CONFUSED ENTERPRISE VENDOR HP might have an uncomfortable annual shareholders meeting next month as investors are expected to vent their anger over the multi-billion dollar writedowns of Electronic Data Systems (EDS) and Autonomy.
Although HP's decision to write down the value of EDS wasn't all that surprising, the $8.8bn writedown of Autonomy has caused particular consternation among shareholders who think that HP and a couple of big name auditing firms let them down. CTW Investment Group, an institutional investor, has written an open letter opposing [PDF] the re-election of two HP directors and has expressed "grave concerns" over the retention of Ernst & Young as auditor.
While HP effectively accused Autonomy of cooking the books to inflate its value prior to its sale, Ernst & Young and Pricewaterhouse Coopers were also put under the spotlight for their roles in auditing accounts and doing the relevant due diligence. Richard Clayton, research director at CTW Investment Group, which claims to be a "substantial HP stakeholder" said "Ernst & Young, LLC: We have grave concerns over HP's unusually extensive use of its outside auditor to provide non-audit consulting services, which in our view threatens both the appearance and actuality of auditor independence."
CTW also urged shareholders not to re-elect HP directors John Hammergren, chairman of HP's Finance and Investment committee and G. Thompson, Audit Committee member. According to the investor, the two directors "bear significant responsibility for the continued strategic and governance challenges the company faces".
HP's share price has been battered over the past year and CEO Meg Whitman has already written off 2013. Given that HP's shareholders are already suing over the Autonomy debacle, its board of directors might find next month's shareholders meeting extremely uncomfortable, with the possibility that heads will roll. µ
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