Activist Pioneer Whitworth Said to Quit HP Board to Fight Cancer

Ralph Whitworth, the activist investor who agitated for overhauls at companies including Home Depot Inc., Genzyme Corp. and Sprint Corp., resigned as chairman of Hewlett-Packard Co. to battle cancer, according to people familiar with the matter. He is also taking a leave from his money-management firm.

An influential voice on corporate governance who cut his teeth under billionaire Texas oilman T. Boone Pickens, Whitworth helped change the rules in the 1990s to make today’s shareholder activism possible. Hewlett-Packard’s board will discuss a successor for Whitworth, 58, at its next meeting, the second-biggest personal-computer maker said yesterday. His duties at Relational Investors LLC will be assumed by co-founder David Batchelder and other senior management, the firm said.

In his three years at Hewlett-Packard, Whitworth, working alongside Chief Executive Officer Meg Whitman, took charge of an infamously fractious board that over the past decade has churned through four CEOs, made a series of bad acquisitions and landed in hot water for a campaign to solicit phone records of board members and journalists.

“He’s been a very strong leader -- obviously a good partner to Meg Whitman and helped bring stability and consistency to a board that had seen a significant amount of turmoil over the last few years,” said Shannon Cross, an analyst at Millburn, New Jersey-based Cross Research. “HP still is a cost-cutting, restructuring story and they’re in the later innings of that as well.”

Whitworth has cancer, according to people with knowledge of the matter. A spokesman for Relational declined to comment.

“Relational remains fully committed to serving its clients’ interests and wishes Ralph and his family all the best at this difficult time,” the firm said in a statement.

CEO Ousters

After working with Pickens, Whitworth and Batchelder founded Relational in San Diego in 1996 with $200 million from the California Public Employees’ Retirement System, the nation’s largest public pension fund. Today they manage more than $6 billion, buying stakes in public companies they consider undervalued and lobbying executives and directors for changes to boost returns. Relational’s activism often leads to the ouster of chief executive officers and board seats for the fund.

Whitworth’s work at Hewlett-Packard reflects how his firm’s strategy differs from many activist shareholders. Relational’s shakeup campaigns are often long-term, investing for years and working closely with executives and directors to steer changes.

Tumultuous Decade

Whitworth turned his attention to Hewlett-Packard in 2011, acquiring a stake after the company’s disastrous purchase of software maker Autonomy Corp. in August of that year. By September Whitman was named CEO and in November Whitworth had joined the board.

The two were charged with stabilizing a company battered by a tumultuous decade. Scarcely a year before Whitworth joined, Hewlett-Packard had ousted former CEO Mark Hurd, who had overseen a years-long run of expanding sales and profit.

The company kept his replacement, Leo Apotheker, for less than a year. Apotheker in 2011 presided over missed earnings targets, an ill-fated plan to spin off the company’s PC business and the Autonomy purchase, which resulted in an $8.8 billion write-down and shareholder lawsuits.

Before that, Hewlett-Packard’s board fought lengthy internal battles over the acquisition of computer maker Compaq Computer Corp., culminating in the dismissal of Hurd’s predecessor, Carly Fiorina, in 2005.

Job Cuts

During Whitworth’s tenure, the company cut 34,000 jobs, invested in new technology and replaced top executives including personal computing head Todd Bradley and enterprise computing head Dave Donatelli. Hewlett-Packard shares gained 25 percent through yesterday since Whitworth joined the board.

He helped bring in new board members including former Microsoft Corp. software chief Ray Ozzie, and in April 2013 took over the chairmanship on an interim basis from Ray Lane, a long-time Silicon Valley executive who still sits on the board.

“Ralph has been a friend and close advisor to me, the HP leadership team and every member of the board for nearly three years,” Whitman said in a statement. “He has been a wonderful contributor to our efforts to turn HP around.”

Relational retained a stake of about 1.5 percent in Hewlett-Packard as of April, according to a filing.

“We believe the blueprint for HP has largely been drawn up and believe HP has made meaningful progress in its restructuring and transformation,” Maynard Um, an analyst at Wells Fargo Securities, wrote in a note.

Big Names

As an activist, Whitworth has confronted some of the biggest names in the executive suite. In 2008, Whitworth joined Sprint’s board after agitating the wireless carrier to improve operations to stem customer defections -- a campaign that ultimately saw CEO Gary Forsee replaced by Dan Hesse.

In 2007, Batchelder joined the board at Home Depot. With Relational pushing the world’s largest home-improvement chain to improve its use of capital, the retailer ousted CEO Robert Nardelli and sold its contract supplies unit months later for $8.5 billion, using the proceeds to buy back stock.

In 2005, Relational began a 17-month fight with Sovereign Bancorp Inc. after becoming the largest outside shareholder at the Philadelphia-based bank, criticizing its financial performance and corporate governance. After settling for two board seats at Sovereign, the fund joined forces with other investors to get CEO Jay Sidhu to resign. Sovereign was acquired by Banco Santander SA of Spain in 2009.

Tyco Campaign

Whitworth served on as chairman of Waste Management Inc. from 1999 to 2004, overseeing a turnaround at the company after an accounting scandal. He also led an effort at Tyco International Ltd. to oust directors who served under former CEO Dennis Kozlowski.

Recently the firm has targeted industrial companies including equipment manufacturer SPX Corp., bearings maker Timken Co., and machinery builder Illinois Tool Works Inc. This year, Relational has actively sought changes at companies including aircraft seat maker B/E Aerospace Inc. and crane and refrigerator builder Manitowoc Co.

Last year Whitworth received the Lifetime Achiever Award from the London-based International Corporate Governance Network, which represents institutional investors.

In 1990, Whitworth wrote a paper calling for changes to corporate governance rules that the U.S. Securities and Exchange Commission adopted in 1992 -- steps that paved the way for today’s activist campaigns.

Those changes included allowing investors to nominate a short slate of directors instead of the entire board; an overhaul of communication rules to allow anyone to comment about ballots without having to send documents to every shareholder; and requiring compensation disclosures as charts with numbers instead of “arcane narrative disclosures written by lawyers,” Whitworth said in an interview last July.

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