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Chairman Raymond J. Lane and new HP board members Bloomberg
When some of Hewlett-Packard's (HPQ) board members became concerned about leaks to the press six years ago, they hired investigators to spy on fellow directors and reporters—creating a high-profile scandal. Then, HP's board tried to distance itself from controversial Chief Executive Officer Carly S. Fiorina by replacing her with Mark V. Hurd, a relatively unknown numbers guy from the Midwestern cash machine maker NCR (NCR). That back-to-business move worked—until a sexual harassment allegation from a B-movie actress-turned-marketing consultant triggered Hurd's abrupt resignation and a soap-opera-level feud between him and the HP board.
Under the new management of Chairman Raymond J. Lane and CEO Léo Apotheker, who both arrived in November shortly after Hurd's departure, HP's board is trying to put the drama behind it once and for all. On Jan. 20, HP announced the resignation of four directors who, according to several people familiar with the matter, had expressed firm feelings—both for and against—the company's handling of the Hurd situation. They're being replaced by five fresh faces.
The extensive overhaul put HP back in the spotlight and caught the attention of corporate governance experts. "That is quite a major change, to say the least," says William W. George, a professor of management practices at Harvard Business School. The departure of so many independent directors at once "is very rare unless there is something that comes to the level of a bankruptcy."
If the latest moves help the HP board finally shake its drama queen image, much of the credit will go to Lane, the former president of Oracle (ORCL) and a managing director at venture capital firm Kleiner Perkins Caufield & Byers.
Lane spearheaded the board makeover and chose to forgo hiring a search firm, relying instead on his own Rolodex and powers of persuasion. "Ray did a lot of work to reach out to the people being considered," says Bill Wohl, an HP spokesman. "Every one of them said, 'Sign me up.' " His actions typified the decisiveness that earned Lane, 64, accolades during his running of day-to-day operations at Oracle. "The headline here is that Ray, as the chairman of the board, is taking control and putting his own stamp on it," George says. "He is not some passive lawyer just overseeing things."
The board shakeup is also an effort to bolster HP's main business selling computing equipment to large companies. Several of the departing directors have little experience in that area. Former director Joel Z. Hyatt, for instance, is a lawyer, entrepreneur, and vice-chairman at Current Media, a television broadcaster specializing in programming submitted by viewers. Lucille S. Salhany, another departing director, is a former Hollywood executive and CEO of consulting company JHMedia.
Who's replacing them? Heavy hitters in the technology industry such as Meg C. Whitman, the former CEO of eBay (EBAY); Patricia F. Russo, former CEO of Alcatel-Lucent (ALU); and Gary M. Reiner, the former chief information officer at General Electric (GE). Their expertise in large-scale e-commerce, networking equipment, and business computing may help HP extend its lead as the world's largest supplier of technology infrastructure equipment.
George and other observers say Lane's board shakeup is a sign the chairman is preparing HP for confrontation as its business lines collide with those of powerful rivals. In the 1990s, enterprise computing companies including HP, Oracle, EMC (EMC), and Cisco Systems (CSCO) were content to make billions in their distinct niches. Those lines are now blurring. HP is stepping on Cisco's networking turf through its acquisition of 3Com. Oracle's purchase of Sun Microsystems threatens HP's line of servers and storage systems. Cisco has started selling servers that compete with gear made by HP and Oracle.
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