The HP board fiasco continues
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In case Joe Nocera didn’t persuade you that HP’s board was pretty much the worst in corporate America, his replacement as Saturday business columnist, James Stewart, will probably manage to do the job:
Interviews with several current and former directors and people close to them involved in the search that resulted in the hiring of Mr. Apotheker reveal a board that, while composed of many accomplished individuals, as a group was rife with animosities, suspicion, distrust, personal ambitions and jockeying for power that rendered it nearly dysfunctional…
Still grappling with Mr. Hurd’s messy departure (H.P. sued him after he joined the rival Oracle as its president, later dropping the case), the company began a search for his successor. Four directors — Lawrence Babbio, John Hammergren, Marc Andreessen and Mr. Hyatt — volunteered to form the search committee.
Some other directors were immediately distrustful. They suspected that some colleagues hoped to advance their own ambitions, including in at least one case to be the next chairman. Others were so angry over Mr. Hyatt’s support for Mr. Hurd that they declined to participate in any committee he was on.
Now, Hurd’s successor, Léo Apotheker, is out, and HP has a new executive chairman as well as a new CEO. And how did the HP board choose Apotheker’s successors? Easy! Both of them — Ray Lane and Meg Whitman — were on the board already. Rather than appoint the best-qualified person for the job, two of HP’s board members managed to snaffle the prime positions for themselves.
Every once in a while, it can make sense for a board member to step in as the new CEO. But not in this case, when HP’s board is being used as a case study in what not to do in boardrooms around the country and the world. HP’s board has failed miserably in its job of governing HP effectively, and no member of that board should be rewarded for that failure by being given the job of running the company on a day-to-day basis.
The HP press release quotes board member Ray Lane, the new executive chairman, talking about Meg Whitman in the most content-free terms imaginable:
“We are fortunate to have someone of Meg Whitman’s caliber and experience step up to lead HP,” said Lane. “We are at a critical moment and we need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead… The board believes that the job of the HP CEO now requires additional attributes to successfully execute on the company’s strategy. Meg Whitman has the right operational and communication skills and leadership abilities to deliver improved execution and financial performance.”
HP is, I think, beyond redemption at this point. No wonder shareholders have been dumping their stock: the only thing worse than the company’s management has been the performance of the shareholders’ own representatives on the board. It’s a sad and ignominious end for a company which was once the very soul of Silicon Valley. The best that shareholders can hope for, at this point, is that Whitman sells HP to someone who knows how to run a company with passion and integrity. Maybe Walter Hewlett can get a group together.
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Goes all the way back to the Carly days and the board that investigated itself.
Very well said.
“HP is, I think, beyond redemption at this point.”
That is a bit of hyperbole. They still have some valuable brands.
They need new management, however. Simplest solution would be to sell out to a successfully managed company. Wouldn’t it be ironic if Oracle ended up with that plum? (Though perhaps not realistic.)
No one is going to buy HP, at least not whole. I don’t know what its market cap is offhand, but it does around $120 billion a year in sales. There may be three tech companies able to put together a credible bid, and I don’t see why they would do so. There may be a Chinese manufacturer willing to take on the PC division, like Lenovo did with IBM years ago, but for various reasons I think that window is closing. Likewise, you may be able to spin off printers, a la IBM with Lexmark, but in printers the brand name counts, and a new branding today would be deadly. No, the company is pretty much going to have to stumble along.
But you’re right about the board, and I’ve been saying that since the Patricia Dunn days.
There is a website that sells mugs & t-shirts with pity sayings on them. One saying I saw there sums up the HP board situation: “Because None of Us Are As Stupid As all of US”
Nice article, Felix. Stay fearless.
Curmudgeon, the market cap is just $45B.
With that kind of ratio between revenues and market cap, you could potentially swing a LBO.
Rumour has it they’re considering a new name for the company: “Headless Parrot” based on the fact that HP is now like a headless chicken but the board wants the CEO to copy what they say parrot fashion.
The board must have known they needed medical help when they got Apotheker as CEO – Apotheker in German means ‘Pharmacist’ – but I guess the medicine didn’t taste good so they decided to sell the company using eBay methodology…
@TFF, point taken, I didn’t realize it was that low. It does (or did) through off a good amount of cash, so an LBO may be the only viable strategy, although you might sell off pieces for a more manageable debt. I still don’t know anyone who would want it whole, though.
So Leo gives his best effort to wreck the company by changing the strategy, the stock tanks and the board decides to dump Leo and hire Meg, whose first words are “the strategy is right.” So why in the hell did Leo get fired again???
@FifthDecade, very funny. I don’t often smile when reading about HP.
@Curmudgeon, HP already has a lot of debt, so an LBO wouldn’t be a great idea. Of course, that never stopped those kinds of deals. The market cap has dropped like a rock this year, I think they were over $100B in February. I would bet shareholders might finally revolt against the board if they tried to sell off the company at a valuation of $50-60B, even if the sale was in pieces, so maybe that would be the best thing for HP’s employees and customers.
The strange idea that there is any value left in HP surely died this morning when Whitman declared (slight paraphrase), “My predecessor was incompetent, and I plan to continue his actions.”
At this point, anyone who is stupid enough to invest in any company that has a member of the HP board on its Board–and, yes, I am including Marc Andressen, who is rapidly becoming the Bernie Madoff of high-tech, on that list–gets what they deserve: massive losses with very limited upside.
Rather like the way Whitman ran eBay after the VC monies were replaced with their own capital.
You’re too nice to them, Felix. That HP’s Board wasn’t fired by the shareholders after The Hurd Debacle is a result of regulatory capture and inept pension funds in the =best= case scenario.
Was Meg Whitman given a lateral transfer (promotion to get her off the board)?
@bedhead From the FT:
Both Ms Whitman and Mr Lane said Mr Apotheker, who became chief in November 2010, was replaced for what they saw as failings of leadership, communication and operation, rather than problems with his strategic decisions.
http://www.ft.com/cms/s/2/be2fa12e-e5f7- 11e0-b196-00144feabdc0.html#ixzz1YoEUO79 d
Felix, while I agree the HP board as an institution has done little to inspire confidence over the last decade, it is worth noting that neither Whitman nor Lane joined the HP board until after Apotheker was hired. Given they are only 12 months removed from an extensive CEO search, it is pretty reasonable to believe that they had a good understanding of what options were out there, and it’s not obviously ridiculous that Whitman was a good choice. She has been a successful CEO in the past. Finally, “we support Apotheker’s strategy but he was executing it and communicating about it poorly” is a perfectly sound reason to replace the CEO.
All that said in the way of semi-defense, the worst thing the HP board did this time around was leak Apotheker’s potential firing 24 hours before they actually decided to do it. That more than anything makes me believe that these guys are still a bunch of clowns.
Mr. Hurd: Please tell the world what it wants to here, the stupidity of “Nobody is indispensable.”
Mr. Hurd: Please tell the world what it wants to here, the stupidity of “Nobody is indispensable.”
“the shareholders’ own representatives on the board.”
I hope one of the outcomes from this ficasco is that shareholders actually get more imput into the makeup of their boards.
Yes boards are elected… but the elections are uncontested. I’m pretty sure I could get elected president if I was the only one on the ballet. Hopefully in few years we’ll have a system where the nominating committee will put forth a slate of 12 – 15 canidates for 8 – 10 annually elected board spots.