I was interviewed today by the San Jose Mercury News about the latest development in the HP/Mark Hurd saga. HP is attempting a standard defense of the claim by shareholders that they wasted money in forking over millions in severance pay to the ousted Hurd. In theory the claim of waste should be pursued by the board of HP itself, but that is not likely in a case where it is the board that is accused of waste. So shareholders usually go straight to court instead of making what would likely be a futile demand on the board to pursue the waste claim.
But HP can respond by telling the court that it will appoint new directors who were not involved in the original controversial decision to a special litigation committee to review what happened with the help of (yet another costly) outside law firm to make an “independent” determination whether or not the HP board should pursue the claim of waste. In theory the HP board can hand complete control of that decision and any subsequent litigation over to the new committee.
That gives the new directors quite a bit of power. Since those new members are sometimes recruited just to handle this question they may actually not feel comfortable using that power and so it is not a surprise that in most instances they conclude that the original board made the right decision and that the case against the board should be dismissed. Courts will often abide by that recommendation.
But at HP the situation is slightly different. The only new board members post-Hurd are the new board Chair Ray Lane and the new CEO Leo Apotheker. Clearly they have more leverage to pursue the investigation than the typical board member. They might view this situation as an opportunity to reshape the board itself. Of course, that may or may not help Apotheker get a hold of the HP octopus. His 8 month failed stint at SAP does not instill confidence.