April 4, 2003 10:42 AM PST

HP logs severance, 'poison pill' votes

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Hewlett-Packard shareholders this week took on management and won, passing measures designed to limit the company's authority to award large severance packages or to prevent a hostile takeover.

A proposal opposed by management that would require shareholder approval for some severance packages was "narrowly approved" by shareholders, HP announced Friday. The measure would require shareholders to give their blessing to any severance package that was more than 2.99 times an executive's salary and bonus. In a statement, HP said that its board would "duly consider the recommendation."

That measure and a number of other issues were put to a vote Wednesday at HP's annual shareholders meeting in Atlanta. HP said at the time that the vote on the severance issue was "too close to call." An HP representative on Friday declined to say how many votes the severance proposal received. HP said it would make the final, certified vote totals available in a quarterly filing with regulators. HP had announced preliminary vote totals for all of the other proposals on the ballot at its shareholder meeting.

On Wednesday, HP shareholders voted to prevent the company from adopting a "poison pill" takeover defense without first gaining shareholder approval, despite management objections.

Such policies, known officially as shareholder rights plans, are designed to allow a company's board of directors to try to thwart a hostile takeover by issuing more shares. Earlier this year, HP rescinded the shareholder rights plan it adopted during its proxy fight over the Compaq Computer acquisition. In arguing against the proposal, HP CEO Carly Fiorina maintained that while the board had no present intentions for a new plan, it needed the flexibility to adopt such a plan in the future.

After the inspector of elections announced that the proposal had passed, Fiorina said that the board would duly consider those recommendations. More than 1.2 billion shares were voted in favor of the proposal compared with 940 million shares voted against it.

However, in a victory for management, shareholders narrowly defeated a measure that would have required the company to account for stock options as an expense.

Fiorina had argued that expensing options would make it harder to compare HP's results to that of its peers. "At this time we don?t believe it is in the best interest of shareholders to change our method of accounting," she said.

Shareholder activism has increased amid a declining stock market, concerns over executive pay and reaction to recent accounting scandals at companies such as Enron and Worldcom. Other companies are likely to face challenges similar to those at HP, said Horace Nash, a Mountain View, Calif., lawyer who heads the securities group at Fenwick & West.

"I think we'll see more of this thing this year and next," Nash said. "It will start with the big companies. The only question is which proposals are going to be pressed."

Although they're still not unified, Nash said, shareholders are increasingly organized and able to stir up support for any number of issues that rein in management's controls.

"They?ve found their voice, and they are using it," Nash said.

All of the company's director nominations easily won approval, while several other shareholder proposals opposed by management were soundly defeated.

HP said that moving the meeting to Atlanta from its usual spot in Silicon Valley was designed to let more shareholders attend the annual meetings. The company said it plans to hold the meeting in different spots each year. About 150 people turned up at Wednesday's event, HP said.

HP had sent letters to some institutional shareholders letting them know management's positions and urging shareholders to offer their backing.

 

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