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Fiorina Leaving Cisco's Board

September 19, 2003|From Bloomberg News

Cisco Systems Inc., the world's largest maker of equipment to link computers, said Thursday that Hewlett-Packard Co. Chief Executive Carly Fiorina would leave Cisco's board, ending what corporate governance specialists have said was a conflict of interest.

Fiorina, who joined the board in January 2001, won't stand for reelection at the company's annual meeting Nov. 11, Cisco said in a proxy statement filed with the Securities and Exchange Commission.

Hewlett-Packard, the second-largest computer maker in the U.S., competes with Cisco in selling switches to link computers in office networks. Fiorina has been pushing her company to gain market share against Cisco.

In the wake of accounting fraud cases involving WorldCom Inc., Enron Corp. and others in recent years, corporate governance has gained increased attention from investors.

"I compliment her on her judgment," said Charles Elson, director of the University of Delaware's Center for Corporate Governance. "By stepping off, you eliminate the conflict, and I think that was a very wise thing in this environment."

Earlier this year, Cisco said Fiorina had recused herself from unspecified board proceedings.

While Hewlett-Packard was a distant seventh last year in the $11.2-billion switch market, specialists said Fiorina had been in a position to shape her network-switch unit's business according to what she knew of Cisco's.

Hewlett-Packard's sales of office-network switches rose 53% to $78.3 million in the second quarter, while Cisco's fell 14% to $1.65 billion, according to market researcher Gartner Inc.

Robyn Jenkins, a Cisco spokeswoman, declined to elaborate beyond saying it was Fiorina's "personal decision" to leave the board.

Separately, Cisco said CEO John Chambers received a $1 annual salary and declined a bonus for the second consecutive year.

Chambers wouldn't take a bonus in the fiscal year ended July 26 "despite all the corporate and individual goals for the year having been met," the company said in the proxy statement.

Chambers received 4 million stock options that vest over five years. As of July 26, Chambers held 27.8 million stock options exercisable for a profit of $196.5 million.

Cisco shares rose 28 cents to $21.42 on Nasdaq. They have risen 74% in the last year

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