DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES
Employee directors do not receive any separate compensation for their Board
activities. Non-employee directors receive the compensation described below.
Each non-employee director is entitled to receive an annual cash retainer of
$50,000 but may elect to receive an equivalent amount of securities in lieu of
the cash retainer. In addition, each non-employee director is entitled to
receive an annual retainer of $150,000 in the form of restricted stock or stock
options. Under special circumstances, the securities portion of the annual
retainer may be paid in cash, but no such exceptions were made during fiscal
2007. The restricted stock awards are determined based on the fair market value
of HP common stock on the grant date, and stock options are determined based on
a Black-Scholes option valuation model. The restricted stock and options
generally vest after one year from the date of grant. Non-employee directors may
elect to defer the cash portion of their annual retainer under the
Hewlett-Packard Company 2005 Executive Deferred Compensation Plan. Under that
plan, investment earnings are credited based on investment choices that are
available to employees under the HP 401(k) Plan, and there is no formula that
would result in above-market earnings or a preferential interest rate. None of
the non-employee directors made any cash deferrals in fiscal 2007.
In addition to the annual retainer, non-employee directors who serve as
chairs of standing committees receive a retainer for such service in the amount
of $15,000 for the chair of the Audit Committee and $10,000 for the chair of
other Board committees. In addition, effective in February 2007, the lead
independent director receives an additional retainer of $75,000 per year.
Non-employee directors also receive $2,000 for each Board meeting attended in
excess of six per year, and $2,000 for each committee meeting attended in excess
of six per year for each standing committee on which the non-employee director
serves. Non-employee directors are reimbursed for their expenses in connection
with attending Board meetings (including expenses related to spouses when
spouses are invited to attend Board events), and non-employee directors may use
the company aircraft for travel to and from HP events. Each non-employee
director also may receive up to $2,500 worth of HP equipment each year. In
addition, each non-employee director is eligible to participate in the product
matching portion of the HP Employee Giving Program. Under this program, each
non-employee director may contribute up to $20,000 worth of HP products each
year to a school or qualified charity by paying 25% of the list price of those
products, with HP paying the remaining 75%.
Fiscal 2007 Non-Employee Director Compensation
The following table provides information on compensation for non-employee
directors who served during fiscal 2007:
Fees
Earned
or Paid
in All Other
Cash(1) Stock Awards(2) Option Awards(2) Compensation(3) Total
Name ($) ($) ($) ($) ($)
Lawrence T. Babbio, Jr. 75,000 69,871 102,062 740 247,673
Sari M. Baldauf 49,333 78,502 93,149 580 221,564
Richard A. Hackborn 111,000 171,937 - 15,324 298,261
John H. Hammergren 13,000 3,015 197,810 - 213,825
Joel Z. Hyatt - 63,481 - 292 63,773
John R. Joyce 22,917 47,620 - 219 70,756
Robert L. Ryan 83,000 171,937 - 17,139 272,076
Lucille S. Salhany 84,000 171,937 - 1,320 257,257
G. Kennedy Thompson 12,000 142,071 - 1,055 155,126
º (1)
º For purposes of determining director compensation, the term of office for
directors begins in March and ends the following February, which does not
coincide with HP's November through October fiscal year. Cash amounts
included in the table above represent the portion of the annual retainers
elected to be received in cash, committee chair fees, lead independent
director
19
fees and additional meeting fees earned with respect to service during HP's
2007 fiscal year. See "Additional Information About Fees Earned or Paid in
Cash in Fiscal 2007" below.
º (2)
º The dollar amounts shown for stock awards and option awards represents the
dollar amount of those awards recognized for financial statement reporting
purposes with respect to fiscal 2007 in compliance with Statement of
Financial Accounting Standards No. 123 (revised 2004) "Share-Based Payment"
("SFAS 123R") for stock options and restricted stock awards that vested in
fiscal 2007. These amounts reflect HP's accounting expense for these awards
and do not correspond to the actual value that may be recognized by the
directors with respect to these awards. For information on the assumptions
used to calculate the value of the awards, refer to Note 2 to HP's
consolidated financial statements in its Annual Report on Form 10-K for the
fiscal year ended October 31, 2007, as filed with the SEC on December 18,
2007. In accordance with SEC rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting conditions. See
"Additional Information About Non-Employee Director Equity Awards" below.
