July 18 (Bloomberg) -- Hewlett-Packard Co. named Chief Executive Officer Meg Whitman as chairman of its board, giving her the responsibilities of Ralph Whitworth, the activist investor who’s stepping down from the post for health reasons.
Pat Russo, a current director, was appointed lead independent director, and Klaus Kleinfeld, CEO and chairman of Alcoa Inc., was brought in, increasing the board’s membership to 12, the Palo Alto, California-based company said in a statement yesterday.
Whitman, 57, is taking over leadership of a board that over the last decade had churned through four CEOs and signed off on acquisitions that burdened the company with debt. Under Whitworth, 58, who became chairman in 2011, the board’s membership has changed and none of the current directors have been there for more than five years.
“The move is somewhat surprising given the record of HP and its board,” said Bill Kreher, an analyst at Edward Jones & Co. who has a hold rating on the stock. “Meg has done a good job executing the turn around.”
While Hewlett-Packard prefers to keep the roles of chairman and CEO separate, it will combine them if it’s in shareholders’ interest, according to its corporate governance guidelines. In such a case, it will promote an independent director to the lead director role, according to the document.
Kate Holderness, a spokeswoman, said Hewlett-Packard wouldn’t comment beyond its statement.
With Whitworth and Whitman at the helm, Hewlett-Packard has cut 34,000 jobs, invested in new technology and replaced top executives. The company has sought to revive its business amid a downturn in the PC industry as more consumers have turned to smartphones and tablets for their computing needs.
Hewlett-Packard is on course to post a revenue decline of 1 percent this fiscal year, the closest it’s come to growth since fiscal 2011, according to the average of analyst estimates compiled by Bloomberg.
Whitworth is stepping down from Hewlett-Packard to battle cancer, people familiar with the matter have said. He is also taking a leave from his money-management firm.
Russo has been a director of Hewlett-Packard since 2011 and leads the HR and Compensation Committee. Prior to Alcoa, Kleinfeld spent two decades at Siemens AG, rising to become the CEO of the industrial conglomerate.
“Meg and Pat are unwavering in their commitment to the corporate governance, capital allocation and management incentive principles that drove our decisions these past three years,” Whitworth said in yesterday’s statement. “They will stick to and strengthen the critical practices and disciplines we’ve put in place. HP is in great hands.”
Shares of Hewlett-Packard, the second-biggest computer maker, fell 1.1 percent to $34.43 at yesterday’s close in the New York, before Whitman’s appointment was announced. The stock has gained 23 percent this year.