M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Thursday, September 22, 2011

Was the H-P Board paying attention?

Really? Really?!  This was the headline from James Stewart's Business Day article today:  Voting to Hire a Chief Without Meeting Him.  The article highlights the almost complete lack of attention the full board of H-P gave to the job of hiring a new CEO after firing Mark Hurd.

Among their revelations: when the search committee of four directors narrowed the candidates to three finalists, no one else on the board was willing to interview them. And when the committee finally chose Mr. Apotheker and again suggested that other directors meet him, no one did. Remarkably, when the 12-member board voted to name Mr. Apotheker as the successor to the recently ousted chief executive, Mark Hurd, most board members had never met Mr. Apotheker. ...

Before a final vote on Mr. Apotheker, H.P. search committee members again urged other directors to meet him. No one took them up. At least one director, Ms. Salhany, tried to slow the process, worrying aloud that “no one has ever met him. Are we sure?” But her concerns were brushed aside. “Among the finalists, he was the best of a very unattractive group,” one director said.

Really, I find that revelation - if true - to be an absolutely incredible abdication of responsibility by a board.  Short of a merger, hiring a CEO is one of the most important things a board can do.  And they can't even bring themselves to have coffee with the guy they are going to hire.  How is that possible?  Who advised them?

The members of the board should be thankful that Delaware has Sec. 102(b)(7) in the code, otherwise they might be looking at major liability - that's not to say they won't get sued, they just might anyway.

I wonder now how involved the board was with Apotheker's recent shift in corporate strategy away from the PC and tablet business and its generous acquisition of Autonomy (for 10x earnings revenues).  The shift took the investment community by surprise.  I wonder if the H-P board was surprised, too. 

-bjmq

Update:  A nice piece by Reuters reminds us just how dysfunctional the H-P board has been over the years.  Of course, one can start with the rancor over the Compaq acquisition that got H-P into the PC business in the first place.  There were accusations that then CEO Fiorina bought DB's votes to get that deal through.  And then there was the whole Patricia Dunn/boardroom leaks investigation that led to Tom Perkins' resignation in 2005/2006?  And now they're talking about hiring Meg Whitman to take over.  Goodness. 

 

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