Hewlett Packard was forced to issue a clarifying statement this week after Silicon Alley Insider noticed an odd line item: CEO Mark Hurd had reportedly received a tax gross up of almost $80,000 last year for meals reimbursement. From there, they extrapolated that HP had reimbursed Hurd for almost $250,000 in meals over the course of the year (the reimbursements are imputed income and so is the tax gross up, so the numbers get ridiculously difficult to figure out).
HP’s relatively embarrassing response:
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.
Ignore the whole issue about why a guy who received $42.5 million in total comp last year is getting reimbursed for meals.
The temptation is always there to gloss over the tables and footnotes in securities filings. “That’s the accountants’ responsibility,” you might think. Don’t. If nothing else, get out a calculator and spot check any calculation you can figure out. Check the prior year’s numbers. In this case, someone should have noticed that the item went from $4,924 last year to $79,814 this year. Even with the changes in executive-comp disclosure, which don’t even really apply here, if a number increases by a factor of 16, alarm bells should be ringing.
There’s no downside here, either.
You are absolutely guaranteed to look like a hero if you find something, no matter how small. This webisode of Living the Dream sums it up pretty nicely.
Besides, if you don’t find anything, you can sleep soundly at night, you might learn something, and you’ll pick up some billable hours.
Anyone know who HP’s outside counsel, if any, is on securities filings? Larry Sonsini (Berkeley AB ’63, Berkeley (Boalt) JD ’66) was their traditional go-to guy, but after the whole pretexting debacle, we don’t know how much he’s still used. The firm is mentioned in a prospectus supplement, but that could just be a vestige of the original registration from 2006.
Related posts:
