Shareholders At HP Meeting Today Is Calling For Vote Against Board Members
Hewlett-Packard is meeting with shareholders today in Mountain View, California. While the proceedings are expected to be routine, Meg Whitman will be making a presentation to reiterate her plan to turn around the company in 2013 and 2014. However several shareholders are seeking to have HP’s management changed around according to AllThingsD.
Institutional Shareholder Services are urging shareholders to vote against Chairman Ray Lane and directors John Hammergren and G. Kennedy Thompson. Another company, Glass Lewis, is urging shareholders to vote against four HP directors including Hammergren, Thompson, Marc Andreessen, and Rajiv Gupta.
California pension fund, Calpers, is voting against Lane, Andreessen, Hammergren, Thompson, and Gupta. They will also be voting against HP auditor Ernst & Young. It is likely that all of the directors will make it through the proxy vote.
Mike Lynch, the former CEO of Autonomy, sent an open letter to HP shareholders to address complaints made about HP’s criticism of Autonomy’s accounting practices. HP acquired British software company, Autonomy, for $11 billion in 2011. Below is the letter:
Open letter from Mike Lynch to the shareholders of Hewlett-Packard
20 March 2013
Today HP will hold its annual shareholder meeting. This meeting provides a moment of accountability for HP’s Board of Directors to all its stakeholders, and is an appropriate time for the Board to address material questions.
A significant issue for HP’s stakeholders is the allegations HP has made against the former management team of Autonomy in relation to the acquisition of that company, and the related impairment charge of $8.8 billion taken against shareholder funds. As a member of the former management team of Autonomy I have a shared interest with the shareholders of HP (of which I am not one) in getting to the bottom of those allegations, understanding exactly what happened within HP related to this situation and resolving it as soon as possible.
We therefore put forward some questions that we believe HP’s Board of Directors needs to answer at the shareholder meeting:
1. Can the Board provide details and evidence of the allegations it has made against the former management team of Autonomy to shareholders and to the people it has accused, so that everyone can understand the allegations that are being made and how it relates to the decisions and statements the Board has made? Can the Board confirm when it first became aware of these specific allegations? Will the Board provide the report from PwC on which its allegations are based to the former Autonomy management team so that this issue can move toward resolution? Will the Board also make available the conclusions of the findings of the recently appointed committee investigating the circumstances of the acquisition?
2. How did HP calculate the impairment charge it has taken against Autonomy? Several qualified commentators, including a former Chief Accountant of the SEC, have questioned how the alleged irregularities in Autonomy’s accounting could generate such a large write-down. How much of the impairment charge was related to the operating performance of Autonomy post-acquisition?
3. Did HP approach the UK Takeover Panel at any stage in an attempt to rescind its offer to buy Autonomy before completion? If so what was the reason it gave and why was this material change of view not communicated to shareholders?
4. The former management of Autonomy began alerting Ms Whitman as early as December 2011 to significant problems with the integration of Autonomy into HP that were negatively impacting its performance. When did Ms Whitman acknowledge that Autonomy was not performing against expectations? Why was this not communicated to shareholders at that time?
5. Will HP commit to behaving in a transparent manner in providing information about these allegations and the legal processes that have been set in motion? This includes not pre-empting announcements by regulatory authorities and not waiting long periods to disclose information.
We continue to reject the allegations made against us by HP and believe it is in the interests of all parties that these questions be addressed directly by the Board so this issue can be resolved as swiftly as possible. HP has acted in an aggressive and unusual manner throughout this episode, making highly damaging public accusations without providing any supporting evidence, either to the public or to the people they have accused.
As we have said before, 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. 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.
Dr Mike Lynch