What About Those Leaky Board Members?

While i don't condone "pretexting," I am astonished that all the attention is on Patricia Dunn and Mark Hurd, with relatively none on former HP board member Jay Keyworth ("Controlling the damage at HP," Cover Story, Oct. 9).

It is incredible that after Enron and Sarbanes-Oxley, a director on a Fortune 500 board would deliberately leak boardroom dynamics to the press to embarrass a fellow director or to press his personal agenda and deny it when identified. I believe any chairman or CEO confronted with a similar situation would vigorously investigate it. Confidentiality applies to employees and is usually spelled out in the employee handbook! Would Jay Keyworth's defense be that he did not read the HP employee handbook?

Henri Tchen


Synapse Capital

Fountain Valley, Calif.

While BusinessWeek and others may have preferred that the Fidelity funds voted differently on any one of the 50,000 proposals before us this proxy voting season ("Fidelity's divided loyalties," Special Report, Oct. 16), there is no disputing the fact that the funds' proxies were cast without regard to whether the company involved was a client of Fidelity.

For example, the frequency at which the Fidelity funds voted proxies in opposition to management was essentially the same at meetings of Fidelity's largest 401(k) and other key clients as it was at those of all other U.S. companies during the most recent annual reporting period.

Fidelity's voting decisions -- based on guidelines approved and annually reviewed by the funds' Board of Trustees, of which 10 out of 13 are independent -- are designed to ensure that company proxies are voted in the best interest of shareholders, particularly in circumstances of apparent or potential conflict between shareholder interests and Fidelity's business relationships. The guidelines require that other business relationships be entirely disregarded in making voting decisions. To that end, Fidelity keeps the funds' proxy voting process and those who carry out this function separate from those who manage business relationships or who otherwise work with client companies or business partners. Our guidelines require escalation to the Fidelity Legal or Compliance Dept. wherever there is no explicit direction on how we exercise votes, and those situations may also be escalated to the funds' Board of Trustees for review as appropriate.

Notably, the Fidelity board has a committee -- composed entirely of independent trustees -- responsible for reviewing proxy voting matters, including a comparison of voting results relating to key clients and all other companies. A review of this year's results shows that the Fidelity funds voted contrary to one or more of management's recommended votes at 31% of all U.S. company meetings at which they voted, and the percentage of votes against management at meetings of key clients was essentially the same.

Some tend to view the withholding of votes for the election of directors as the preferred or most effective way to signal concern or dissatisfaction with a particular action (or inaction) by a company's senior management or by its board of directors. But as an institutional shareholder, we have other ways to communicate our views to a company. More broadly, we make decisions every day about the effectiveness of a company's management on a multitude of issues -- not simply a handful of company proposals before us in proxy voting season. If we make a determination that a company is not being run well, we have the option to sell our shares and, in fact, we make such decisions to buy and sell shares daily in the market.

We take our fiduciary duties to shareholders very seriously and work assiduously to avoid conflicts in our other business relationships. The evidence shows that any conclusion otherwise is unfounded and not supported by the facts.

Stephen P. Jonas

Executive Director

Fidelity Management & Research


Your story got it wrong when it implied that an existing relationship between Home Depot (HD) and Fidelity Investments affects the way the mutual fund votes in our board of directors elections and on our shareholder proposals.

Home Depot does not have any business relationship with Fidelity. Furthermore, our board members do not have any direct relationship -- representing our company with Fidelity -- that would influence Fidelity's decisions to invest in our company or to vote on proxy matters.

Furthermore, the article states that Home Depot has lost $23 billion in market value from the time CEO Bob Nardelli joined the company, in late 2000, through May. This assertion ignores stock repurchases that reduced our outstanding shares by about 15%. The buybacks have enabled the company to return more than $10 billion in cash to shareholders during that period. By confusing the return of cash with the loss of value, you have greatly overstated the impact of the decline in Home Depot's stock price.

We sent this information to your magazine in the form of answers to several questions posed by the reporter. The way BusinessWeek chose to present our answers resulted in misleading statements that are incorrect.

Brad Shaw

Senior Vice-President

Home Depot


It is absurd that an insurance company would rather pay $170 a month for medication than contribute to a gym membership, which could produce comparable benefits with regard to disease prevention, not to mention vastly improve the overall well-being of a patient ("The vexing success of Avandia," Developments to Watch, Science & Technology, Oct. 9).

While Avandia might be successful in preventing Type 2 diabetes, a change in lifestyle can contribute more profoundly by helping to prevent heart disease, hypertension, and some forms of cancer as well. By providing medication that, in effect, takes away the incentive to live a healthier life, we are surely doing more harm than good.

Stig Pramming, M.D.

Executive Director

Oxford Health Alliance


"Beyond the `strip and flip"' (Corporation, Oct. 9) did not fairly characterize our investment in Corel Corp. (CREL) The team at Vector Capital is fiercely proud of the employees, management, and products of Corel. Corel is a true Cinderella story, transforming from a company on the verge of oblivion when we took it private in fall, 2003, to one that is successfully competing with some of the largest global players in the packaged software industry.

Through thoughtful product innovation, sharp execution, and careful mergers and acquisitions, Corel has increased revenue by over 50% since 2003. Pretax cash flow has improved from -$16.9 million in 2003 to $49 million in 2005, with significant improvement continuing into 2006. Surprisingly, your article focused on GAAP [generally accepted accounting principles] net income, a measure heavily distorted by Corel's acquisition history and one that no sophisticated software investor would track. The enterprise value of Corel has grown from $60 million in 2003 to around $375 million today.

It is this outstanding performance that has allowed Corel to use debt to finance returns to our investors and execute a sound acquisition strategy that has further strengthened the company. The use of leverage to finance Corel's growth shows Vector's belief in the long-term value of Corel's stock. Why issue equity to dilute something we believe is very valuable?

You also seemed to imply that Vector took a number of actions that ultimately detracted from the post-initial public offering performance of Corel. As a 72% shareholder of the company, we have no such incentive. The bulk of Vector's returns in Corel are tied directly to the performance of the company in the coming years. In fact, since your article was released, Corel's stock price has increased.

Alex Slusky

Managing Partner,

Vector Capital

San Francisco

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