December 19, 2001 03:40
Opponent to Hewlett-Packard, Compaq Merger Wants Identity of Board Members
By Tracy Seipel, San Jose Mercury News, Calif.
Dec. 19--In the latest move of an escalating battle of letters, Walter Hewlett, chief opponent to the merger between Hewlett-Packard and Compaq Computer, is pressing HP to explicitly identify which board members and key executives would leave if the merger does not go forward.
In a Dec. 12 letter filed Tuesday with the Securities and Exchange Commission, Hewlett's lawyer seized on recent comments by HP board member Richard Hackborn alluding to an exodus of board members if the deal falls through. The letter called Hackborn's remarks "shocking," and said they "raise serious questions about the directors' compliance with their fiduciary duties."
A Dec. 12 story published in the New York Times quoted Hackborn as saying: "If the merger gets turned down by shareholders, they will have to get a board and a management to fix the PC business and these other problems."
Stephen Neal, the attorney representing Hewlett, made public the letter he wrote to HP attorney Larry Sonsini, saying his request was a matter of "material information" for HP and Compaq shareholders.
"I think shareholders have a right to know if it's true, and if so, who is going to resign," said Neal on Tuesday.
He called Hackborn's remarks "an inappropriate way for a director to behave."
"They're elected by the shareholders and serve the shareholders and make decisions," said Neal.
"The shareholder vote is a critical part of corporate governance, and if the shareholders say no, the board should not throw up their hands and say, `I quit.' "
HP officials declined to comment on Neal's letter. But Sonsini, reached late Tuesday afternoon, said he was preparing a reply.
In his response, Sonsini says that "any assertion that a HP director or member of management is making a threat to resign or has made a decision to do so is incorrect and misleading. The HP directors are discharging their fiduciary duties without compromise and intend to do so, so long as they remain in office."
Told of Sonsini's response, Neal replied: "I take that as a correction of statements attributed to Mr. Hackborn and a correction of other rumors that have been reported, which is what we had been seeking for almost a week."
The dueling letters are the latest chapter in the HP-Compaq saga that began in early November, when HP board member Walter Hewlett, after voting for HP's proposed acquisition of Compaq, decided to publicly oppose the deal backed by HP CEO Carly Fiorina.
Last Wednesday, Hewlett sent a letter to the boards of HP and Compaq asking them to consider abandoning the deal because of the "enormous unhappiness about the transaction."
The same day, Hackborn -- a HP board member and supporter of the merger -- resigned from the board of the William and Flora Hewlett Foundation, removing himself from a situation where he had been simultaneously within the camps of pro-and anti-merger forces.
Asked Tuesday if Hewlett would, in turn, resign from HP's board, Neal said Hewlett had "no intention" of doing so.
"Walter was sorry to see Dick Hackborn resign. He was disappointed that Dick Hackborn didn't realize it was possible to have serious disagreement about serious issues, but nonetheless continue to serve on the board," said Neal.
"In corporate America, we like to have differing views by our directors," said Neal, no matter how strongly held those views might be.
Corporate governance experts who are watching the tug-of-war from afar mostly chuckled at Tuesday's developments. Richard Koppes, with the Sacramento law firm Jones Day Reavis & Pogue, called it "the normal back-and-forth" of a proxy battle.
Charles Elson, who teaches at the Center for Corporate Governance at the University of Delaware, agreed. "I don't think shareholders will be swayed by the fact that a director is threatening to leave," he said. "The suggestion would seem to be that these directors are irreplaceable. And they're not."
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