isn't going to stand for this chin music anymore.
Laboring to prop up its proposed $25 billion buy of
, the Palo Alto, Calif.-based computer giant Monday moved to kick dissident director and onetime music scholar Walter Hewlett off its board. Saying his "ongoing adversarial relationship with the company undermines the board's ability to effectively conduct business," Hewlett-Packard nominated a slate of directors that was notably free of the founder's son. Shareholders will vote on the slate April 26.
Walter Hewlett, who served on the board with little notice for 15 years before launching a multipronged effort to block the Compaq deal, called the action "unfortunate" but suggested he won't seek re-election on another slate.
Investors brushed off the latest skirmish, as Hewlett-Packard shares last traded at $17.86, down 0.45%. But at least one observer worried that the increasingly hostile tone of the dispute threatens to disrupt the company, no matter what happens with the Compaq deal.
"I'm disappointed," says Charles Elson, director of the Center for Corporate Governance at the University of Delaware, noting that Hewlett's antideal slate won a significant portion of the vote. "If the merger goes through, this is time everyone has to work together. Not renominating him reinforces the divisions."
The outcome of the March 19 shareholder vote isn't known, though it was widely noted at the time that only the company proclaimed victory afterward. But Hewlett hasn't been content to let the votes be counted quietly; he has since sued H-P, alleging that voting irregularities swung the vote against him.
Hewlett claimed last Thursday in Delaware Chancery Court that H-P improperly solicited votes from Deutsche Bank. Hewlett asked the court to investigate a last-minute change of heart at the institution in support of the vote, which may have swung a large portion of its 25 million H-P shares in favor of management. Hewlett has proposed that if wrongdoing is found, the court should throw out the pro-merger votes or order a new vote.
"His recent actions have violated basic principles of trust," H-P said of Hewlett in a press release Monday. Chairman Sam Ginn said that after March 19, the board re-established good relations with Walter Hewlett and saw fit to renominate him. But the lawsuit prompted the board to yank Hewlett's chair out from under him.
Onlookers in the H-P/Compaq merger fight had long doubted whether Hewlett would be embraced as a director after a contentious campaign against the Compaq acquisition. After all, some wags have begun speculating that the merger's many twists and turns have all but guaranteed CEO Carly Fiorina will depart sooner rather than later.
"It is unfortunate that the H-P board has seemingly missed what the company's stockholders have clearly recognized: that dissent is not disloyalty," Walter Hewlett said in a statement. "That healthy boards need not agree on every issue and that while the management and board may run a company, the stockholders are the true owners of a company."
Regardless of the evident animosity, not everyone buys Hewlett's black sheep act. Lawrence E. Mitchell, author of
Corporate Irresponsibility: America's Newest Export
(Yale University Press, 2001), wonders if Hewlett isn't simply saving face with the lawsuit.
"If he really believes there were voting irregularities, it's his obligation as a director to try and rectify them," says Mitchell.