With the resignation of two directors and Ray Lane’s relinquishing his role of board chairman, the turmoil at the top of Hewlett-Packard, a tale of almost soap opera proportions, continues. But HP’s story is scarcely unique. Many companies make unsuccessful acquisitions, boards continue to search for corporate saviors from the outside, and few directors suffer any consequences for overseeing catastrophic problems. All this provides evidence that corporate governance remains a problem in many publicly traded companies.
Let’s begin with some facts. It is almost impossible to overstate the devastation wrought by an HP board that couldn’t shoot straight. Although recent commentary has focused on the ill-fated Autonomy acquisition and an associated $8 billion charge, that is scarcely the only snafu. As Pete Carey of the Mercury News documented last fall, HP since 2008 has spent some $32 billion on acquisitions, which included Electronic Data Systems ($8 billion writedown of the $13.9 billion purchase price) and Palm ($885 million writedown of the $1.2 billion purchase price). In the fall of 2012, HP’s market capitalization was $10 billion less than it had spent acquiring companies over the preceding four years. And speaking of acquisitions, there was also the controversial deal for Compaq that left HP with a dominant position in the low-margin and slowly disappearing personal computer industry.