March 8, 2006 (PLANSPONSOR.com) - Shareholders in four pension plans have filed suit against Hewlett-Packard Co. (HP), alleging the Board of Directors violated its own policy by approving a more than $42 million severance package to former CEO Carleton Carly Fiorina.

The Associated Press reports that the complaint says the award of cash, stock and other benefits was a blatant violation of a board policy adopted in 2003 limiting severance payments to 2.99 times an executive's combined salary and annual bonus.  The suit contends that, based on this formula, Fiorina's severance package should not have exceeded $16.7 million, however HP paid Fiorina $21.4 million in cash, plus stock worth about $19 million and pension benefits valued at about $2 million.

The four pension plans that filed the suit hope to force Fiorina to pay back millions of dollars by proving HP's board improperly approved her severance package, according to the AP.  The suit will require HP to defend the package awarded to Fiorina at a time when the new CEO is attempting to cut more than 15,000 jobs to boost the company’s profits.

Besides Fiorina, the suit names eight other current or former HP directors: Patricia Dunn, Lawrence Babbio, Richard Hackborn, George Keyworth II, Robert Knowling Jr., Thomas Perkins, Robert Ryan and Lucille Salhany.  "We are trying to make the point that HP and other major companies have got to get some control on these outrageous compensation practices," said Michael Barry, a partner at Grant & Eisenhofer representing the shareholders, in the news report.

An HP spokesman says the company believes the suit has no merit.