HP Shareholders Rein in the Board

Hewlett-Packard shareholders Wednesday shot down a handful of plans that would have given its board more power.

By overwhelming majorities, voting investors of the Palo Alto, Calif.-based computer and printer maker disapproved of proposals to extend corporate indexed and expensing options and demanded more say in any provision that combats hostile takeovers — also known as a poison pill.

The plan adopted by shareholders recommends HP’s board get shareholders’ approval first before adopting any poison pill. In January 2003 the HP board terminated HP’s poison pill that was then in effect at the time.

During its annual meeting, HP CEO Carly Fiorina advised shareholders filing their proxy votes that this was just a precaution and there was no immediate danger of HP being taken over.

Shareholders voted more than 1 billion in favor of the plan with 942 million against. Some 34 million abstained their votes and there were 459 million broker non-votes. HP said the board “will duly consider the recommendation about future poison pill adoption.”

Fiorina also expressed high confidence in the company’s direction, saying this was the same board that put together one of the biggest mergers in tech history and built it into a powerhouse.

“Nearly one year after closing the Compaq acquisition, we look forward to closing soon one chapter of a successful integration and opening a new chapter that delivers even more to our shareowners, customers, partners and employees.”

But this was the same group of shareholders that were violently split on whether to trust Fiorina and HP’s board to agree to acquire Compaq Computer.

HP shareholders also went against the grain and turned down proposals to revise indexed options and expensing options.

Shareowners also approved the HP executive pay-for-results plan, which Fiorina and the board recommended against.

Not announced at the meeting was the vote on the proposal urging the board to seek shareowner approval for future severance agreements for senior executives that provide benefits in an amount exceeding 2.99 times the sum of the executive’s base salary plus bonus. The company said results of this particular vote were too close to call and were still being tabulated.

In a show of support, all 11 board nominees were elected to serve as directors of HP for a one-year term.

Of the 11 board nominees, four stood for election as directors of HP for the first time: Lawrence Babbio, Jr.; Sanford Litvack; Thomas Perkins; and Lucille Salhany. These four directors served on the Compaq board prior to Compaq’s acquisition by HP.

“The newly elected board brings a unique balance of qualifications and experiences to HP and its shareowners,” said Fiorina

With regard to its market position, Fiorina said every division has made headway and even supplanted Sun Microsystems in the UNIX server revenue. Fiorina also though it quite interesting that its big PC rival, Dell Computer , “has to search for new growth opportunities” by increasing its printing and handheld lines.

“HP is no longer an integration story. The integration is largely complete and it is working. This is now an execution story and a leadership story,” Fiorina said. “We now turn our attention to winning and growing and now see opportunities to grow efficiencies.”

Also at the meeting, shareowners ratified the appointment of Ernst & Young LLP as independent auditors to audit HP’s consolidated financial statements for the fiscal year ending Oct. 31, 2003.

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