Hewlett-Packard Shakes Up Board to Quell Criticism Over Hurd's Departure
Hewlett-Packard Co., the largest maker of computers, announced a board shake-up aimed at adding foreign-based directors and quelling criticism over the way it handled the departure of Chief Executive Officer Mark Hurd.
Exiting board members are Robert Ryan, John Joyce, Joel Hyatt and Lucille Salhany, Palo Alto, California-based HP said in a statement yesterday. Directors joining the board are Shumeet Banerji, CEO of Booz & Co.; Patricia Russo, former CEO of Alcatel-Lucent SA; Dominique Senequier, CEO of AXA Private Equity; Meg Whitman, former CEO of EBay Inc.; and Gary Reiner, former chief information officer of General Electric Co.
The changes increase the number of women and directors with backgrounds in foreign markets. The new board may be more able to work in tandem with Chief Executive Leo Apotheker, who is less than three months into his tenure at HP, said Sarah Stewart, principal for board services at recruiting firm Boyden.
“Fit is always important in recruitment and it’s also important at the board level,” said Stewart, who’s based in Pittsburgh. “The CEO is the person we pin all our hopes on, and he or she is the person who’s going to make things happen.”
Apotheker, who was CEO of German software maker SAP AG until last year, was born in Germany and resided in Paris. HP named him CEO in September at the same time it appointed former Oracle Corp. President Ray Lane as non-executive chairman.
HP’s board had been faulted for its handling of Hurd’s departure, including from shareholders who filed lawsuits. Companies don’t often revamp the board and management as completely as HP has done, said Dennis Carey, vice chairman at executive recruiter Korn/Ferry International.
“It’s extremely rare for a company to almost simultaneously install both an outside CEO and an outside non- executive chairman and also so dramatically overhaul its board, as HP has done,” said Carey.
The new appointees are more likely to support the agenda of Apotheker and Lane, and help HP put last year’s departure of Hurd behind it, said Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco.
“As an investor, you need to look at HP’s stock with fresh eyes,” said Noland, who has an “outperform” rating on HP shares. Investors have seen HP’s board as “immature,” he said.
“This will help put to rest some of the events of 2010,” he said. “Maybe this changes the situation and gets everyone moving in the same direction.”
HP is planning an independent probe into the circumstances of Hurd’s departure, which was announced in August, according to court documents.
Apotheker and Lane said in an interview that the new board appointments would be accompanied by tighter controls on how directors interact with the press, following months of leaks.
“It was a feeding frenzy,” Lane said. “That is just not the way it is going to work anymore. The board needs to operate in privacy.”
Apotheker said Banerji, who has worked as an academic at the University of Chicago’s business school, would bring a fresh outlook to the board.
“We felt we needed someone that would bring a longer-term perspective,” said Apotheker. “This is a great opportunity for us to diversify our skills.”
Hurd resigned as chairman and CEO after an investigation found he violated business conduct standards in trying to conceal a personal relationship with a contractor. Shareholder lawsuits allege that HP directors wasted company money by awarding Hurd as much as $53 million in severance.
Executives at other companies criticized the board for its handling of Hurd, with Oracle CEO Larry Ellison the most vocal. In an e-mail to the New York Times in August, he likened the removal to Apple Inc.’s ouster of Steve Jobs in 1985. The HP board “made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago,” Ellison wrote.
Jack Welch, the former CEO of General Electric Co., said the board appeared “to be somewhat dysfunctional” in how it handled Hurd. Welch also criticized the board for selecting its third CEO in a row from outside the company, rather than developing and selecting internal candidates.
HP’s board has witnessed upheaval before. In 2006, board member Tom Perkins resigned in protest over the handling of a company probe into leaks to the news media.
Chairwoman Patricia Dunn was ousted from the board in 2006 amid the fallout from an investigation that showed private investigators working on her behalf improperly obtained telephone records of directors, employees, and reporters. Director George Keyworth also quit HP’s board that year.
“They’ve certainly provided some entertainment value in how a board shouldn’t behave,” said Boyden’s Stewart.
HP rose 45 cents to $47.23 at 4 p.m. on the New York Stock Exchange. The shares fell 18 percent last year.
The departing directors left of their own volition, Lane said.
“These are the board members that graciously said they would step down to make room for new blood,” he said.
Russo also is a director of aluminum producer Alcoa Inc., pharmaceutical company Merck and Co., and automaker General Motors Co., where she was named lead director in March.
She was one of six new directors named to GM’s board after the company emerged from bankruptcy in 2009. Russo stepped down as CEO of Alcatel-Lucent in 2008 after two years of losses that stemmed from the merger of the two telecom hardware companies.
Whitman, former CEO of EBay, joins HP’s board after her unsuccessful campaign for California governor last year. Reiner, another new HP director, is now a special adviser at Greenwich, Connecticut-based investment firm General Atlantic LLC.
Senequier runs AXA Private Equity, the investment buyout arm of French insurer AXA Group.
HP’s new board of 13 directors will include three women, a higher number than most corporate boardrooms. Fewer than 20 percent of Fortune 500 companies have three or more women serving together as directors, according to a 2009 survey by Catalyst, the New York-based research organization. Two of the 13 directors at International Business Machines Corp. are female; Oracle also has two women among its 13 directors.
To contact the reporters on this story: Aaron Ricadela in San Francisco at firstname.lastname@example.org; Ashlee Vance in San Francisco at email@example.com; Brad Stone in San Francisco at firstname.lastname@example.org.