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CalPERS Says HP Board Needs ‘Corporate Therapy’

The California Public Employees’ Retirement System is looking to the company’s new interim chairman and activist investor

The great and powerful California Public Employees’ Retirement System, commonly known as CalPERS, the largest public pension fund in America with around $256 billion in assets and a significant stake in Hewlett- Packard, is looking to the company’s new interim chairman and activist investor Ralph Whitworth to do what amounts to “corporate therapy” on the HP board as it now exists.

Viewing Whitworth as a “change agent,” it wants him to “take a rigorous look at the talent at the table” and get other directors involved in HP’s recent series of “disastrous” acquisitions “who may not have understood what was going on and may have made decisions they now regret” to realize that they should step down in favor of people who would “support the new strategy.”

Its list includes former chairman Ray Lane, who gave up the job last week because HP stockholders didn’t give him a mandate but is staying around as a director, as well as VC Marc Andreessen and former lead independent director Rajiv Gupta.

CalPERS, which holds 13.7 million shares of HP, voted against the re-election of Lane, Andreessen and Gupta last month at the annual stockholders meeting as well as the return of long-time directors John Hammergren and Ken Thompson, who will be stepping down after the May board meeting.

CalPERS is also opposed to the reappointment of HP auditor Ernst & Young, figuring that after $18 billion in write-offs and a plunge in share price the company needs somebody else doing its sums.

Anne Simpson, CalPERS senior portfolio manager and director of global governance, told Bloomberg TV that the changes in the board’s composition last week only represent “Chapter One in HP’s new playbook.”

She’s unhappy with HP’s notion that the board is “evolving.” Evolution, Ms. Simpson said, is too slow. She’s looking for a more fundamental overhaul.

In a public statement welcoming the resignation of Lane and the departure of Thompson and Hammergren, she said, “It is time to move beyond the recent failures at HP and bring fresh talent to the boardroom. HP needs a board which is unencumbered, and will provide rigorous oversight of all decisions, including reviewing the auditor.”

CalPERS is expecting Whitworth to find a new chairman who knows the industry and has the time needed to devote to the cause. It says it’s “backing him fully.” Separate from CalPERS’ direct investment in HP, it has money out with Whitworth’s hedge fund.

Ms. Simpson told Bloomberg not to overlook the fact that what’s called “proxy access” was voted in at HP and would allow large shareholders of three-years standing to nominate their own candidates to the board.

Whitworth has to deliver the promised independent board report on the ghastly $11 billion Autonomy acquisition that explains what the board and management did to find themselves writing off $8.8 billion and accusing the UK company of bilking it.

And he needs to start cleaning up HP’s reputation as having one of the worst boards in America according to Governance Metrics International.

Of course there is the very real possibility that a new board might not make any difference ostensibly because of lack of continuity.

Maybe HP needs to hire an exorcist and change its boardroom’s fung shui.

Lane is suffering the embarrassment of being forced out of the HP chair after trying to run the company through Meg Whitman, his hand-picked replacement for Leo Apotheker, whom he also backed along with the Autonomy acquisition.

He knows that his old boss, Oracle CEO Larry Ellison – no love is lost there – is delighted at his disgrace. Meanwhile he has to live down the failure of Fisker Automotive, the clean energy start-up Lane persuaded Kleiner Perkins to put millions in.

Fisker decided to cut 75% of its 200 people last week at the same time Lane’s overweening power at HP was curtailed. It couldn’t get an automotive partner and stopped assembling its own electric sedans last year.

Apparently Lane’s ability to pick winning race horses is vastly overrated.

He did manage to sell a few Kleiner-backed companies to HP because of his insider role.

As widely noticed Lane is now listed on Kleiner’s web site as “partner emeritus.” He put five of his own people on HP’s board including Meg, who joined Kleiner shortly after she was named HP’s CEO. Small world isn’t it.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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