º (3)
º Amounts in this column represent the dollar value of dividends paid on
stock awards and the cost to HP of product donations made on behalf of
non-employee directors pursuant to the product matching portion of the HP
Employee Giving Program.
Additional Information About Fees Earned or Paid in Cash in Fiscal 2007
The following table provides additional information about fees earned or
paid in cash to non-employee directors in fiscal 2007:
Committee
Chair/Lead
Annual Independent Additional
Retainers Director Fees Meeting Fees Total
Name ($) ($) ($) ($)
Lawrence T. Babbio, Jr.(1) 50,000 15,000 10,000 75,000
Sari M. Baldauf(2) 33,333 - 16,000 49,333
Richard A. Hackborn(3) 50,000 55,000 6,000 111,000
John H. Hammergren(4) - 5,000 8,000 13,000
Joel Z. Hyatt - - - -
John R. Joyce(5) 22,917 - - 22,917
Robert L. Ryan 50,000 15,000 18,000 83,000
Lucille S. Salhany 50,000 10,000 24,000 84,000
G. Kennedy Thompson - - 12,000 12,000
º (1)
º The $15,000 paid to Mr. Babbio for committee chair/lead independent
director fees includes a $5,000 fee paid for his service as chair of the
former Acquisitions Committee, which was prorated to reflect the
dissolution of that committee in May 2007.
º (2)
º The $33,333 annual retainer paid to Ms. Baldauf represents the portion of
Ms. Baldauf's $50,000 cash annual retainer for the March 2007 through
February 2008 Board term that was earned during fiscal 2007. Ms. Baldauf
did not elect to receive in cash any portion of her annual retainer for the
March 2006 through February 2007 Board term.
º (3)
º The $55,000 paid to Mr. Hackborn for committee chair/lead independent
director fees represents a prorated amount of $50,000 paid for his service
as lead independent director from February 2007, the effective date of the
Board's approval of the $75,000 annual retainer paid to the lead
independent director, through the end of fiscal 2007 and a $5,000 fee paid
for his service as chair of the Technology Committee, which was prorated to
reflect the reconstitution of that committee in May 2007.
º (4)
º The $5,000 paid to Mr. Hammergren for committee chair/lead independent
director fees represents a fee for his service as chair of the Finance and
Investment Committee, which was prorated to reflect the re-formation of
that committee in May 2007.
º (5)
º Mr. Joyce was elected to the Board effective May 17, 2007. Mr. Joyce
received a prorated retainer of $166,667 for service from May 2007 through
February 2008, $41,667 of which he elected to receive in cash. The $22,917
cash annual retainer paid to Mr. Joyce represents the portion of that
$41,667 that was earned during fiscal 2007.
20
Additional Information About Non-Employee Director Equity Awards
The following table provides additional information about non-employee
director equity awards, including the stock awards and option awards made to
non-employee directors during fiscal 2007, the grant date fair value of each of
those awards and the number of stock awards and option awards outstanding as of
the end of fiscal 2007:
Grant
Date
Fair
Value of
Stock
and
Stock Option Option
Awards Awards Awards Stock Option
Granted Granted Granted Awards Awards
During During During Outstanding Outstanding
Fiscal Fiscal Fiscal at Fiscal at Fiscal
2007 2007 2007(1) Year End Year End
Name (#) (#) ($) (#) (#)
Lawrence T. Babbio, Jr. - 8,021 150,014 - 103,879
Sari M. Baldauf 3,628 - 150,018 3,628 17,332
Richard A. Hackborn 3,628 - 150,018 3,628 40,000
John H. Hammergren - 10,694 200,006 - 28,026
Joel Z. Hyatt(2) 3,650 - 166,696 3,650 -
John R. Joyce(3) 2,738 - 125,044 2,738 -
Robert L. Ryan 3,628 - 150,018 3,628 -
Lucille S. Salhany 3,628 - 150,018 3,628 94,655
G. Kennedy Thompson(4) 6,009 - 250,025 6,009 -
º (1)
º Represents the fair value of stock options and stock awards granted in
fiscal 2007, calculated in accordance with SFAS 123R. For stock awards,
that number is calculated by multiplying the fair market value of HP's
common stock on the date of grant by the number of shares awarded. For
option awards, that number is calculated by multiplying the Black-Scholes
value determined as of the date of grant by the number of options awarded.
