Large HP Shareholders Don't get Say in Board Nominations

March 15, 2007 ( - Hewlett-Packard Co. investors axed a proposal that would have given large shareholders such as pension funds the clout to nominate their own candidates to sit on the board of directors, the Associated Press reported.

The measure – backed by four public pension funds – would have permitted stockholders who have owned at least 3% of HP’s outstanding stock continuously for at least two years to nominate two candidates to the board (See   Public Pension Funds Want Say in HP Board Nominations).

The New York State Common Retirement Fund, the Connecticut Retirement Plans and Trust Funds, the North Carolina Retirement System, and the American Federation of State, County and Municipal Employees Pension Funds filed the proposal in September 2006.

The Palo-Alto-based company said allowing the big shareholders to weigh in would lead to a costly and divisive proxy fight over director elections, the AP reported.

The proposal failed at an annual shareholder meeting for the on Wednesday when it failed to get the 1.8 million shares voted it needed to amend the company’s bylaws on director nominations. Instead, 52% of the total shares, or 1.61 billion shares, voted against the proposal, and more than 800 million shares, or 39% of the total shares voted, were cast for the proposal.

According to the AP, some large stockholders were against the proposal, saying the change would give investors with a small percentage of the outstanding shares the ability to wage expensive proxy contests at the company’s and shareholders’ expense.

HP has been entangled in a spying scandal that has ended in the dismissal Wednesday of felony charges against former HP Chairwoman Patricia Dunn and a guilty plea by three others in connection with the revelation in September 2006 that private investigators working for HP used Social Security numbers of board members and employees, as well as those of journalists who report on the company, to obtain phone records and other data in an effort to discover the source of boardroom leaks (See  Former HP Employees in Spying Scandal Avoid Jail Time ).

Criminal charges are still being pursued by federal prosecutors against all except Dunn.