Hewlett-Packard (HPQ)

4–Separate the Roles of CEO and Chairman

RESOLVED: Shareholders request that our Board establish a rule (required in our charter or bylaws if practicable) of separating the roles of our Board Chairman and CEO, so that an independent director who has not served as an executive officer of our Company, serve as our Chairman whenever possible.

This proposal gives our company an opportunity to follow SEC Staff Legal Bulletin 14C to cure a Chairman's non-independence. This proposal shall not apply to the extent that compliance would necessarily breach any contractual obligations in effect at the time of the 2007 shareholder meeting.

Harold Mathis, P.O. Box 1209, Richmond, TX 77406 sponsors this proposal.

This proposal is related to the announcement that Mr. Mark Hurd will become our Chairman and CEO in January 2007. The Financial Times said: Since March 2005, when Mark Hurd was appointed chief executive, shares in Hewlett-Packard soared 62% while those of rival Dell slumped 45%. Even during HP boardroom turmoil because of a scandal over its decision to spy on phone records, HP shares remained almost unnaturally calm.

Investors are belatedly waking up to probably the biggest threat: that Mr. Hurd might get caught in the storm. HP shares fell 5% on the morning of September 21, 2006. The fear is that Mr. Hurd, as CEO, was aware of elements of the investigation that were of dubious legality, or did nothing about them when he was made aware. That could raise questions over his judgment, or potentially drag him into more serious investigations by external agencies into the scandal.

Especially given that various journalists' records were spied on by HP, the story looks unlikely to die any time soon.

That leaves HP's fudged response to the crisis, which gives Mr. Hurd the chairmanship starting in January 2007, looking increasingly misjudged. Investors want him to run the business. HP's board should have tried to ring-fence him as far as possible from the boardroom shenanigans and brought in a heavy-hitting, external chairman—untainted by the problems—to restore order.

24

Instead, they now face the threat of him taking over as chairman with the scandal still rumbling—and soaking up a lot of his time. Even worse, there is the outside possibility that the ongoing investigations recast him as the blundering Hurd and threaten his ability to continue running the company effectively. Shareholders are right to be nervous. (End of text based on The Financial Times article.)

The primary purpose of our Chairman and Board of Directors is to protect shareholders' interests by providing independent oversight of management, including our Chief Executive Officer. Separating the roles of Chairman and CEO can promote greater management accountability to shareholders and lead to a more objective evaluation of our CEO.

The Council of Institutional Investors adopted a Corporate Governance Policy which recommends, "The board should be chaired by an independent director."

An independent Chairman can enhance investor confidence.