On May 23, the Securities and Exchange Commission settled administrative charges against Hewlett-Packard Company (HP) for failing to disclose the circumstances that led to the resignation of director Thomas Perkins. The SEC maintained that HP should have disclosed the circumstances of Mr. Perkins’ disagreement with HP in the Form 8-K it filed, rather than simply disclosing that he resigned. HP neither admitted nor denied the SEC’s findings but consented to an order to cease and desist from committing or causing violations of these provisions.
Item 5.02(a) of Form 8-K requires disclosure of the circumstances of a director’s resignation when it is “because of a disagreement with the registrant, known to an executive officer of the registrant...on any matter relating to the registrant’s operations, policies, or practices.” It also requires that the director be given the opportunity to review and respond to the registrant’s disclosures concerning the disagreement. The SEC found that Mr. Perkins resigned because of his objections regarding the manner in which a leak investigation was presented to the board of directors (he believed the director who was subject to the investigation should have been told privately first) and because he disagreed with the decision to ask the director to resign, citing the director’s contributions to HP.
HP, after consultation with outside counsel, took the position that this was a disagreement between Mr. Perkins and HP’s Chairman, not a disagreement relating to HP’s operations, policies or practices, and disclosed only the fact of Mr. Perkins’ resignation pursuant to Item 5.02(b). The SEC argued that the disagreement, to the extent it involved HP’s corporate governance practices and policies concerning confidential information, should have been disclosed under Item 5.02(a).