º (2)
º Mr. Hyatt was elected to the Board effective May 17, 2007. Mr. Hyatt
received a prorated annual retainer of $166,667 that he elected to receive
in the form of 3,650 shares of restricted stock for service from May 2007
through February 2008.
º (3)
º Mr. Joyce was elected to the Board effective May 17, 2007. Mr. Joyce
received a prorated retainer of $166,667 for service from May 2007 through
February 2008, $125,000 of which he elected to receive in the form of 2,738
shares of restricted stock.
º (4)
º Mr. Thompson was elected to the Board effective November 16, 2006.
Mr. Thompson received a prorated retainer of $50,000 that he elected to
receive in the form of 1,172 shares of restricted stock for service from
November 2006 through February 2007 in addition to an annual retainer that
he elected to receive in the form of 4,837 shares of restricted stock for
service from March 2007 through February 2008.
Non-Employee Director Stock Ownership Guidelines
Under HP's stock ownership guidelines, non-employee directors are required
to accumulate over time shares of HP common stock equal in value to at least
three times the value of the regular annual cash and equity retainers. Shares
counted toward these guidelines include:
º •
º any shares held by the director directly or through a broker,
including shares received under restricted stock grants;
º •
º restricted stock; and
º •
º vested but unexercised stock options (50% of the in-the-money value of
such options is used for the calculation).
All non-employee directors with more than two years of service have met HP's
stock ownership guidelines. See "Common Stock Ownership of Certain Beneficial
Owners and Management" on page 26.
21
PROPOSALS TO BE VOTED ON
PROPOSAL NO. 1
ELECTION OF DIRECTORS
There are ten nominees for election to our Board this year. All of the
nominees except Joel G. Hyatt and John R. Joyce have served as directors since
the last annual meeting. Messrs. Hyatt and Joyce were elected by the Board to
serve as directors effective May 17, 2007. Each director is elected annually to
serve until the next annual meeting or until his or her successor is elected.
There are no family relationships among our executive officers and directors.
Each director nominee who receives more "FOR" votes than "AGAINST" votes
representing shares of HP common stock present in person or represented by proxy
and entitled to be voted at the annual meeting will be elected.
If you sign your proxy or voting instruction card but do not give
instructions with respect to voting for directors, your shares will be voted for
the ten persons recommended by the Board. If you wish to give specific
instructions with respect to voting for directors, you may do so by indicating
your instructions on your proxy or voting instruction card.
You may cumulate your votes in favor of one or more directors. If you wish
to cumulate your votes, you will need to indicate explicitly your intent to
cumulate your votes among the ten persons who will be voted upon at the annual
meeting. See "Questions and Answers-Voting Information-Is cumulative voting
permitted for the election of directors?" for further information about how to
cumulate your votes. Mark V. Hurd and Michael J. Holston, as proxy holders,
reserve the right to cumulate votes and cast such votes in favor of the election
of some or all of the applicable nominees in their sole discretion, except that
a stockholder's votes will not be cast for a nominee as to whom such stockholder
instructs that such votes be cast "AGAINST" or "ABSTAIN."
All of the nominees have indicated to HP that they will be available to
serve as directors. In the event that any nominee should become unavailable,
however, the proxy holders, Mr. Hurd and Mr. Holston, will vote for a nominee or
nominees designated by the Board.
If an incumbent director nominee receives a greater number of votes against
his or her election than votes for such election, he or she is required to
tender his or her resignation for consideration by the Nominating and Governance
Committee in accordance with Section V of HP's Corporate Governance Guidelines
and as described on page 18.
Our Board recommends a vote FOR the election to the Board of the each of the
following nominees.
Lawrence T. Babbio, Jr. Mr. Babbio has served as a Senior Advisor to Warburg
Director since 2002 Pincus, a private equity firm, since June 2007.
Age 63 Previously, Mr. Babbio served as Vice Chairman and
President of Verizon Communications, Inc. (formerly
Bell Atlantic Corporation), a telecommunications
company, from 2000 until his retirement in April
2007. He was a director of Compaq Computer
Corporation from 1995 until HP's acquisition of
Compaq in May 2002.
22
--------------------------------------------------------------------------------
Sari M. Baldauf Ms. Baldauf served as Executive Vice President and
Director since 2006 General Manager of the Networks business group of
Age 52 Nokia Corporation, a communications company, from
July 1998 until February 2005. She previously held
various positions at Nokia since 1983. Ms. Baldauf
also serves as a director of SanomaWSOY, F-Secure
Corporation, YIT Corporation, and CapMan Plc and as
the non-executive chairman of the Savonlinna Opera
Festival and as a member of the Global Board of the
International Youth Foundation.
