Two shareholders are suing Hewlett-Packard Co., alleging that it broke company policy when it awarded a severance package to former chief executive officer Carly Fiorina, according to published reports.
Pension funds for the Indiana Electrical Workers union and the Service Employees International Union claim that shareholders should have been given approval over the $21 million-plus severance, reported The New York Times. A spokesman for the company told the paper the company “believes the suit is without merit.”
The unions reportedly alleged that Hewlett-Packard changed the terms of Fiorina’s bonus plan to give her more money than she was entitled to. The Times noted that when Fiorina was fired a year ago, she was paid about $14 million in severance, equivalent to 2.5 times her base salary and cash bonus. Under HP rules, shareholders are required to approve severance deals if the total payment exceeds 2.99 times salary and bonus.
However, Fiorina also reportedly received a payment of roughly $7.4 million under the company’s long-term bonus program, which raised her total severance to about $21 million. The Times explained that originally, Fiorina didn’t qualify for the additional payment because she had been fired.
According to newspaper, the company changed the terms of the bonus program to apply to fired executives after Fiorina received her severance payment in February 2005. The lawsuit reportedly maintains that the change was made secretly.
“It is a severance payment no matter what they call it,” said Michael Barry, a partner at Grant & Eisenhofer, which filed the lawsuit, according to the Times. Citing the court filing, the newspaper also noted that if stock options and other benefits are included in the calculations, Fiorina’s severance package could amount to as much as $42 million.