Clock Ticking on H-P Reforms

Hewlett-Packard (HPQ Quote) and its CEO Mark Hurd have racked up financial gains for shareholders by improving profitability, boosting market share and overtaking chief rival Dell (DELL Quote) in sales of personal computers.

But the company has a mixed record when it comes to addressing shareholder concerns about corporate governance and reforming its troubled board of directors.

H-P is recovering from years of highly public boardroom clashes and ethical lapses that led to charges of conspiracy and battles with shareholders, legislators and the Securities and Exchange Commission. While the company has followed its own path to reform, it has rejected proposals from shareholders who are concerned that boardroom discord can distract directors from their duty to oversee management.

Corporate America has witnessed a flurry of shareholder activism. The latest wave of annual meetings saw a marked increase in shareholders' proposals to control who represents them on the board, to let them approve executive pay packages and to prevent insider dealings.

More than 40% of Home Depot (HD Quote) shareholders voted last Thursday to give themselves a vote on executive compensation.

The recent boost in emboldened shareholders also has been supported by research from Goldman Sachs, which showed that sample portfolios had better returns when taking corporate governance ratings into consideration.

H-P's recent troubles began when longtime director William Hewlett, scion of one of the company's founding families, used media interviews, a lawsuit and a shareholder vote to campaign against the watershed 2002 merger with Compaq.

In subsequent years, boardroom leaks revealed tension among members. In an effort to stanch the leaks, the board hired a security firm that impersonated directors and reporters in order to obtain their phone records.