In an interview after the firm gave its nod of approval, ISS Vice President Patrick McGurn said he was dismayed that HP and Compaq were not more clear in their disclosure of negotiations that had taken place between the companies and their chief executives.
Dissident board member Walter Hewlett has charged that HP CEO Carly Fiorina and Compaq CEO Michael Capellas would have received a $115 million windfall under the terms of a post-merger pay package discussed, but not approved, by the HP board of directors.
"We read them the riot act," said McGurn, adding that ISS was poised to make its decision last week, until the compensation issue came up. McGurn said ISS not only listened to Hewlett's side but also demanded to speak with the other members of HP's compensation committee.
In the end, ISS said it found no "smoking gun" showing that HP's leaders had been unduly influenced by the contract talks. "However, HP's decision not to disclose what clearly were very advanced discussions falls far short of the good governance ideal," ISS said in its report.
Rockville, Md.-based ISS has become a central figure in the mega-merger, with some seeing the obscure firm as the pivotal player in the controversial deal. HP has been facing an uphill battle since heirs of David Packard and William Hewlett and foundations linked to the two company founders have come out against the deal.
With the recommendation, HP is certain to at least get the vote of Barclays Global Advisors, which holds 3 percent of the company's shares, as well as those of an undetermined number of ISS clients and others that will be swayed by the firm's analysis.
But McGurn shies away from the notion that his firm is deciding the fate of the merger.
| "We read them the riot act." ="" class="t2">-Patrick McGurn, ISS vice president |