Five months after the controversial ouster of its chief executive, Hewlett-Packard Co. announced Thursday that four members of its board of directors were stepping down.
They are being replaced by five newcomers including Meg Whitman, the former EBay Inc. chief executive who was defeated in her bid to be elected California governor last November.
For The Record
Los Angeles Times Wednesday, January 26, 2011 Home Edition Main News Part A Page 4 News Desk 1 inches; 62 words Type of Material: Correction
Hewlett-Packard board: In some copies of the Jan. 21 Business section, an article about a shake-up on computer firm Hewlett-Packard's board of directors said the board expanded to 13 members from eight. In fact, the HP board started with 12 directors. It added five and now has 17. Four will leave after the annual meeting in March, reducing the board to 13.
The board of HP, which is the world's largest computer maker, drew widespread criticism last August for its handling of a scandal involving Mark Hurd, its once highly respected CEO.
The board forced Hurd to resign amid accusations of sexual harassment and expense-account abuse. Though opinion was split about the wisdom of the dismissal itself, investors were dismayed in the ensuing weeks by back-and-forth revelations that suggested rash decision-making.
"There's not a person in the investment community today who's not dissatisfied with the board of directors at Hewlett-Packard and who doesn't scratch their head whenever they make a decision," Brian Marshall, an analyst at Gleacher & Co., said Thursday.
Court documents filed by HP and made public Wednesday show the company is planning its own independent probe into Hurd's departure, stemming from a shareholder suit over Hurd's severance.
The outgoing directors are Joel Hyatt, John Joyce, Robert Ryan and Lucille Salhany. The company, which announced the board shakeup in a statement Thursday, did not give reasons for their departure.
The directors who are leaving will not stand for reelection at the company's board meeting in March. But in an unusual twist, the five new directors were appointed immediately and they will stand for reelection in two months.
"Something like this is very unusual," said Charles M. Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "This company is a hotbed. Every year or two something dysfunctional happens."
Some analysts said the four outgoing directors may not have wanted to risk investor wrath at the annual meeting.
"The likelihood is if they stood for reelection shareholders would likely have rejected them anyway," said Tim Bajarin, president of Creative Strategies Inc., a consulting firm.
The other newcomers are Shumeet Banerji, CEO of Booz & Co.; Gary Reiner, former chief information officer of General Electric Co.; Patricia Russo, former CEO of Alcatel-Lucent; and Dominique Senequier, CEO of AXA Private Equity.
Hurd resigned after an internal investigation concluded he had falsified expense reports to cover up a relationship with an independent contractor. The woman claimed that the married Hurd sexually harassed her. The matter was settled for an undisclosed sum.
HP's stock plunged, partly because Hurd had overseen a resurgence in the firm that had nearly doubled its market value. Investors were also outraged at Hurd's severance package, worth as much as $53 million.
Almost immediately, questions were raised about whether the ouster was necessary and how the company would recover. HP determined that Hurd had not violated the company's sexual harassment policy.
The bitterness continued in September, when HP sued to prevent Hurd from becoming co-president at rival tech company Oracle Corp. HP said it was concerned about Hurd potentially sharing company secrets, but then dropped the lawsuit after he agreed not to divulge any key details.
Word of the impending shakeup leaked late in the trading day Thursday, causing HP shares to jump. For the day, HP shares rose 46 cents, or about 1%, to $46.78.