CtW Investment Group called for an overhaul of the Hewlett-Packard board's audit committee and replacement of Ernst & Young as the company's auditor, citing “serious weaknesses” in the company's outside audit function and oversight threatening shareholder value, according to a CtW statement Tuesday.
Richard Clayton, research director at CtW, in a letter, dated Jan. 17, to Rajiv L. Gupta, HP lead director and corporate governance committee chairman, demanded HP appoint an independent special master to investigate and report to shareholders on the acquisition of Autonomy in 2011 and EDS in 2008. HP took charges of $8.8 billion and $8 billion, respectively, in 2012 related mostly to the two deals.
CtW plans to oppose the re-election of G. Kennedy Thompson, audit committee chairman, and possibly other directors to the board at HP's March 20 annual meeting unless the company meets the group's demands by Feb. 1, the statement said.
In the letter, Mr. Clayton cites Ernst & Young's failure “to detect allegedly improper accounting at Autonomy” and “provide HP shareholders with a genuinely independent check on management” associated with the EDS acquisition.
“The long-standing conflicts and mounting evidence of auditing failures makes ending HP's relationship with Ernst & Young a necessary precondition for restoring shareholder value,” Mr. Clayton said in the statement.
Michael Thacker, HP spokesman, said HP has no comment on the letter, but noted HP endorsed the ratification of Ernst & Young as the company's auditor in its proxy statement.
HP nominated Mr. Thompson, principal of Aquiline Capital Partners, a private equity firm, as a director, according to its proxy statement.
Amy L. Call Well, Ernst & Young director-public relations, said she had no comment.
CtW seeks to enhance shareholder value by working with pension funds whose combined assets total more than $200 billion and which are sponsored by affiliates of Change to Win, a federation of unions, the statement said.