HP's board gets an activist investor
The company adds a vocal critic to its board, which may help it regain the faith of the investing community.
The directors of Hewlett-Packard (HPQ) are making changes after years of being described as blundering, pathetic and a "bunch of clowns." In an effort to please investors, the board has done the unthinkable: brought in an activist investor.
The company is adding Ralph Whitworth, a hedge-fund director and vocal critic of the company. Whitworth has taken on a number of companies in the past. He helped oust Bob Nardelli from the CEO spot at Home Depot (HD) and has agitated for change at Sprint (S), Mattel (MAT) and JCPenney (JCP), according to Xconomy's Bruce Bigelow.
Not exactly a board's best friend. And it sounds like HP didn't exactly welcome him with open arms. Whitworth's firm, Relational Investors, owns a nearly 1% stake in the company. HP and Whitworth worked out a deal to allow Whitworth on the board if his firm agrees not to acquire more than 9.9% of the stock or start a proxy fight, The Financial Times reports.
"We believe that Ralph will bring a constructive voice and a track record of value creation into the boardroom," HP's executive chairman, Ray Lane, said in a statement. "We look forward to benefiting from his perspective and experience."
So is HP's board starting to show signs of responsibility and maturity? Really, there was nowhere for the board to go but up after a series of embarrassing scandals and corporate missteps.
Mark Hurd resigned as CEO last year amid numerous ethical questions. His replacement was fired in September. The company alarmed customers by mulling whether to spin off its PC business, and then changing its mind. HP outraged investors in August by paying a steep price for U.K. software company Autonomy.
The Business Standard calls Whitworth's arrival "a step in the right direction" since he has a decent track record when it comes to getting companies focused. Whitworth will join HP's finance and investment committee and compensation committee.
"This kind of tough love sounds like the right medicine for HP," writes Robert Cyran. "And better, given the recent turmoil, that Whitworth should apply it from within rather than publicly from outside."
Whitworth's appointment may also show more signs of leadership from Meg Whitman, HP's new CEO. Whitman's first matter of business was putting an end to the company's plans to explore spinning off its PC business.
Whitman may be open to more diverse opinion than HP's board is used to.
"It's definitely a positive development for the company,” ISI Group analyst Brian Marshall told Bloomberg. "The board needs help, and Ralph has the background to help them."
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