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Shareholder frustration was probably most evident in

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Shareholder frustration was probably most evident in recent weeks in the unusually bitter public spat at Hewlett-Packard. H.P.'s board has already been heavily criticized for its handling of the ouster last year of its former chief,Mark V. Hurd, after an H.P. investigation uncovered business conduct violations related to a personal relationshipwith a contractor.Two of the most powerful shareholder advisory groups issued highly critical public reports recommending thatinvestors this year vote against H.P.'s executive pay plans and current board members, saying that the companyhighly overpaid its executives.In a report in early March, one advisory firm, Glass, Lewis & Company, gave H.P. a grade of D on a scale of A to F.It said H.P. paid its executives more than the median of 33 other similar-size companies and faulted the board forthe $35 million severance payout to Mr. Hurd, now a president of Oracle.In a second report, the proxy advisory firm Institutional Shareholder Services criticized H.P. for what it called itsgenerous executive compensation that ''rewards executives even if the company performs poorly.''H.P. rejected the criticism in a letter to shareholders in March, saying the recommendations were flawed. But at apacked annual meeting in an Arlington, Va., hotel late last month, a majority of shareholders voted againstapproving the robust executive pay packages.The company said the compensation plans were under review.''While we are disappointed with the outcome of the advisory shareholder vote, H.P. intends to carefully considerour shareholders' perspectives regarding executive compensation matters and will take those views underadvisement when making future decisions relating to executive compensation,'' the company said in a statement.True power for shareholders may come when executives who perform badly or whose companies are accused offraud are required to forfeit their multimillion-dollar payouts.Regulators forced just such a concession with the chief executive of Beazer Homes, Ian J. McCarthy. Though hewas not charged personally, in a settlement with the S.E.C. last month, Mr. McCarthy agreed to return $6.5 millionin compensation that he had received while the company was accused of filing inaccurate financial statements in2006. Beazer restated its results for that year and resolved the S.E.C.'s claims in 2008 without paying penalties oradmitting any wrongdoing.Such clawbacks have rarely been used, but were a main feature of the Sarbanes-Oxley Act of 2002, which waspassed after extensive frauds at Enron and WorldCom. In late March, investors in Beazer Homes also filed alawsuitagainst directors of the company, accusing the board of improperly increasing pay for executives in 2010despite the company's $34 million net loss that year. The losses were blamed on poor sales of existing homes andlittle demand for new ones. Beazer said it would not comment on pending litigation.

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Term
Spring
Professor
Mr.C.WilliamPierce
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