sources, much as his predecessor Carol Bartz did at the start of her tenure.

But many think Yahoo needs even more drastic changes, including massive cuts in staff and also product arenas, to give the company new life.

That includes shifts in leadership at the top levels too. In a major move this week, co-founder Jerry Yang stepped down from the company’s board and all roles there. More directors are expected to leave soon, too.

That will likely come after negotiations to sell part of its lucrative stakes in both the Alibaba Group and Yahoo Japan are successfully completed.

While not a certainty, Yahoo’s board hopes that will happen sometime before activist shareholder Daniel Loeb initiates a proxy battle against the company in the coming month.

Sound complex?

It is, and also troubling to Yahoo’s long beleaguered rank and file, who have been worried about more layoffs.

The Yahoo troops have been under intense pressure and have suffered from ongoing attrition. Just yesterday, for example, Yahoo lost one of its top advertising execs, Seth Dallaire, to Amazon.

The company can ill afford such departures of key talent, even as it seeks to pare employee numbers in other parts of its business.

At the end of its last quarter, Yahoo reported that it had 13,700 staffers, down from 14,100 in the previous year.

Yahoo, of course, declined comment.

According to sources close to the situation, Guilherme Ribenboim, VP and managing director of Latin America and U.S. Hispanic markets, has left Yahoo for another job at a start-up.

The 12-year Yahoo veteran, who is located in Brazil, is widely respected at the troubled Silicon Valley Internet giant and leads an area that is growing for it.

[UPDATE: A Yahoo spokeswoman confirmed the departure of Ribenboim.]

[UPDATE NO. 2: Also leaving: Connie Lee Schiefer, the well-regarded Yahoo veteran of more than eight years. She was VP of product management at Yahoo's cloud platform group.]

Sources said that attrition — already a big problem at Yahoo — is about to hit the company hard. While the board and its top leaders try to figure out a strategy — either a sale or whatev — in the wake of the firing of CEO Carol Bartz, Yahoo has yet to put in place a new plan to hold onto talent.

“The people walking out the door is about to become a flood, unless management acts,” said one employee in a common sentiment among people I have interviewed at Yahoo.

According to sources at the company, Yahoo’s Carol Bartz is no longer CEO of Yahoo. CFO Tim Morse has been named interim CEO.

The situation around what is clearly an ouster is uncertain, but Bartz has had a very rocky tenure in her 32 months at the company.

[UPDATE: Yahoo confirmed the departure of Bartz in a press release outlining a reorganization.]

Bartz also sent a stunning email to staff, saying she had been ousted:

To all,

I am very sad to tell you that I’ve just been fired over the phone by Yahoo’s Chairman of the Board. It has been my pleasure to work with all of you and I wish you only the best going forward.

Carol

Several sources said the board, specifically Chairman Roy Bostock and Co-founder, as well as director Jerry Yang, acted today, informing Bartz by phone of the need to make a change.

What the next steps will be are unclear, but Yahoo needs desperately to explore a range of strategic changes to bring it back to its former glory.

But Wall Street liked the move, with Yahoo stock up more than six percent already in after-hours trading.

Sources said Morse held a call with Yahoo’s senior staff this afternoon, telling them Bartz was out and that a search for a permanent CEO will be commencing.

Why Yahoo’s board did not name a new leader immediately is curious and might indicate a larger deal around Yahoo is in the offing.

As I wrote earlier today, when the Internet giant announced on January 13, 2009, that it had hired longtime Silicon Valley tech veteran — who was well-regarded for her tenure at running Autodesk — to replace outgoing CEO and co-founder Yang and turn around the company, there was much hope.

At the time, she presented a take-no-prisoners image and was touted as someone with a reputation as a professional manager who could clean up the place.

Not so, as it has turned out.

While Bartz has streamlined certain areas and made some strong management hires, her performance has been decidedly bumpy and mostly downhill.

The share price has settled in at about $12.50 (just about where it was when Bartz took over), Yahoo’s recent financial results have been weak, its key advertising business is struggling, its attrition rate among engineers and others is startlingly high and its product innovation cycle seems stopped up.

Add to that: Weak relationships with key Asian partners, a pricey but failed marketing effort and a proclivity for embarrassing verbal gaffes by Bartz.

Still, given that Yahoo’s Internet traffic, top media sites and brand remain huge, the going-sideways situation has again caused some investors — including powerful private equity firms and other monied investors — to pull out their spreadsheets about a variety of scenarios related to Yahoo.

