HP shareholders approved two proposals related to executive pay and anti-takeover provisions, and vented some of their frustration with the company's board of directors at the company's annual meeting on Wednesday.
The measures were given only preliminary approval and they are non-binding, an HP representative said. One of the proposals demands that HP adopt a more rigorous long-term compensation policy linked to executive performance. The other would subject any future adoption of a "poison pill" anti-takeover provision to a shareholder vote.
The poison pill proposal passed with 72.5 percent of the voted shares, and the executive pay proposal passed with 53.1 percent of the voted shares. HP had recommended against both proposals, and the company only promised to review its policies in statements distributed immediately following the close of the polls.
"As with most public companies, these are non-binding proposals that were preliminarily approved by shareholder vote today. Once the votes are officially tallied, they will be reviewed and acted upon by the board, with the serious consideration they deserve," HP said in a statement.
Poison pills are enacted when a company is the subject of a takeover bid from another company. Existing shareholders are offered the right to buy more shares at discounted prices, which dilutes the value of their shares but makes it much harder and more expensive for any potential acquirer to lock up all the outstanding shares. Although HP is an unlikely takeover target at the moment, given its size, shareholders could now be given the chance to vote before any poison pill technique could be used in the future.
The measure regarding executive pay would require HP to ensure that long-term compensation packages involving stock options and hefty bonuses be tied to performance. The proposal stems from shareholder dissatisfaction over the pay received by former chief executive Carly Fiorina, especially after her dismissal by the board, according to the proxy statement.
Two other proposals were soundly defeated, one asking HP to consider shareholder-nominated candidates for the board of directors and one calling for a separation of the chairman and chief executive slots, currently both held by Mark Hurd. The eight directors up for re-election were also overwhelmingly approved, but not before shareholders had a chance to express their displeasure with the board's conduct in 2006.
During a question-and-answer session following the discussion of the proposals, and during the presentation of some of the proposals, shareholders vented about the board's conduct during its investigation of leaks to the media.
"The board's greatest accomplishment in 2006 was introducing the world 'pretexting' into the American lexicon," said Scott Adams, who represented several pension funds in making a proposal in favour of shareholder nominees. Other questioners wondered how Hurd would restore the same confidence in the board that investors now have in the business, given HP's solid financial performance over the past year.
Criminal charges against former chairman Patricia Dunn were dropped earlier on Wednesday by the state of California, and Hurd said right at the start of the question-and-answer session that he wouldn't take any questions related to that development.
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