(Jonathan Alcorn, Bloomberg )
Three members of Hewlett-Packard Co.'s troubled board of directors, including its chairman, will quit their posts after barely being reelected two weeks ago.
The shake-up follows widespread criticism that HP botched an $11-billion acquisition of British software company Autonomy. The three directors were seen as those most directly involved in that deal and several of the board's other unpopular moves in recent years.
Raymond Lane has given up his post as chairman but will remain a director, the Palo Alto company announced Thursday. G. Kennedy Thompson and John Hammergren will leave the 11-member board, which has begun a search for a permanent non-executive chairman and two or more new independent directors.
"Perceptually, it's good for HP. The more things you take off the table that are potential objections, the better," said Patrick Moorhead, president and principal analyst with Moor Insights & Strategy. "It means they can operate somewhat with a clean slate."
Director Ralph Whitworth, a well-known activist shareholder, is filling in as interim chairman. In an open letter, Whitworth said that each of the three directors "considered the results of our recent shareholder meeting and made the personal decision to do what they felt was best for HP."
On March 20, shareholders voted in favor of the current board at an annual meeting. The shareholders shrugged off a campaign to protest a series of troubled acquisitions and prolonged problems in turning around the company.
The three members were narrowly reelected, a sign that shareholders lacked confidence.
Lane, who joined the board a little more than two years ago, received 59% of the vote. Hammergren, who had been on the board for eight years, and Thompson, a seven-year board member, received 54% and 55% of the votes, respectively. The two will leave the board in May.
Anger had been building over the last couple of years at a board that at times has struggled to escape a reputation for being less than competent.
Among the many criticisms: the mishandling of the departure of former Chief Executive Mark Hurd amid allegations of sexual harassment, the hiring and abrupt firing of CEO Leo Apotheker after less than 11 months, failing to advocate a strong strategy and signing off on large acquisitions that resulted in billions of dollars of write-downs.
The most recent of these was Autonomy, the British software company HP bought in 2011. Last fall, HP announced it had uncovered widespread accounting fraud at Autonomy and was taking an $8.8-billion write-down.
Before the election results were announced at the March 20 meeting, CEO Meg Whitman told shareholders she believed the board was making a crucial contribution to the company's comeback.
"This has been a difficult time for HP over the last number of years," Whitman said. "That is hard on customers, partners and shareholders. My view on the board of directors is that they are helping turn HP around."
Whitman on Thursday thanked the three board members for their service and credited them with the "early success" in helping to turn the company around. The company declined to comment further.
But without strong shareholder support, the board would have struggled to revamp its reputation, analysts said.
Richard Kugele, a Needham & Co. analyst, said in a note to investors that the moves were "probably the first positive piece of news out of HP since Meg Whitman's arrival."
"We have been clamoring for massive changes at the Board of HP," Kugele said. "The recent shareholder voting, while unsuccessful in outright unseating board members, did send a signal that the board would not get a rubber stamp approval."
New York City Comptroller John C. Liu, an HP shareholder who last month announced that the city's pension funds would vote their shares against Hammergren and Thompson, quickly lauded their departures.
"HP's board got the message," Liu said. "It has removed the two directors most responsible for a series of value-destroying oversight failures, and established fresh, independent leadership. This a good day for HP, its board, and its shareowners."
HP announced the resignations after the markets closed. During regular trading, shares rose 39 cents, or 1.8%, to $22.30. They were little changed after hours.
The stock has been making a comeback in recent months, nearly doubling since late November. It's still well below the $53.90 mark the company hit in April 2010, a few months before Hurd left the company.