Published March 05, 2013
Hewlett-Packard Co's board came under renewed pressure on Tuesday after influential proxy adviser ISS recommended shareholders vote against the re-election of Chairman Ray Lane and two other directors for their role in the botched 2011 acquisition of British software company Autonomy.
ISS, whose recommendations are closely watched by investors seeking guidance on controversial issues, blamed inadequate due diligence for a price tag that Wall Street deemed was inflated.
HP last year took a massive writedown on its value after executives accused former Autonomy executives, including then-CEO Mike Lynch, of accounting fraud.
Lynch has denied the allegations.
"The Board fully supports the election of each of the director nominees named in the proxy statement," a HP spokesman said.
ISS' recommendations on Tuesday followed a strongly worded declaration from union pension adviser and shareholder CtW Investment Group last month. Both ISS and CtW urged shareholders to reject board members John Hammergren and G. Kennedy Thompson, though CtW said it would not oppose Lane because of the risk of disruptions if he left.
"While developments surrounding the 2011 Autonomy deal may continue in the coming months, it is clear that the due diligence process that occurred at that time was not robust," ISS said in a report.
It said Lane, Hammergren and Thompson "bear the most responsibility for a very costly oversight failure."
Thompson was formerly chairman and CEO of Wachovia Corp, the North Carolina bank bought by Wells Fargo & Co in 2008.
Hammergren is chairman and CEO of U.S. drug wholesaler McKesson Corp. Thompson chairs the HP board's audit committee, while Hammergren chairs its finance and investment committee, according to HP's proxy.
On Tuesday, CtW welcomed ISS' recommendation, saying it would help finish an overhaul of the board that had begun a year or two ago, after a series of missteps starting with a wiretapping scandal in which it gave the go-ahead to monitor of journalists' conversations, up to the ouster of former CEO Mark Hurd over his relationship with a female contractor.
"The ISS recommendation adds enormous weight to the case for removing long-tenured Hewlett-Packard directors and finish the Board renewal," said Dieter Waizenegger, recently appointed executive director of CtW.
"Despite having unanimously approved the Autonomy deal, the board continues to try to sweep the debacle under the rug by blaming the mess on a previous CEO it appointed. The Board must hold itself accountable, especially those directors who most clearly failed investors."
HP shares rose 3 percent to $20.56 as the Dow Jones Industrial Index surged to a new high.
(Reporting By Ben Berkowitz and Ross Kerber; Editing by Gerald E. McCormick, Grant McCool and Jeffrey Benkoe)