Pui-Wing Tam and Aaron Lucchetti.Wall Street Journal.
Feb 11, 2005.
Carly Fiorina, often anointed as the "most powerful woman in business," has been ousted from her perch at Hewlett-Packard Co. Her replacement as H-P's chairman, Patricia Dunn, is pretty powerful herself.
Ms. Dunn, 51 years old, has been an H-P director since 1998 and is vice chairman of Barclays Global Investors, a major fund-management firm. Her ascension at H-P reflects the key role the former free-lance journalist played in the exit of Ms. Fiorina.
Ms. Dunn helped prod H-P's board to examine Ms. Fiorina's performance and how well H-P had fared since its $19 billion acquisition of Compaq Computer Corp. in 2002, people familiar with the matter say.
As a finance executive who sits on H-P's audit committee, Ms. Dunn was disillusioned by H-P's inability to meet the financial goals it had set during the bitter proxy battle over the Compaq deal, these people added. Two months ago, Ms. Dunn wrote a four-page report spelling out the board's concerns that was later presented to Ms. Fiorina, says one person close to the situation.
An H-P spokesman said Ms. Dunn wasn't available to comment for this article. A spokeswoman for Ms. Fiorina said she wasn't available for comment.
Ms. Dunn's emergence as a central player at one of the world's largest technology companies is the latest chapter in her recovery from cancer. Ms. Dunn stepped down as Barclays's chief executive in 2002 to battle breast cancer and melanoma, taking the vice-chairman role that carried fewer daily responsibilities. Now, she seems to be throwing herself into H-P's troubles with considerable vigor.
Ms. Dunn presides over an H-P board that has won kudos for taking action as the company foundered amid tough competition from rivals Dell Inc. and International Business Machines Corp. But the board's activism is relatively newfound. Ms. Dunn was a member of the board that hired Ms. Fiorina in 1999, and by all accounts she supported the move. The board endorsed the Compaq deal and defended it during the proxy fight. After H-P shareholders approved the Compaq acquisition, directors ousted from the board Walter Hewlett, son of an H-P co- founder who had led the campaign against the deal. Last year, the California Public Employees' Retirement System criticized H-P directors for hiring H-P's auditors for nonaudit tasks as well.
But the board also has undergone a lot of turnover in the past six years. Only four of the 14 directors who hired Ms. Fiorina remain. And in recent months, directors have grown uneasy with H-P's uneven financial performance and sagging stock price, which declined 50% during Ms. Fiorina's tenure.
In an early sign of trouble for Ms. Fiorina, directors late last year reached out to venture capitalist Thomas Perkins, an outspoken former H-P director, and asked him to rejoin the board. His appointment was formally approved on Monday, a day before Ms. Fiorina was asked to resign.
Some corporate-governance experts say the ouster of Ms. Fiorina doesn't improve their evaluation of the board. "Firing a CEO doesn't make you a strong board -- it's actually an indicator the board has failed," says Nell Minow, a corporate-governance expert at the Corporate Library in Portland, Maine. Susan Schultz, CEO of the Board Institute, faults the H-P board for not planning the CEO succession better.
Unlike Ms. Fiorina, who obtained two master's degrees in business and management, Ms. Dunn majored in economics and journalism at the University of California at Berkeley. After her initial work as a free-lance journalist, she joined Wells Fargo's fledgling investment unit, the Barclays Global predecessor, as a temporary secretary, says Barclays Global spokesman Tom Taggart. Ms. Dunn married more than 20 years ago to William Jahnke, a financial author, and has four stepchildren.
Known as Pattie to her colleagues, she rose through the ranks at the San Francisco-based investment firm after learning the strategy of index investing, which attempts to mirror broad stock-market movements rather than pick individual stocks. That is far from H-P's traditional technology businesses. But index funds share one important trait with personal computers, one of H-P's biggest units: Both are brutally competitive, requiring large volume and great efficiency to produce razor-thin profits.
In 1998, Ms. Dunn was named CEO of Barclays Global. Steven Schoenfeld, a former Barclays Global executive, says Ms. Dunn is known for her skills dealing with staffers. She often held lunches with staffers from various parts of the organization at local restaurants, and was known to leave voice-mail messages when she heard a speech or read something that Barclays Global people had written that she had liked. Mr. Schoenfeld says Ms. Dunn emphasized execution, once telling senior staffers that Barclays Global "needed to manage our business as we manage our clients' assets."
During that same year, she was recruited to the H-P board. She joined H-P's audit committee, where former H-P executives say she often asked tough questions during their presentations to directors. "She was one of the stronger board members," says one former H-P executive.
Ms. Dunn has at times faced criticism for her dual role as a Barclays executive and an H-P director, since Barclays Global is one of the biggest holders of H-P shares. As of the end of September, Barclays Global was the third-largest institutional holder of H-P stock, with more than 127 million shares, according to Securities and Exchange Commission filings. Now Barclays Global's nonexecutive vice chairman, Ms. Dunn is no longer involved in the day-to-day operations of the investment firm.
On Wednesday, when her ascension to the chairman's post at H-P was announced, Ms. Dunn said she and the eight other members of H-P's board immediately would begin searching for a new CEO and would make sure to keep H-P on track in the meantime. "My role is to leverage the strength" of H-P and its executives, she said.
At least three major search firms, all with H-P connections, are vying for the assignment of finding H-P's next CEO: Heidrick & Struggles International Inc., Spencer Stuart and Russell Reynolds Associates Inc.
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Joann S. Lublin and Karen Damato contributed to this article.