March 18, 2004

The Hewlett-Packard Annual Meeting Yesterday,

Yesterday, at Hewlett-Packard’s annual meeting, a majority of shareholders cast votes in favor of a shareholder proposal that requested that the company expense options. Management had vigorously opposed the proposal.

According to, shareholders cast 1.2 billion votes in favor of the measure and 921 million against. In 2003, the company’s net income of $2.5 billion would have been reduced $762 million to $1.8 billion if the company had expensed options using the fair-value method. Annual earnings would have been cut from 83 cents to 59 cents.

In addition, all but one of H-P’s directors received the support of over 90% of the votes cast, including its audit committee members – despite the urging of CalPERS for shareholders to vote against these five audit committee members because they approved Ernst & Young as both the H-P’s auditor and tax adviser. CalPERS has taken this position universally this year – and as a result, it has voted against the audit committee members at a number of companies.

CalPERS had more success with the director that works for Dewey Ballantine, while the law firm provided legal services to H-P. Last week, CalPERS publicly criticized the director for having a “poor attendance record and a business relationship with the company that CalPERS believes could impair his objectivity.” The preliminary voting results show that this director received withhold votes from over 30% of the votes cast.

Ethics Programs – The Role of the Board: A Global Study

In our “Code of Ethics” and “Compliance Training” Portals, we have posted an executive summary of a 2003 report from The Conference Board on the role of the Board in the design, implementation, and monitoring of corporate ethics programs. The full report can be purchased for $140 ($35 for Conference Board members) at the Conference Board website.