SAN JOSE — Hewlett-Packard Co.’s board axed an olive branch to dissident director Walter Hewlett on Monday, reversing a plan to renominate him after he sued to try to stop the merger with Compaq Computer Corp.
Though Hewlett no longer will sit on the board, the move is unlikely to end or quiet the feud between company officials and the co-founder’s son over the $19 billion union of computer giants.
After HP chief executive Carly Fiorina claimed a slim victory in the fight for shareholder approval, board members met with Hewlett “to develop a constructive working relationship,” HP said.
The full board met with Hewlett on Wednesday and unanimously decided to renominate him. He then filed suit to stop the merger, which has yet to be officially approved.
“My fellow board members and I were ... shocked when just hours later Walter Hewlett filed a spurious lawsuit against the company,” said Sam Ginn, chairman of the nominating and governance committee.
In the suit filed last Thursday in Delaware, Hewlett alleged the investment arm of Deutsche Bank switched its vote at the last minute after HP threatened to take future business away.
Hewlett also said HP misled investors about the progress of plans to integrate its massive organization with Compaq’s. He said HP executives lied about their ability to achieve the deal’s financial targets without exceeding their prediction of 15,000 job cuts.
The suit, which HP calls baseless, seeks to invalidate the vote by HP shareholders and declare the merger defeated or order a new election. HP and Compaq are incorporated in Delaware.
Hewlett, who has said he will work to support the integration if the deal closes, issued a statement Monday regretting the board’s decision.
“It is unfortunate that the HP board has seemingly missed what the company’s stockholders have clearly recognized: that dissent is not disloyalty, that healthy boards need not agree on every issue,” he said.
David Katz, president of Matrix Asset Advisors and a merger opponent, said the decision comes at a time when investors are looking for independence on corporate boards.
“Here’s a strong comment by a board who says, ’We love you as long as you’re with us. If you’re against us we’re not going to have you there,”’ he said.
In a rare news conference after the March 19 shareholder meeting, Hewlett, who has served on the board for 15 years, said he would like to remain active with the company.
That was despite months of sometimes personal attacks from both sides, including a company advertisement belittling Hewlett as being a musician and academic with no real business experience.
On Monday, the company’s statement cited concerns about his “lack of candor and issues of trust.”
John Coffee, a Columbia University law professor who advised the board after the lawsuit, said the directors were surprised Hewlett had not mentioned his planned suit during their talks preceding the filing.
“They were free to consider ... whether their current relationship with Mr. Hewlett would render the board a less cohesive, less congenial body in which candor and confidentiality would become problematic,” he said.
Though HP’s corporate bylaws allow for write-in board candidates, the deadline passed in November, company spokeswoman Rebeca Robboy said.
Shareholders will vote on nominations to the board at HP’s annual meeting set for April 26 at the Flint Center in Cupertino.
Pending final closure of the deal, the nominees are current HP Board members Philip M. Condit, Patricia C. Dunn, Fiorina, Ginn, Richard A. Hackborn, George A. Keyworth II and Robert E. Knowling Jr. as well as Compaq board members Lawrence T. Babbio, Jr., Michael D. Capellas, Sanford M. Litvack, Thomas J. Perkins and Lucille S. Salhany.
If the merger transaction with Compaq has not closed prior to the annual meeting, HP’s shareowners will vote on Condit, Dunn, Fiorina, Ginn, Hackborn, Keyworth, Knowling and Robert P. Wayman.
Shares of HP closed down 4 cents to $17.90 in trading Monday on the New York Stock Exchange, while Compaq shares were down 3 cents at $10.42.
On the Net:
Hewlett’s opposition site: http://www.votenohpcompaq.com