Risk & Compliance

Calpers Nixes Five HP Directors

Hewlett-Packard board members were part of the audit committee that authorized Ernst & Young, the company's auditor, to perform non-audit services,...
Stephen TaubMarch 12, 2004

One week after 43 percent of shareholders withheld their votes for Walt Disney chairman Michael Eisner, the California Public Employees Retirement System (Calpers) withheld votes for five Hewlett-Packard directors.

The pension fund cited the computer and printer maker’s noncompliance with Calpers’ corporate-governance guidelines. One of the reasons was that the directors are members of the audit committee that authorized auditor Ernst & Young to perform non-audit services, according to a statement on the pension fund’s Web site.

Calpers believes “the auditor’s role should be auditing and nothing else,” Brad Pacheco, a spokesman for the retirement fund, told Reuters. “We’ve learned our lesson from other corporate scandals that it’s a conflict of interest.”

The fund, which owns 17.85 million HP shares, withheld its votes for the reelection of directors Lawrence Babbio, Patricia Dunn, George Keyworth, Robert Knowling, and Sanford Litvack. HP’s annual meeting is scheduled for March 17 in Houston.

Calpers also noted that Litvack, a lawyer, has a poor attendance record and a business relationship with the company that could impair his objectivity. Interestingly, Litvack served as vice chairman of the board of The Walt Disney Co. from 1999 to 2000. From 1994 until his appointment as vice chairman, he was senior executive vice president and chief of corporate operations at Disney.