March 15, 2006 5:55 PM PST

HP rejects compensation proposal

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Hewlett-Packard won't be forced to introduce a "Carly clause" into its executive compensation policies.

HP shareholders rejected two proposals related to executive compensation and voting rights at the company's annual stockholder meeting Wednesday in Los Angeles, which was available via Webcast. The first proposal would have allowed HP's board of directors to recoup bonuses paid to executives in the event of a restatement of earnings or a "significant, extraordinary write-off," citing the performance of deposed HP CEO Carly Fiorina as an example.

Fiorina received a $21 million severance package from HP when she was fired as CEO in early 2005. This package, which has also provoked a lawsuit, was awarded with no allowances for the company's performance over that period, according to the proposal from shareholder Nick Rossi, acting on behalf of Katrina Wubbolding.

HP Chairman Patricia Dunn noted that the company already has a policy that allows it to recover compensation that was awarded before the discovery of fraudulent conduct, and that the proposal would impose restrictions that were too vaguely worded to attract future executives. The proposal was soundly defeated.

Shareholders also rejected a proposal that would have required HP directors to win a majority, not a plurality, of shareholder votes to be re-elected to the board. Some companies have changed their policies after directors were re-elected with a large percentage of voters withholding their votes for certain candidates. Dunn said HP requires directors who receive more "withheld" votes than actual votes in their favor to submit their resignation, and the proposal was defeated.

In other business, HP reapproved its slate of directors, recertified Ernst & Young as its accounting firm, and approved an executive compensation plan that could allow new CEO Mark Hurd to earn as much as $9.2 million in 2006.

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Scratching each other's backs
"the proposal would impose restrictions that were too vaguely worded to attract future executives." Preposterous! The pool of newly-minted MBA's that our top business schools churn out each year would line up to do these jobs at a fair salary without unjustified compensation and would do it better than any of these unqualified schemers.

Most shares in a corporation like HP are being voted by institutional shareholders, so it sounds like institutional execs wouldn't vote for anything for HP that sounds like too good an idea in relation to their own pay. It's a shame, because Wall Street continues to sell the propaganda line about buying stock as buying "ownership rights" or "value" when in fact the upper-echelon insiders with privileged shareholding positions vigorously defend their closed system of executive compensation against the participation of the masses. No, the stock market for the small investor continues to be just a form of legalized gambling. Forget about "value" or changing the governance of these companies, just look for a stock with maximum volatility and buy it down and sell it up.
Posted by Razzl (1318 comments )
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How about a Pay Raise for Employees ?
I understand most employees haven't had any
kind of a pay raise or performance bonus in years.
Posted by grey_eminence (153 comments )
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