The players who have sniffed around of late are powerful, sources said, including Silver Lake Partners, Andreessen Horowitz, former News Corp. exec Peter Chernin and Providence Equity Partners, among others. Also in the Wall Street rumor mill recently are large companies: AT&T, News Corp. and Verizon.

All the schemes are different — ranging from taking it private to making a large investment to splitting it into parts — although they all seem to require cooperation with Yahoo to get done.

And while there is no serious effort afoot as yet, there have been increasing signs of late that Yahoo’s board is ready to listen to any serious offers, said multiple sources, especially as the company has continued to drift under the leadership of Bartz.

While board chairman Bostock has publicly backed Bartz — after all, he was her biggest champion at the time of her hiring — multiple sources said he had started to become more involved at looking at the management issues at the company and its challenges.

Yang — still a key figure at Yahoo — has also become more active, said sources, and tensions between him and Bartz have increased over the last few months.

The increasing pressure on the directors of the company from its major shareholders to act has gained in recent months, said sources.

Thus, Bartz is gone and the next chapter in Yahoo’s corporate drama begins.

[Photo credit: Asa Mathat for All Things Digital]

Related posts

• As Yahoo Continues to Wobble, Investors (And Board) Eye Options
• Exclusive: Carol Bartz Out at Yahoo; CFO Tim Morse Named Interim CEO
• Carol Bartz’s Last F%*& You — Now Aimed at Yahoo Board
• Yahoo’s Statement on Bartz Ouster
• Wall Street Likes Bartz’s Firing — Yahoo Stock Spikes on News
• My Picks for Yahoo’s Next CEO — Maybe Snoop Dogg, Ya Digg?

Second, Amitabh Srivastava, head of Microsoft’s Azure cloud platform business, announced that he’s leaving the company. Srivastava, who joined Microsoft in 1997, was widely considered to be a possible successor to Muglia, but lost out to Nadella.

One of the few ever to be named a Distinguished Engineer at Microsoft–an honor now known as Technical Fellow–he was tapped, along with Brian Valentine, by then Windows chief Jim Allchin to take over the Windows engineering efforts in 2003 at a time when the operating system was being widely derided as plagued with security and other problems. Srivastava had his team draw up a map depicting how all the various pieces of the Windows source fit together. It was eight feet tall, 11 feet wide, and was described in a 2005 Wall Street Journal story as looking like a “haphazard train map with hundreds of tracks crisscrossing each other.”

Srivastava and Valentine are credited with the 2004 proposal to streamline how all those pieces functioned, a plan that would allow various features to be added or removed without disrupting the whole operating system. The idea was a partial response to the looming threat from Google, which that year had launched Gmail. The problem was their plan required throwing out a lot of legacy source code that had been in Windows for years, and starting fresh.

Srivastava’s changes included automating testing on features that had for years been done by hand. Code with too many bugs were sent to “code jail.” Over time, code flowing into what was to become Windows Vista improved.

We all know what happened with Vista–it too was widely panned. But the engineering processes put in place had a lot to do with the many improvements that appeared in Windows 7.

Srivastava then moved on to a new Microsoft project in 2006, code named Red Dog, now known as Azure, which launched in 2008. From this he pivoted to running the server and cloud division, overseeing Microsoft’s relationships with enterprise and data center customers.

People I’ve been talking to who tend to know a lot about the internal politics at Microsoft say this isn’t the last of the changes. Now that Muglia’s replacement has been announced, Nadella is going to want to name key members for his team, which means that those not tapped will probably choose to leave as well. The management shake-up at Microsoft is not over yet.

Srivastava has a Ph.D. in computer science from Penn State, and was invited to deliver the commencement address at the school’s College of Engineering in 2008, which is in the video below. Key quote: “In the end, it’s all about execution.”

Rivet’s departure follows that of CEO Dirk Meyer, who resigned back in January, also rather abruptly. No word yet on AMD’s plans to replace either exec. CFO Thomas Seifert continues to serve as interim CEO of the company.

In a blog post, Scott Guilfoyle, PayPal’s CTO, made the announcement and introduced the new head of the platform team, Matthew Mengerink.

But the departure of Bedier to Google is a big blow to PayPal, considering that both companies are racing to build next-generation payment platforms with a strong mobile component.

Bedier held the title of VP of platform and oversaw PayPal’s global payments platform, including mobile.

