ISS’s recommendation is based on a “misinterpretation of the process that HP employed in identifying, selecting and nominating” directors, Hewlett-Packard said in a statement yesterday.Stockholders’ power balanceInterest“We do not believe that it would be in the best interests of HP’s stockholders to lose the service of the experienced and dedicated board members who have been delegated primary responsibility for establishing and maintaining those governance practices,” Palo Alto, California-based Hewlett-Packard said.Hewlett-Packard reshaped its board with executives who have ties to Apotheker, whose tenure as CEO began Nov. 1. One director sits on a board in Europe with Apotheker, and at least three others have been customers of German software maker SAP AG, where Apotheker was CEO and worked for two decades. The ties could inhibit directors from acting objectively, ISS said.Apotheker played a direct role in picking new board members, a move that contravenes the board’s own rules governing director selection, according to Institutional Shareholder Services Inc., an adviser to investors on corporate governance powerbalance matters.“The direct participation of Apotheker in the appointment of five new directors raises red flags,” ISS said in a report prepared for clients and obtained by Bloomberg News. “The board is responsible for representing shareholders and overseeing management, in particular the CEO.”ISS recommended that shareholders vote against three sitting directors who are up for re-election at the annual meeting, scheduled for March 23, because they shouldn’t have permitted Apotheker to play a role in the nomination, ISS said.Hewlett-Packard Co. directors, including Chief Executive Officer Leo Apotheker, went against company rules in their shop online 2011appointment of new board members, according to a shareholder-advisory group.
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