I can't put it any more bluntly. The current board of directors at Hewlett-Packard Co. (NYSE: HPQ) needs to be replaced.
The board presided over a mess, fostered an atmosphere of executive incompetence at HP, and by its actions or omissions in leadership appointment and oversight helped drive one of the world's most innovative companies into a ditch. It has named Meg Whitman as CEO, even though she was previously on the board that sanctioned some bad investment and strategic decisions by her predecessor, Léo Apotheker.
If shareholders want to improve the odds of Whitman successfully turning around the company, they need to sweep out the current directors and appoint new ones that will provide the oversight she would need. In some ways, the board is already mostly new, but it is also compromised; many of the current directors, including Whitman, were appointed in the last year.
Lawrence Babbio, Jr., the longest-serving member, joined the board in 2002, followed by John Hammergren, a director since 2005, and then G. Kennedy Thompson and Sari Baldauf, both of whom were appointed in 2006. The other directors include Marc Andreessen (2009), Shumeet Banerji (2011), Rajiv Gupta (2009), Ann Livermore (2011), Gary Reiner (2011), Patricia Russo (2011), Dominique Senequier (2011), and Raymond Lane (HP's non-executive chairman from November 2010 to September 2011 and now executive chairman).
I am a huge fan of HP, which is why I am pleading with investors and CEO Whitman to let their current board of directors go. As I have written previously, the group has not, in my opinion, fulfilled its fiduciary duty to the company but instead, through its actions and omissions, both under-represented and under-served its shareholders. (See: HP Needs a Higher Bar for Whitman and Muddled Thinking Sinks HP.)
The new directors are equally compromised, despite their extensive knowledge. Most have executive experience and are either currently leading or have led major international companies. Yet, they inherited and adopted a system where the board has more or less become a rubber stamp authority, rather than an independent body that is supposed to closely scrutinize the decision of the CEO and provide critical guidance.
Under the board, HP became an example to the high-tech community of how not to manage the announcement of a major structural reorganization, the hiring and firing of a CEO and the building of shareholder value. Under its watch, HP's market value has dropped so low that computing and consumer electronics rival Apple Inc. (Nasdaq: AAPL) could add a 30 percent premium and still purchase the company with cash on hand. The board presided over the hiring of Apotheker, a software specialist who clearly had no idea how to transform the company for the 21st century.
Apotheker's replacement with Whitman, the former would-be governor of California and ex-CEO of eBay, was no less bewildering. Within weeks of assuming the role, Whitman and the directors had reversed the decision to spin off or sell HP's personal computer division -- a position they supported during Apotheker's tenure -- making me wonder if they just rubber-stamped the former CEO's proposal or actively debated the subject and conducted due diligence to make sure it was in the company's interest. HP said in a recent statement it decided after a strategic review it would keep the PC business as a part of its operations. The company said further:
The data-driven evaluation revealed the depth of the integration that has occurred across key operations such as supply chain, IT and procurement. It also detailed the significant extent to which PSG contributes to HP's solutions portfolio and overall brand value. Finally, it also showed that the cost recreate these in a standalone company outweighed any benefits of separation.
Really? Even without access to the "data" they reviewed, any analyst could have told the board it didn't make sense to hack off the PC business. Unlike IBM Corp. (NYSE: IBM), which sold its consumer PC division to Lenovo, HP has not developed its consulting and software business enough, and the tight link between the PC unit and the higher-margin printer ink business clearly suggests a different strategy. Somehow, the board, which at the time included Whitman, missed this simple fact.
Turning around HP will require some tough decisions in the year ahead, but nobody should doubt that this is a company worth overhauling. Some data from the company's online "Fast Fact" page shows it as a diamond in the rough. The company, according to the site, ships "more than one million printers per week; 48 million PC units annually; one out of every three servers shipped worldwide and makes calls possible for more than 300 million mobile phone customers around the globe."
With such an admirable record, it shouldn't be that difficult to tell the HP story, but today the company isn't wowing anyone anymore with its "Invent" slogan. If HP is serious about "Invent," it should start at the very top of its organizational structure.