March 14, 2007 5:25 PM PDT
HP shareholders want exec pay more tied to performance
The measures were only given preliminary approval and they are nonbinding, an HP representative said. One of the proposals demands that HP adopt a more rigorous long-term compensation policy linked to executive performance. The other would subject any future adoption of a "poison pill" antitakeover provision to a shareholder vote.
addresses shareholders at the company's
annual meeting in Santa Clara, Calif.
The poison pill proposal passed with 72.5 percent of the voted shares, and the executive pay proposal passed with 53.1 percent of the voted shares. HP had recommended against both proposals, and the company only promised to review its policies in statements distributed immediately following the close of the polls.
"As with most public companies, these are nonbinding proposals that were preliminarily approved by shareholder vote today. Once the votes are officially tallied, they will be reviewed and acted upon by the board, with the serious consideration they deserve," HP said in a statement.
Poison pills are enacted when a company is the subject of a takeover bid from another company. Existing shareholders are offered the right to buy more shares at discounted prices, which dilutes the value of their shares but makes it much harder and expensive for any potential acquirer to lock up all the outstanding shares. Although HP is an unlikely takeover target at the moment, given its size, shareholders could now be given the chance to vote before any poison pill technique could be used in the future.
The measure regarding executive pay would require HP to ensure that long-term compensation packages involving stock options and hefty bonuses be tied to performance. The proposal stems from shareholder dissatisfaction over the pay received by former CEO Carly Fiorina, especially after her dismissal by the board, according to the proxy statement.
Two other proposals were soundly defeated, one asking HP to consider shareholder-nominated candidates for the board of directors and one calling for a separation of the chairman and CEO slots, currently both held by Mark Hurd. The eight directors up for re-election were also overwhelmingly approved, but not before shareholders had a chance to express their displeasure with the board's conduct in 2006.
During a question-and-answer session following the discussion of the proposals, and during the presentation of some of the proposals, shareholders vented about the board's conduct during its investigation of leaks to the media.
"The board's greatest accomplishment in 2006 was introducing the world 'pretexting' into the American lexicon," said Scott Adams, who represented several pension funds in making a proposal in favor of shareholder nominees. Pretexting is a practice of acquiring someone else's telephone or other records by deceptive means. In the wake of the HP scandal, President Bush early this year approved a bill to make pretexting a federal crime.
"We need to transform our board the same way we need to transform our company," Hurd said. "No one is proud of what happened last year, and you have my commitment that we will do hard work to deliver a board that you can be proud of."
Criminal charges against former chairman Patricia Dunn were dropped earlier on Wednesday by the state of California, and Hurd said right at the start of the question-and-answer session that he wouldn't take any questions related to that development.
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