Category Archives: Finance Capital

HP Update: “Conduct Unbecoming A Public Company Board Of Directors”

Remember Spygate, HP’s undercover operation against its own board and journalists? Well, now we have Hurd-gate, according to Mike Arrington at TechCrunch.

Stung twice, first by their abrupt dismissal of star CEO Mark Hurd for what appeared to most people to be a personal failing (his involvement with an HP marketing contractor) and second by their hiring of a failed CEO to lead the country’s largest technology company, the board has now gone on the offensive against business reporter Joe Nocera of The New York Times.

As I noted here a few days ago, Nocera pointed out the hypocrisy of the board for dumping Hurd for relatively minor ethical issues while hiring Leo Apotheker, whom SAP fired after 8 months as their sole CEO (he held a co-CEO position for longer).

Apotheker it turns out was CEO of SAP while SAP was stealing software code from competitor Oracle.

Nocera wrote an earlier column calling the HP board “the most inept in America.”

Unable to make the business case for the hiring of Apotheker, Arrington says the HP directors are going after Nocera instead, first through a guy named Ben Horowitz. Horowitz was CEO of a company called Opsware (formerly LoudCloud) which was chaired and co-founded by Marc Andreesen. Horowitz and Andreesen arranged the sale of Opsware to HP in the summer of 2007 for $1.6 billion. Andreesen eventually got appointed to the HP Board. Horowitz quit HP after a year and he and Andreesen formed a venture capital fund.

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New HP Chair Ray Lane: HP Board Did Not Tell Investors the Whole Story Behind Hurd Ouster

SEE UPDATES AT END.

Apparently the HP Board did not tell investors everything there was to know about the ouster of HP CEO Mark Hurd.

At least that is what the incoming HP Board Chair Ray Lane has told the New York Times in a letter that attempts to explain the ouster. While there was some disclosure by HP that Hurd had fudged expense accounts, Lane now says that that explanation did not give investors the full story. Lane says that Hurd “repeatedly lied” to the Board about his involvement with Jodie Fisher.

Federal securities laws require statements to investors not be materially misleading. If the board knew Hurd had “lied repeatedly” to them it certainly would have made sense to tell investors, the owners of the company, that this was the case.

All that HP said at the time of the firing was that their standards of business conduct were violated, which is so vague as to be meaningless. The market was confused at the time and remains now even more confused about the nature of corporate governance at our country’s largest technology player.

Oh, and why was Lane now revealing this information? Apparently he is embarrassed that the new CEO HP has hired, Leo Apotheker, was CEO of SAP when SAP was stealing IP from competitor Oracle. I guess Lane’s attempt to distract the market from that story is to somehow try to beef up the board’s ouster of Hurd.

Just in case folks are wondering about the role that SAP may have played in the IP theft, SAP has admitted its TommorowNow (SAP TN) subsidiary violated a federal statute against intentional theft of information from a computer.

Claims that SAP itself was involved in this illegal behavior survived “summary judgment” (i.e. an attempt to dismiss the Oracle claim by SAP) because, in the words of the federal judge hearing the case, “triable issues exist with regard to the extent of SAP AG’s and SAP America’s knowledge of the alleged infringement; with regard to whether SAP AG or SAP America induced, caused, or materially contributed to the alleged infringement; and also with regard to the extent of any actual involvement by SAP AG or SAP America in any copying that was performed by SAP TN.”

Normally when a company like SAP loses on a summary judgment motion they will attempt to settle the dispute rather than proceed to trial since otherwise they are leaving matters in the hands of a jury. In fact, SAP issued a public statement after the court’s August ruling saying it would compensate Oracle for the harm it caused. Oracle also won summary judgment on several other issues before the court.

Recall that HP’s new CEO, Apotheker, was a senior SAP sales executive and CEO while SAP TN was engaged in this activity. Yet that somehow was ignored by the HP board in its vetting of him. As I said when first interviewed about this story, the entire HP board should go, sooner rather than later.

UPDATE: The FT reports that Lane does not take office until November 1. One wonders, then, how he is privy to details about the Hurd ouster that investors are not? The FT seems shocked by what it called the “outbursts” and “astonishing public accusations” by Lane.

UPDATE #2: It appears the TN theft may have stopped prior to the elevation of Apotheker to the CEO position. He was at the time a member of the SAP Executive Board, which together with the Supervisory Board is the equivalent of an American Board of Directors, and deputy CEO. The Oracle complaint against SAP includes references to emails indicating that Apotheker was familiar with TN operations.

