Risk & Compliance

Proxy Access Defeated at Hewlett-Packard

Measure that would have given shareholders more power to nominate directors received 39 percent approval.
Stephen TaubMarch 15, 2007

Hewlett-Packard shareholders declined to support a much-anticipated resolution that would have given them more power to nominate board members.

According to the Associated Press, the proposed bylaw amendment would have enabled shareholders who have owned at least 3 percent of Hewlett-Packard’s outstanding stock continuously for two years to nominate two candidates.

The proposal was filed by the American Federation of State, County and Municipal Employees (AFSCME) Employees Pension Plan, the New York State Common Retirement Fund, the Connecticut Retirement Plans and Trust Funds, and the North Carolina Retirement Systems filed the proposal. The funds own a total of more than 17 million HP shares with a market value of $700 million.

“Hewlett-Packard deserves to be the first company in U.S. history to face a binding proxy access proposal because of its board’s dysfunction so evident from the Compaq merger, Carly Fiorina’s troubled tenure, and now the pre-texting scandal,” said AFSCME president Gerald W. McEntee, in a statement prior to the vote.

To be adopted, the amendment needed a two-thirds majority of outstanding shares entitled to vote, according to the Sacramento Business Journal; the measure received approval from 39 percent.

“HP is pleased that this proposal was not approved,” the company stated afterward. “The board believes that this proposal was not in the best interests of HP stockholders.”

Supporters of the measure, however, hailed the 39 percent as a victory for shareholders, considering that this was the first such measure to face a vote at an annual meeting.

In a statement, Russell Read, chief investment officer of the California Public Employees’ Retirement System, asserted: “This landmark vote will have a material impact well beyond HP, and will likely establish a new core principle in American business that shareowners need the basic right to nominate directors, particularly in extreme circumstances such as those we sadly experienced at HP. Two out of every five shareowners took a stand in favor of democracy.”