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HP board needs to add an ‘r’ to evolution plan

Reuters Breakingviews delivers agenda-setting financial insight. Its global correspondents react to stories as they develop, delivering sharp and provocative commentary on big financial news as it breaks.

Hewlett-Packard's boardroom needs a revolution. After chairman Ray Lane and two other directors squeaked back into office with less than 60 per cent support, Ralph Whitworth, a fellow board member, said shareholders should expect "evolution." A more radical shakeup of both directors and strategy is called for.

Criticism centring on HP's massively overpriced $11-billion (U.S.) acquisition of U.K. software group Autonomy led governance advocates to advise shareholders to vote against several directors at Wednesday's annual meeting. They did – but not in numbers quite large enough to unseat anyone. All the same, the level of dissatisfaction was clear, with Mr. Lane achieving less than 59 per cent support and two other directors, McKesson chief executive officer John Hammergren and former Wachovia CEO Kennedy Thompson, garnering even less backing.

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Meg Whitman, the former eBay CEO who has run HP for the past 18 months, may have rallied the long-dysfunctional board. The company's shares are also up more than 50 per cent so far this year after slumping in 2012. But the Silicon Valley icon is still worth more in pieces, according to a Breakingviews analysis.

Part of the runup in the stock also looks related to hints that HP could sell off some assets. That suggestion, contained in the annual report filed in late December, marked the start of a 2013 surge in the share price that has far outstripped rivals, even including buyout target Dell. Yet although possibilities discussed in private are presumably bolder than public pronouncements, there's no sign that a more comprehensive breakup is on the cards. At the very least, it's a viable strategy against which to compare other, less certain, turnaround options.

Past abortive CEO choices and the Autonomy mess alone justify changes on the board. It's especially hard now for HP to argue that Mr. Lane has broad enough shareholder support to continue as chairman, even though he secured re-election. A new figurehead open to a breakup of the company would be a start.

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