The issue of succession planning is getting more attention again after last week’s sudden ouster of Hewlett-Packard Chairman and CEO Mark Hurd, and activist investors plan to file more shareholder proposals on this topic in 2011.
HP announced Friday that Hurd resigned and was replaced by Catherine A. Lesjak, the company’s executive vice president and chief financial officer, who will serve as interim CEO. A new chairman has not been named. According to news reports, the board voted to seek Hurd’s resignation after an investigation into a sexual harassment complaint by a marketing contractor; the probe concluded that Hurd falsified about $20,000 in expense reports to conceal that relationship.
According to news reports, HP’s board had no formal succession plan in place before Hurd’s resignation. Industry observers expect the company will bring an outside executive to take over, a process that will take some time and likely require costly recruitment incentives. The company’s shares fell 8.3 percent in after-hours trading on Friday.
The shakeup at the Palo Alto, California-based technology giant is the latest corporate crisis to generate interest in succession planning issues. Other recent examples include the 2009 resignation of Bank of America CEO Ken Lewis, and Apple CEO Steve Jobs’ health-related leave of absence.
Jennifer O’Dell of the Laborers ’ International Union of North America said her union plans to file 10 to 20 proposals for the 2011 season, and may reach settlements at some of the companies where succession planning resolutions went to a vote this year. The union plans to announce its targets once the proposals are filed.
During the spring 2010 proxy season, the Laborers and other investors submitted five proposals related to succession planning. Three resolutions went to a vote, receiving 40.1 percent support at Bank of America, 32.4 percent at Verizon Communications, and a 29.4 percent vote at Whole Foods Market, which are strong results for a first-year proposal.
This year's proposal volume was depressed in part because the Securities and Exchange Commission staff didn’t rule until late October 2009, after the filing deadlines for early 2010 annual meetings, that succession planning proposals were no longer excludable as an “ordinary business” matter.
The Laborers’ 2010 proposals called for companies to adopt and disclose a written and detailed succession planning policy, which includes an annual review by the board, the development of criteria that reflect the company’s business strategy, a formal assessment process to evaluate candidates, and the development of internal candidates. The resolution also asked boards to begin non-emergency succession planning at least three years before an expected transition, to maintain an emergency succession plan that is reviewed annually, and to release a succession plan report to shareholders each year.