HP explains Hewlett ousting

03 Apr 2002 11:55


Hewlett-Packard had planned to renominate the son of its founder to the board - until he filed his lawsuit alleging systematic deception of shareholders

Hewlett-Packard's board of directors tried on Tuesday to reach out to the company's employees, outlining its reasons for not renominating Walter Hewlett as a director.

In a letter to employees, HP's board said it had planned to renominate Hewlett despite his opposition to the Compaq Computer merger, but changed its mind after Hewlett filed suit last week seeking to overturn HP's shareholder vote.

The decision to remove from the board the lone representative of the Hewlett and Packard families drew criticism Monday as analysts and others said it could further drive a wedge between company management and employees and shareholders who oppose the merger.

HP has claimed a narrow but decisive victory in the shareholder vote, while Hewlett has maintained it is too close to call. An independent tally is still up to a few weeks away.

Tuesday's letter says HP board members met with Hewlett a day before the lawsuit, and he raised none of the issues addressed in the suit. Board members were therefore "shocked" at his legal action the next day.

Hewlett's lawsuit, filed last week in Delaware Chancery Court, alleges that HP improperly influenced Deutsche Asset Management, a large shareholder, to change its votes on the morning of the 19 March vote. Hewlett also contends that the integration process had been faltering, and that HP failed to disclose that information to shareholders.

On Monday, HP asked a Delaware judge to throw out Hewlett's lawsuit, calling it "a last-gasp attempt by the apparent loser of a proxy battle to gain in the court what he apparently could not win at the ballot box."

The judge in the case, Chancellor William B. Chandler III, has set a hearing for Sunday morning to consider arguments on HP's motion.

In Tuesday's letter, HP characterised the allegations in the suit as "completely baseless."

"In essence, Mr. Hewlett continues to allege -- now in the courts -- that the board and management team are systematically deceiving shareowners," the board members wrote. "We will not stand by and let this go unchallenged."

HP urged employees to focus on the results of the vote, not on Hewlett's lawsuit.

"It's time we let the votes be counted and whoever gets more votes wins," HP's board said in the memo. "That's what real corporate democracy is all about."

Hewlett, who has been on HP's board for 15 years, has come under fire from the company his father co-founded. HP has labelled him a "musician and academic" unqualified to decide the company's future.

In addition to soliciting proxies in an effort to derail the proposed $20bn merger, Hewlett has irked HP by releasing details of board discussions on salary negotiations with HP chief executive Carly Fiorina and Compaq chief executive Michael Capellas.

Hewlett, along with other members of the Hewlett and Packard families, controls roughly 18 percent of HP shares.


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