New York Times: The Hypocritical HP Board

Joe Nocera at the Times takes the board of directors at HP to task for hiring as its new CEO Leo Apotheker who was CEO of SAP when that company admitted theft of key intellectual property assets from major competitor Oracle.

The HP board had some two months ago ousted Wall Street darling CEO Mark Hurd for what appeared to be minor expense account issues, but somehow was so enamored of Apotheker, apparently in part for his minor role as a liason between HP and SAP during his brief and disastrous 8 months as SAP CEO, that they rewarded him a compensation package worth tens of millions.

HP recently tapped the services of hotshot defense lawyer Alan Ruby to go after Hurd when he joined Oracle for the mere possibility that he might, someday, misuse confidential business information for Oracle that he gleaned while at HP. Ruby should stay near the phone – the hapless HP board may need him again to bail their new CEO out of trouble.

Proxy Access Rule Issued by SEC

After years of hard work by organized labor, pension activists and, finally, friendly politicians, the SEC has bit the bullet to allow shareholders under (very) limited circumstances to spend their own money to participate in shareholder democracy!

I am being ironic but also accurate. Until now managers use corporate resources to help directors get elected: they control access to the proxy statement that accompanies the proxy card that shareholders inevitably submit back to management who then vote onto boards their hand picked director candidates.

Now however shareholders can piggy back on the proxy material sent out by management and use that material to nominate independent candidates for corporate boards.

Much like the market for corporate control it may well be that the mere threat of the rule will be enough to change corporate behavior – event studies galore will no doubt emerge soon!

The link below is to a law professors’ site that is debating the issue and here is a link to the rule itself on the SEC website.

The Conglomerate Blog: Business, Law, Economics & Society.

A rare MSM spotlight on Han Dong Fang of China Labour Bulletin

imagesHan Dong Fang of the independent Hong Kong based China Labour Bulletin comments in this FT video on the recent labor unrest and tragic Foxconn suicides.

A wildcat strike at Honda has led to a large wage increase as well.

I recently was profiled in Inside Fashion making the point that the global “race to the bottom” in China has likely touched bottom. Workers there are pushing back.

The regime itself now likely realizes the need to raise domestic demand to counter balance the hit the export sector is taking. The key step now is the legal recognition of genuinely independent unions. In the longer run the new Chinese labor movement must develop an alternative perspective on economic organization.

June 1: Han Dongfang on why Chinas labour system is broken – world – FT.com.

The Party’s Over: China’s Endgame

And so, as the economy began to fail in 2008 and as factories closed by the tens of thousands, workers took to the streets, especially in the country’s export powerhouse, the Pearl River Delta of Guangdong Province. Protests have continued around the country. At the end of July last year, for instance, some thirty thousand steelworkers in the rust-belt province of Jilin fought with police and beat to death a top manager who had threatened large layoffs after a merger. The incident illustrates the trend that disturbances are becoming larger and more violent. In fact, demonstrators in the last few years have been using deadly force as an initial tactic against local authorities.

All the more reason for the State Department and organized labor to re-think any idea of “constructive engagement” with China.

via World Affairs Journal – The Party’s Over: China’s Endgame.

“Oh to be Solvent When Labor Strikes Back”

This is an interesting idea – that organized labor has more power than it may think in the era of globalization.

Why? Well the argument is that companies use a kind of “just in time” approach to finance, stretching to the breaking point their credit position. Any unexpected pressure from the labor force can tear a damaging hole in the thin fabric of global finance that knits the whole system together.

I made a related point recently in an interview about my new book, From Che to China, with Inside Fashion. I suggested that the race to the bottom of global capital over the last three decades may have reached bottom with widespread labor unrest breaking out in China and thus threatening the cheap labor model that has been so dominant.

Dude, wheres the Dharma?: Oh to be Solvent When Labor Strikes Back.

The Greek Grind

imagesFelix Salmon notes the problem: an explosion of fictitious capital (149% of GDP “in a best case scenario”) with a possible fall in GDP of 12%!

The FT had a piece today comparing Greece to California…of course, they leave out one huge difference – there is no serious left or labor movement in California while rioting Greek workers helped contribute to the panic on Wall Street last week.

The EU bailout: Too much, too late | Analysis & Opinion | .