Correcting Mark Hurd’s full plate…
Last week, we footnoted about some odd tax gross-up disclosures in Hewlett-Packard’s (HPQ) proxy that caught our attention, simply because the $79,814 in “other tax-gross ups” and the corresponding footnote that explained that the figure “represents amounts reimbursed to the NEOs (named executive officers) for taxes on meals associated with business travel undertaken by the NEOs in connection with events to which family members were invited” was too juicy not to bite at.
Over the weekend, an HP spokeswoman contacted me with this statement: “The tax gross-up figures contained in HP’s 2009 proxy were miscalculated. The correct “other gross-up” figure for Mark Hurd was $4,117 (not $79,814), which is in-line with last year’s figures. Notwithstanding this, some media outlets inaccurately extrapolated the supposed tax rate, resulting in vastly inflated and inaccurate figures for Mark’s meals. While this is not a material disclosure, we wanted to set the record straight.”
At first, HP said they didn’t plan to file an amended proxy correcting the figure. But now they apparently will. To be quite honest, it’s still not entirely clear to me how $79,814 turns into $4,117 and it seems like a pretty big oops to me. The spokeswoman wasn’t willing to go into details about the discrepancy other than to say that some numbers were counted twice. Just to put that $4,117 into perspective, the same number was $3,285 in the 2008 proxy.
Of course, given HP’s size, the numbers are not material. But the whole thing does seem a bit odd, no?
Quick update for 1/27: My laptop isn’t starting this morning for some reason and it’s too hard to type up a post on my Iphone so we won’t be posting today. Sorry!
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January 26th, 2009 at 11:52 am
Maybe they borrowed Prince Alaweed’s accountants to redo the calculations (they originally said he would lose $8.0+ B and then came back with a restated modest profit).
January 26th, 2009 at 12:33 pm
turns out HP says this was a “mistake” should have been $4117. See end of this article
http://www.mercurynews.com/ci_11532260?IADID=Search-www.mercurynews.com-www.mercurynews.com
January 26th, 2009 at 12:47 pm
@T: Funny!
On a more serious note, I’ve been doing a bit more research on this correction and just realizing all of the comments, like here that probably prompted HP’s correction this weekend. There were a lot of unhappy HP folks out there.
January 26th, 2009 at 2:30 pm
Arguably this is just as bad as if it were a 79k payment. 24 Mln cash comp and he can’t pay 4k in taxes? I make no judgment on Mr. Hurd’s cash and equity comp. He has done a great job at HP. If his board thinks he deserves it, and current SEC proxy rules entrench the Board, then so be it.
But his time, or most likely his assistant(s) time in documenting this, HP finance staff time in recording and reporting it, and E&Y’s hourly charges to audit this, not to mention the time it took to recheck and do it correctly, surely have to add up to much more than triple this number.
Eliminate tax gross ups along with LT cap gains treatment for private equity carried interest. Two changes that would be a great start to bringing fair treatment to the tax code.
January 26th, 2009 at 6:16 pm
The 79k is likely the meals total, on which the tax was the $4117, since this is a aprox 5% of the larger figure.
January 26th, 2009 at 6:28 pm
I think @JR is on the money here (pardon the pun) to question how much money was spent on this correction. We’ll be keeping an eye out for HP’s corrected proxy. But in the meantime, I don’t think I’m alone in wondering what other numbers that HP has put out may be subject to corrections. A story on Real Money today by Eric Jackson (behind a wall) also raises these questions.
January 28th, 2009 at 3:55 am
“if you cant convince them…confuse them”
I suspect the original figure was correct and an unsuspecting clerk released it unadulterated. Then seeing the damage it could do (considering how HP rank and file are being treated at the moment) this new ‘revised’ figure was released.
Either that or HP is telling the truth ;o)