From the news services, sorry I missed this on Friday
HP's Unearned Move to Make Meg Whitman Its
Chairman
By Diane Brady
July 18, 2014
In any other company, the decision to give your chief
executive the title of chairman might simply be a matter of debate. But Hewlett-Packard
(HPQ)
isn’t an average company.
The once-revered tech giant holds a special place in the
annals of boardroom antics. In recent years its directors have approved some
truly terrible deals, including the $11.1 billion acquisition of Autonomy that
turned out to be worth 80 percent less. The board fired popular CEO Mark Hurd,
giving him tens of millions in severance, and then hired a replacement, Léo
Apotheker, that most of them hadn’t met, only to fire him 11 months later. Add
in the bickering, the public accusations, the embarrassing leaks, and the even
more embarrassing spying scandal, and it’s easy to see why several governance
experts once dubbed HP’s board the worst in U.S. history.
Luckily, under Chairman Ralph Whitworth, HP’s board
seemed to have some measure of credibility with shareholders waiting to see if
CEO Meg Whitman could fix the mess she inherited. Between the writedowns and
34,000 job cuts, it’s been a tough slog. But Whitman has made some progress,
and the stock was starting to recover.
All the more reason to question why the board suddenly
gave her the job of chairman this week. For one thing, it looks like a reward
for a job well done–a verdict even Whitman herself might feel is a tad premature
at this point. And HP is going against the growing trend among corporate boards
to split the chairman and CEO roles in an effort to boost a board’s
independence.
Whether an independent chairman actually improves a
board’s performance is open to debate. Noel Tichy, a management consultant and
professor at the University of Michigan’s Ross School of Business, isn’t a fan
of splitting the roles. He thinks it undermines a leader’s effectiveness and
can promote a dysfunctional dynamic where directors play the chairman off the
CEO in the same way kids try to pit mom against dad. Still, Tichy agrees it’s
too early to heap accolades on Whitman, who was plucked from the board to take
over as CEO. At this point, he says, “they’re at base camp at the bottom of Mount
Everest.”
All the more reason for HP’s board to aim for
best-in-class governance instead of bucking the trend. Nell Minow of GMI
Ratings describes HP as “a serial offender” with shareholders. “To unthinkingly
give the same person the CEO and chairman role shows that they still don’t get
it,” Minow says. “Given the many failures that this board has had, you have to
wonder why they didn’t even explain this move.”
Will they give lead director Pat Russo more authority?
Has Whitman been hampered by not running the board? Do directors realize
they’re going against the advice of most governance experts in giving Whitman
both jobs? For most other boards, such questions might suggest a lack of trust.
For HP’s board, it’s more like standard operating procedure.
This
board hasn’t yet earned the full trust of shareholders. To give Whitman the
chairman role and say little beyond a bland corporate statement illustrates
why. The issue isn’t whether Whitman has earned the right to be chairman.
Shareholders should ask whether HP’s board has earned the right to make that
deci
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