Carly Fiorina, H-P & Corporate Governance

Alan Murray of the Wall Street Journal wrote an excellent piece this morning about H-P's recent performance, and how it relates to the firm's ex-CEO.

In further comments on CNBC this morning, as Alan usually does to follow-up on his weekly column, he aptly fended off inquiries from the guest-host, Herb Greenberg, regarding the wisdom of the Compaq-H-P merger. What Alan pointed out is that, while sales may not have increased by more than simple addition because of the merger, expenses clearly fell from scale economies.

My ears perked at this, because it dovetails with my own research. In slower-growth companies, ROI matters a lot for achieving consistently superior total returns. And a big part of that comes from expense base management, since, by definition in a slower-growth company, it won't be coming from revenue growth.

Alan further pointed out that the board members backed the merger, but not, ultimately, Carly's personal and professional management style.

I again perked at this. What Alan Murray is really saying, without naming it, is that H-P's board did the unheralded right thing of dumping a problematic CEO and replacing her with one who focused on what they felt was critical for H-P at this time. That's a rare thing, despite the recent years of lackluster total returns at H-P.

So, for once, we have actually witnessed some effective "corporate governance" by a board that took action to benefit shareholders, without some scandal forcing them to do it. Maybe the system can work- it just takes the right board.