The heat has been building on Hewlett-Packard's board as the company prepares for its annual meeting next week, with several major shareholders calling for a protest vote against some directors.
In a securities filing on Monday, HP struck back against critics, arguing that a turnaround plan is in place and making progress, and that any upheaval on the board would cause a distraction.
"Changing the composition of the HP board of directors could be destabilizing to the company," wrote lead independent director Rajiv L. Gupta in a letter to shareholders. "Losing some of our directors in an abrupt and disorderly manner could undermine our efforts to stabilize the company. As such, we do not believe that changing the composition of the board now is in the long-term best interests of the company or its stockholders. What the company needs now is stability and consistency of leadership so that the board and the management team can devote all of their focus and energy towards executing on our strategic plan."
Anger has been building over the last couple of years at a board that at times has struggled to escape a reputation for being less than competent. Among the perceived sins: The mishandling of the departure of CEO Mark Hurd following allegations of sexual harassment; the hiring and abrupt firing of CEO Leo Apotheker after less than 11 months; failing to advocate a strong strategy; and signing off on large acquisitions that resulted in billions of dollars of write-downs.
The most recent of these was Autonomy, the British software company HP bought for $11 billion in 2011. Last fall, HP announced it had uncovered widespread accounting fraud at Autonomy and was writing down another few billion dollars.
That was the last straw for some shareholders who have turned their ire toward the board rather than CEO Meg Whitman, who was on the board during the Autonomy acquisition.
Just last week, New York City Comptroller John Liu issued a news release saying that his city’s pension funds will vote against reelecting HP directors John Hammergren and G., Kennedy Thompson "because of their failure to protect investors from costly, misguided acquisitions."
In addition, two firms that make recommendations on how shareholders should vote on proxies have recommended variously that investors vote against the reelection of Gupta, Marc Andreessen and Chairman Ray Lane in addition to Hammergren and Thompson.
Gupta in response argues that all the board members are highly qualified for their roles. He also tries to highlight how far HP has come in recent months under Whitman.
"HP is making progress in executing on its strategy and improving on its financial performance," Gupta writes. "HP has made significant progress in recent months in improving its financial performance and moving beyond the challenges of the past."
Among the examples of success he cites:
"HP has defined a clear strategy for the business, and our better-than-expected first fiscal quarter earnings performance is one constructive data point in our turnaround journey;"
"HP’s management team, led by Meg Whitman, a CEO that this board of directors put in place, is making the difficult, yet necessary, improvements to set HP up for long-term success;"
"HP has laid a solid foundation for its future and our business turnaround is underway;"
"The HP Board has built an excellent relationship with HP’s CEO and the other members of HP’s executive team;"
"HP has separated its corporate development group from its business strategy team and placed it under CFO, Cathie Lesjak, and we believe that separation will improve the decision-making process with regard to any future acquisitions or divestitures."
It should be noted that Lesjak reportedly spoke out against the hefty price tag that came with Autonomy before the deal closed. The board and the rest of management reportedly ignored her warnings.
Such shareholder revolts tend to be long shots against boards supported by management. Still, the recent outcry should make for a spicier-than-usual annual meeting on March 20.