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Vanguard Opposes HP Director Proposal
Hewlett-Packard Co.'s sixth-largest shareholder said Wednesday it opposes a proposal floated in the wake of the company's boardroom spying scandal that would allow shareholders to nominate candidates for the company's board of directors.
The Vanguard Group Inc. -- which held 72.4 million shares, or 2.68 percent, of HP's common shares outstanding at the end of 2006, according to Thomson Financial -- said shareholders have the right to a "meaningful, proportional" say in determining the election of board members.
However, Vanguard said in a statement that it sees "no value in giving holders of a small, insubstantial percentage of the shares the ability to wage a proxy contest at the company's (and by extension, the other shareholders') expense."
Vanguard did not say explicitly that it would vote against the proposal, which would allow stockholders who have owned at least 3 percent of HP's outstanding stock continuously for at least two years to nominate up to two candidates.
A coalition of large pension funds floated the proposal following revelations last year of HP's scheme to root out the source of boardroom leaks to the media by illegally accessing phone records of some directors, employees and journalists. The scandal led to criminal charges against former Chairwoman Patricia Dunn, former HP ethics chief Kevin Hunsaker and three private investigators.
HP has come out against the proposal, saying it would lead to divisive and costly proxy battles.
HP, which has scheduled its annual shareholder meeting for March 14, said its passage could lead to the election of "special interest directors" who represent only the shareholders who nominated them instead of all HP shareholders. It also could cause expensive proxy fights over director elections, the company said.
The nation's largest public pension fund, the California Public Employees' Retirement System, or CalPERS, has joined other large pension funds in supporting the change.
CalPERS, which has about 1.5 million members and more than $230 billion in assets, said recently in a letter to shareholders that changing HP's bylaws to allow shareholder nominations of directors "is the most effective mechanism for ensuring director accountability."
CalPERS held 12.8 million shares, or 0.47 percent, of HP's common shares outstanding at the end of 2006, according to Thomson Financial.