Richard A. Hackborn Mr. Hackborn has served as HP's Lead Independent
Director since 1992 Director since September 2006. Previously,
Age 70 Mr. Hackborn served as HP's Chairman from January
2000 to September 2000. He was HP's Executive Vice
President, Computer Products Organization from 1990
until his retirement in 1993 after a 33-year career
with HP.
John H. Hammergren Mr. Hammergren has served as Chairman of McKesson
Director since 2005 Corporation, a healthcare services and information
Age 48 technology company, since July 2002 and as President
and Chief Executive Officer of McKesson since
April 2001. Mr. Hammergren also is a director of
Nadro, S.A. de C.V. (Mexico) and Verispan LLC.
Mark V. Hurd Mr. Hurd has served as Chairman of HP since
Director since 2005 September 2006 and as Chief Executive Officer,
Age 51 President and a member of the Board since April
2005. Prior to that, he served as Chief Executive
Officer of NCR Corporation, a technology company,
from March 2003 to March 2005 and as President from
July 2001 to March 2005. From September 2002 to
March 2003, Mr. Hurd was the Chief Operating Officer
of NCR, and from July 2000 until March 2003 he was
Chief Operating Officer of NCR's Teradata
data-warehousing division.
Joel Z. Hyatt Mr. Hyatt has served as the Chief Executive Officer
Director since 2007 of Current Media, LLC, a cable and satellite
Age 57 television company, since September 2002. From
September 1998 to June 2003, Mr. Hyatt was a
Lecturer in Entrepreneurship at the Stanford
University Graduate School of Business. Previously,
Mr. Hyatt was the founder and Chief Executive
Officer of Hyatt Legal Plans, Inc., a provider of
employer-sponsored group legal plans.
John R. Joyce Mr. Joyce has served as a Managing Director at
Director since 2007 Silver Lake, a private equity firm, since July 2005.
Age 54 Prior to joining Silver Lake, Mr. Joyce spent
30 years with IBM, a global technology firm, serving
most recently as Senior Vice President and Group
Executive of the IBM Global Services division from
May 2004 until July 2005 and Chief Financial Officer
of IBM from 1999 until May 2004. Prior to that,
Mr. Joyce served in a variety of roles, including
President, IBM Asia Pacific, and Vice President and
Controller for IBM's global operations. Mr. Joyce is
a member of the Bertelsmann AG Supervisory Board and
a director of Gartner, Inc., Avago Technologies
Limited and Serena Software, Inc.
|
23
--------------------------------------------------------------------------------
Robert L. Ryan Mr. Ryan served as Senior Vice President and Chief
Director since 2004 Financial Officer of Medtronic, Inc., a medical
Age 64 technology company, from 1993 until his retirement
in May 2005. He also is a director of UnitedHealth
Group Incorporated, General Mills, Inc., The Black
and Decker Corporation and Citigroup, Inc.
Lucille S. Salhany Ms. Salhany has served as President and Chief
Director since 2002 Executive Officer of JHMedia, a consulting company,
Age 61 since 1997. Since 2003, she has been a partner and
director of Echo Bridge Entertainment, an
independent film distribution company. From 1999 to
March 2002, she was President and Chief Executive
Officer of LifeFX Networks, Inc., which filed for
federal bankruptcy protection in May 2002. From 1994
to 1997, Ms. Salhany was the Chief Executive Officer
and President of UPN (United Paramount Network), a
broadcasting company. From 1993 to 1994, she was
Chairman of Fox Broadcasting Company, a national
television network, and from 1991 to 1993 she was
Chairman of Twentieth Television, a division of Fox
Broadcasting Company. Ms. Salhany was a director of
Compaq from 1997 until HP's acquisition of Compaq in
May 2002. She also is a director of Ion Media
Networks, Inc.
G. Kennedy Thompson Mr. Thompson has served as Chairman of Wachovia
Director since 2006 Corporation, a financial services company, since
Age 57 February 2003 and as a director since 1999. He has
also served as Chief Executive Officer of Wachovia
since 2000 and as President since 1999. Mr. Thompson
also is a director of Wachovia Preferred Funding
Corp.
|
24
|