Hewlett-Packard chairman Ray Lane and two board members survived a shareholder revolt sparked by the company’s costly takeover of UK software company Autonomy, receiving a slim majority of the votes at the annual shareholder meeting.
Lane received 59 percent of the votes for his reconfirmation at the March 20 meeting of Palo Alto-based HP, compared with the 96 percent of the vote he won last year, according to media reports. Director Kennedy Thompson won 55 percent and John Hammergren, another director, took 54 percent of the vote. Both of the directors won more than 80 percent of the vote last year.
The vote comes after proxy advisors Institutional Shareholder Services (ISS) and Glass Lewis, and several HP investors blamed directors for due diligence failings in its purchase of Autonomy for $11.1 bn in 2011. In November of last year, HP wrote down $8.8 bn of that value.
`We believe the board is hobbled by years’ worth of poor judgment, lack of accountability and weak oversight of critical functions,’ said the CtW Investment Group, which advises union pension funds with shareholdings in HP, in a statement before the vote. `Since last year’s meeting, the company has announced approximately $17 bn in write-downs associated with past acquisitions.’
CtW also accused the board of maintaining a `conflicted’ relationship with auditor Ernst & Young, saying that HP `pays Ernst & Young non-audit fees equal to 40 percent of total fees, twice the average for public companies.’ Ernst & Young was reaffirmed as HP’s independent auditor at the annual shareholder meeting, with 85 percent of the vote. The executive compensation package was also approved, with 75 percent of the vote.
In a five-point letter to investors hours before the shareholder meeting, Autonomy founder Mike Lynch, repeated his denial of the HP allegations and accused the board of using Autonomy as a ‘scapegoat’ for the board’s own failings. He also called on HP’s board to explain how it calculated the impairment charge and demanded more complete disclosure regarding the allegations and ongoing legal proceedings.
`We believe the problem with the Autonomy acquisition by HP lies in the mismanagement of that business by HP under its ownership, making it impossible for Autonomy to deliver on HP’s expectations,’ Lynch writes. `Autonomy’s accounts were fully audited by Deloitte throughout the period in question and Deloitte has confirmed that it conducted its audit work in full compliance with regulation and professional standards. We refuse to be a scapegoat for HP’s own failings.’
The SEC has been looking into the case since December and the UK Serious Fraud Office started its own investigation earlier this month. After stating it would investigate, however, the SFO was forced to admit a conflict of interest over its own use of Autonomy software that will stall the probe.
