HP is removing almost one-third of its board of directors this spring, with five new members taking seats effective January 21 -- just one day after the company filed a motion to re-investigate its actions during the removal and multi-million-dollar compensation of former CEO Mark Hurd.
HP announced on Jan. 20 that four incumbent directors will be stepping down after the HP Annual Meeting of stockholders in March, including Joel Hyatt (of cable broadcast group Current Media, and part of last year's executive search team to replace Hurd), John Joyce (Silver Springs Networks), Robert Ryan (Medtronic) and Lucille Salhany (JHMedia).
The new directors will be Meg Whitman, the former eBay CEO who ran for California governor and lost in 2010; Shumeet Banerji, CEO of Booz & Company; Gary Reiner, former CIO of General Electric; Patricia Russo, former CEO of Alcatel-Lucent; and Dominque Senequier, CEO of AXA Private Equity. Each will have to stand for re-election in March.
HP will have a 17-member board between Jan. 21 and the March resignations of the four board members. Current non-executive chair Raymond Lane, who joined the board after Hurd was ousted, praised the new directors who are standing for re-election. Lane leads the board while not holding an HP executive position. Like the departure of four directors in one move, his standing, non-executive chairman post is unprecedented in HP's history.
Now the company promises to look deeper into the compensation processes and the events that triggered Hurd's removal, as a way of forestalling shareholders' charges of "breaches of fiduciary duties, waste of corporate assets, and unjust enrichment... which have caused damage to the company in connection with or arising out of the board's granting, and Hurd's receipt of, an allegedly unreasonable and grossly excessive severance award upon his resignation." Hurd took a $12 million cash award away from the company after a demand letter alleging sexual harrassment in his relations with contractor and former B-movie actress Jodie Fisher led to his resignation.
The suits are tied to Hurd for another reason, using one set of logic. Fisher's lawyer Gloria Allred accused Hurd of "[telling] her of HP's intention to buy EDS at an HP event in Madrid in March 2008," according to a report in the Wall Street Journal. The SEC is very interested in that item.
A new group of directors named after Hurd's resignation -- the five directors joining the board this week, plus new CEO Leo Apotheker and Lane -- will make up an "independent Committee" to investigate matters. From HP's filing on Jan. 20:
According to HP and the Director Defendants, the investigation will be conducted by a committee of independent directors (the “Committee”), assisted by independent outside counsel – not counsel in this litigation – and will include, among other things, all of the matters included in plaintiffs’ amended consolidated complaint -- including, for example, the circumstances surrounding the departure of Mark Hurd and the Board’s decision to approve the separation agreement between HP and Mr. Hurd.
HP and the Director Defendants currently contemplate that the Committee will report to the Board on the results of the investigation and the Board will decide on the appropriate response to the [suits'] Demand. HP and the Director Defendants maintain that the investigation will thus cover the same subject matter and will undeniably impact this action.
In addition, the investigation will include allegations set forth in the Demand and certain other lawsuits currently pending in this Court and the Superior Court, County of Santa Clara, that include violations of the Foreign Corrupt Practices Act and Anti-Kickback Act of 1986 as against each of the defendants in this action as well as former boardmembers named as defendants in one of the other lawsuits.
In a farewell to departing board members Hyatt, Joyce, Ryan and Salhany, Lane was generous in praise for their work on the board including the years when Hurd ran the board.
"[They] have offered invaluable service to HP over many years, and we are deeply grateful for their insights, counsel and commitment to HP’s business,” said Lane. “These directors worked tirelessly and effectively to navigate HP through a difficult leadership change in the last six months.
“As a recent addition to HP’s board, I have been incredibly impressed by Joel, John, Bob and Lucille’s experience and talents. I know the entire board of directors joins me in thanking each of these directors for their many contributions towards the long-term success of HP.”
Ryan, the former lead independent director of the board, said, "It has been a great privilege to serve on the HP board and see this outstanding company build on its legacy as a technology leader and innovator. HP is well-positioned to drive – and profit from – the changes under way across the technology industry, and I am confident that, with Léo as CEO and Ray as chairman, HP has a strong leadership team in place to continue moving the company forward."