Mengerink is an internal replacement for the position, having worked at PayPal for 10 years. He previously led the PayPal architecture, infrastructure, payments development, core technologies, international development, customer quality and engineering services teams.

I will update when I hear more on what Bedier will be doing at Google.

It’s the latest development in a shareholder lawsuit against HP in which the plaintiffs have alleged that HP’s board of directors let Hurd walk out the door with too much money when he resigned following accusations of sexual harassment by a onetime contractor. They’re seeking an order that would require Hurd to disgorge the payments he received as his severance deal.

The judge, James Ware, ignored Hurd’s argument that he deserves to see documents relating to the matter that so far HP has refused to share, though the ruling doesn’t address whether he’ll ultimately get to see them or not. Hurd had objected to a new investigation, saying he would agree to it only if he were to get copies of the initial demand letter from shareholders that led to the lawsuit, as well as related documents that are under seal in a separate shareholder case on the same issue that’s before the Delaware Court of Chancery. Ware scheduled a hearing on March 20 to hear an update on the investigation.

Hurd resigned from HP in August after accusations about sexual harassment arose from Jodie Fisher, a onetime actress and former HP contractor. He was found not to have violated HP’s sexual harassment policy, but was found to have violated HP’s expense-reporting policy. After leaving HP, he went on to become co-president of Oracle, after Oracle CEO Larry Ellison criticized HP’s board of directors for its handling of the incident.

The various boardroom dramas that have roiled HP’s directors during the last decade have often overshadowed HP itself. Last August’s blowup involving the departure of CEO Mark Hurd following accusations of sexual harassment occurred against the backdrop of lingering memories of the 2006 scandal involving the use of illegal methods to spy on journalists that ended the tenures of three HP directors.

Before that there was a public fight against HP’s 2002 acquisition of Compaq, led by dissident director Walter Hewlett, who eventually lost his seat. The Compaq deal ultimately cost Carly Fiorina her job at HP after a boardroom confrontation in 2005.

The result of all this is that boardroom drama has become something of an HP specialty, along with printers, computers and IT services. Criticizing the board’s actions has become something of a sport, with Oracle CEO Larry Ellison serving as the most public practitioner.

Shareholders appeared to agree that a change was overdue. HP shares shot up right away as word of a shake-up began to leak right before markets closed yesterday. HP shares closed up one percent today, trading at levels not seen since before Hurd’s abrupt departure in August.

The four departing directors were deeply involved in the Hurd kerfuffle. Two were Hurd defenders, and the other two wanted him out. All four volunteered. Chairman Ray Lane, in an interview with The Wall Street Journal, said the debate over Hurd’s status “took a lot out of this board.”

It’s highly unusual for a company to change its board so deeply and so suddenly. The five new additions became directors effective today without any input from shareholders, and will serve until a vote can be held to approve them for a full one-year term at the next shareholder meeting in March.

Shareholders in theory have the power to offer their own slate of directors, but there’s little time for that, and even if some group were to do so, its only option would be to do so at its own expense. SEC rules governing the access to the proxy nominating process are currently being challenged in court by the U.S. Chamber of Commerce and Business Roundtable, and so the rules that would allow shareholders to more easily submit their own list of names are on hold pending the outcome.

Absent a proxy challenge, HP shareholders will be put in the position of accepting a board on which seven of 13 directors are brand-new. That’s a lot of new blood and may turn out to be the kind of change HP’s board needs. And getting the change done all at once rather than gradually may prove the better option.

However, I can’t help but wonder: In seeking to close out a period in which HP’s board became known more for its drama than anything else, is more drama the right answer?

Word of a new probe comes in response to a shareholder lawsuit in federal court in California claiming that HP paid Hurd too much in severance when he left. In the meantime, both HP and the shareholders suing have asked the judge to put the case on hold until the investigation is complete.

Hurd says he wants to see a copy of the shareholder demand that led to the lawsuit, and will oppose the delay in the case until that happens. HP says that as a subject of the inquiry, Hurd isn’t entitled to see any of the documents in question.

In the Delaware case, Hurd’s lawyers argued that the original letters from Jodie Fisher, a onetime actress and a former HP contractor who accused Hurd of sexual harassment, shouldn’t be made public.

Hurd, you’ll recall, went on to become co-president of Oracle, after Oracle CEO Larry Ellison raked HP’s board over the coals for its handling of the incident. Ellison wasn’t alone, as former General Electric CEO Jack Welch later piled on.