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HP: When to Step Down from the Board
Friday, Apr. 5, 2013
Thursday, Hewlett-Packard announced that board chairman Raymond Lane had stepped down as chair, but will continue to serve on the board, while two other directors resigned from the board entirely. Lane, along with other directors, have been key supporters of a series of mishaps that led to HP writing off $18 billion from failed acquisitions in the fiscal year of 2012 alone; most notably the $11.1 billion acquisition of Autonomy, considered to be among the worst acquisitions in history. Ranging from the Autonomy acquisition to the ill-fated appointment of former CEO Léo Apotheker, who was hired without meeting many of the board members, shareholders accused the board of serious shortcomings in its role of providing risk oversight. At the HP investor meetings last month, Lane received only 59 percent of the vote for reappointment to the board. While a majority vote is technically enough for reappointment, such a low percentage is indicative of very low shareholder confidence. Were HP’s board members duty bound to resign, despite obtaining the majority vote?
Patrick: Yes, I think the board members were duty bound to resign, but not for the reason implied. In terms of shareholder support alone, majority vote is sufficient for accepting reappointment. The truth of the matter is that Lane and the other board members are obstacles to HP’s turnaround, and their presence alone was a detriment to the company—out of this concern alone were they duty bound to resign.
Kirk: I think the HP directors were late in resigning and I think Lane should have resigned entirely from the board. We allow CEO’s to “bet the company” on giant acquisitions and reversals of strategy, subject only to the board’s evaluation of the risk involved. If directors fail miserably in that risk assessment, they should immediately apologize to shareholders and resign. We need a much stronger sense of accountability in all areas of American life, but particularly among corporate directors.
NEXT STORY: DOES SINCERITY MATTER IN PUBLIC APOLOGIES?