HP/COMPAQ: Shareholders grill Fiorina

Hewlett-Packard's annual shareholder meeting Friday drew about one-tenth of the attendance but only slightly less rancor than the special meeting called in March to consider HP's still-pending acquisition of Compaq Computer.

The deal was the topic of most of the few questions from the approximately 200 shareholders present. But its most apparent residue was the absence of acquisition opposition leader Walter Hewlett from the ballot to reelect HP's board of directors. It is the first time since HP's 1939 origin that the board has not included one of the now-deceased founders or a member of their families. Hewlett did not appear to be in attendance.

HP's board removed Hewlett's name from its list of nominees after he filed suit alleging illicit lobbying of major shareholders by HP management. HP just completed three days in court on the matter.

Still also awaiting resolution is the final vote count on the acquisition, although HP last week declared that it had been approved by a preliminary count. Chairman and Chief Executive Officer Carly Fiorina, presiding at the annual meeting Friday, said HP and Compaq still expect to begin merging on May 7. No shareholder proposals were accepted from the floor at today's meeting.

"The board has stated its reasons for not renominating Walter Hewlett," Fiorina answered to one of several questions related to the topic. Shareholder Bob Stewart, of Los Altos, California, replied that he would vote against the entire slate of directors if he could not write in Hewlett's name.

"I certainly agree that dissent and debate are vital to a quality decision," Fiorina said, replying to shareholder Andy Black's question about the wisdom of ousting Hewlett as a director. "But there is a time for a decision, and there is a time to move on."

Although it wasn't even on the agenda, the pending acquisition clearly was the theme of the meeting. And although Fiorina fielded questions on the topic during the half hour while attendees cast ballots, her own theme clearly is to "move on."

"I believe we have debated this merger in the full light of the public for six months," Fiorina said. "The shareholders have spoken, and we should move on."

She also pointedly testified to the integrity and dedication of Robert Wayman when introducing the chief financial officer at the meeting. It was Wayman's voicemail that was apparently hacked into to reveal a message from Fiorina about last-minute meetings to persuade major shareholders to support the deal. The message was among the evidence in Chancery Court in Delaware last week.

Fiorina also dealt with several pointed queries from shareholders, some of whom were retired HP employees.

Shareholder Daniel Hinojosa of San Jose cited the founders' principle that "if there were even the appearance of impropriety, HP would forgo the deal."

Fiorina acknowledged in answer to that question and others that HP's directors face a challenge rebuilding a relationship with its employees. "Respect and the highest integrity are our core values," she said. While she regretted Hewlett's decision to file suit, she said the case gives HP's board the opportunity "to stand in the courtroom and say what happened" and maintain its integrity.

HP retiree John Bailey of Sunnyvale, however, remained as skeptical as he was at the special shareholders' meeting in March. He asked Fiorina how she would heal the rift with employees.

She said the management team expects to "spend more time talking with employees and making sure we understand their concerns" in the future. She also praised HP employees for continuing to focus on the customers and their work during the turmoil of the past six months.

"I don't trust her," Bailey said, shaking his head.

Two shareholder proposals not related to the merger came before the meeting, submitted months before the contested deal came up.

One called for HP to work with several human rights organizations and other technology companies to urge China to change some of its social and political practices. HP has operated in China since 1985, Fiorina noted. The other, submitted by a foundation that espouses social change, asked HP to expand its recycling efforts by instituting a buy-back program for used equipment that can pollute the environment.

Both apparently failed to pass, according to preliminary votes announced at the meeting. Also, both were opposed by HP's board, largely on grounds that HP already addresses those issues and expects to continue to do so.

(Peggy Watt is a senior editor with PC World, an IDG News Service affiliate.)

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