HP Stockholders After Fiorina Severance
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Former HP CEO Carly Fiorina received a very sweet compensation package when HP dumped her last year. Too sweet, in fact, claim some stockholders.
Earlier this week, a group of unions holding HP stock filed a class action suit against HP, Fiorina and the board of directors claiming Fiorina's package violated the company's own policy.
The unions want Fiorina to refund HP millions of dollars.
When Fiorina departed just over a year ago, the HP board authorized $21.4 million in cash to Fiorina plus stock and pension benefits worth another $19 million.
According to HP executive compensation rules, departing executives are entitled to no more than 2.99 times their base salary and cash bonus. Fiorina's $21.4 million payment works out to approximately 2.5 times her base salary, but the bonus takes the number over the maximum 2.99.
"One would think they would abide by their own policy," Michael Barrett, one of the attorneys representing the unions, told internetnews.com.
HP maintains the lawsuit is without merit.
Barrett contends that two days after Fiorina was fired, the HP board "tweaked" the compensation package to "disguise" the additional payouts.
"I know they breached the 2.99 provision," he said. "The question is just how much more [then 2.99] they changed it."
The basis of the lawsuit actually dates back to 2002, when HP authorized a $16 million severance package to former Compaq President Michael Capellas. The Service Employees International Union complained about the payment, and the board changed the executive compensation rules to the current 2.99 ceiling.
According to HP's new rules, any compensation over the 2.99 threshold requires stockholder approval.
"However, the board breached the severance policy and its fiduciary duties ... without seeking or obtaining shareholder approval, awarding [Fiorina] a severance package that exceeded the 2.99 threshold," the lawsuit states.