HP Board Defends Ouster Of Walter Hewlett

The Hewlett-Packard board Tuesday defended its decision to oust dissident Walter Hewlett, telling employees the co-founder's son "shocked" directors by filing a lawsuit against the company following a shareholder vote on HP's proposed merger with Compaq.

In a memo to HP workers, the board also said Hewlett acted hypocritically in speaking about ethics in the boardroom during a speech to institutional investors a week ago, and then filing a lawsuit March 28, a day after the board decided to renominate him as a director. "But corporate democracy, transparency, accountability, and fiduciary responsibility are not platitudes to dress up speeches and please crowds," the memo said. "They are actions to be practiced during the hard discussions that take place in the boardroom on behalf of shareowners, and they are inherently based on candor between board members and management."

The HP board said it renominated Hewlett, who led a bitter fight with HP management over the proposed merger, because of his high standing among many employees, to demonstrate the board's willingness to work with the Hewlett and Packard families, and to prove that the board "not only tolerates different views, we embrace them." During discussions that included Hewlett, the board said he gave no indication that he was concerned about HP's conduct over the proxy fight. "The board was shocked, therefore, when just hours after these meetings, Mr. Hewlett filed a lawsuit against the company continuing his assault on the integrity of the HP board and management team," according to the memo released by HP. "In essence, Mr. Hewlett continues to allege--now in the courts--that the board and management team are systematically deceiving shareowners."

Hewlett's suit accuses HP of acting improperly to win shareholder approval of the merger. He claimed the company used its corporate assets "to entice and coerce" financial institutions to support the $19 billion deal and asked the court to declare the merger defeated or to order a new vote. While HP has claimed victory by a slim margin in the shareholders' March 19 vote, Hewlett says it's too close to call. A final vote count is several weeks away. If approved, the merger would be the largest ever in the high-tech industry.