AMD tries to placate stockholders
The chipmaker will add a 9th member to its board of directors at a stockholders' meeting in a move to soothe tensions with pension fund members.
An annual AMD stockholders' meeting wouldn't be complete, it seems, without an attempt by disgruntled shareholders to oust Sanders or limit his power inside the company.
Sanders, the colorful and controversial founder of the company, has been criticized in the past for lavish pay packages, especially in light of the company's troubles, and for holding an excess of power.
Earlier this week, AMD announced it would lay off 300 employees and incur "significant" financial losses for the first quarter because of manufacturing problems and pricing pressures. Analysts, as a result, have gone from expecting a profit for 1999 to predicting a loss.
The addition of a 9th board member comes as a compromise between AMD and TIAA-CREF, or the Teachers' Insurance and Annuity Association and College Retirement Equities Fund, according to an AMD spokesman.
Earlier in the year, the group submitted a resolution that would have called for a restructuring of the AMD board of directors so that it consisted of five members from outside the company and only three company insiders. The controversy swirled around board members Leonard Silverman, dean of the school of engineering of the University of Southern California, and Joe Roby, chief operating officer of Donaldson, Lufkin & Jeanrette.
TIAA-CREF claimed that both were insiders, said the AMD spokesman. AMD, meanwhile, said that the two were officially outside directors because neither of them worked at the company or had interests with the company beyond owning stock and being a board member.
As a compromise, AMD said it would add a 9th board member, who would be an outsider. The shareholder group withdrew the proxy.
The company would not reveal who the lead candidate for the 9th seat was, but said it would be included on the ballots being sent to shareholders this month. The annual meeting will take place April 29th in New York.
"We are pleased that AMD has agreed to move quickly to assure that a greater majority of the members of its board are not affiliated with the company," said B. Kenneth West, TIAA-CREF senior consultant for corporate governance.
Last year, CalPers, or California Public Employees' Retirement System, one of the largest institutional holders, tried to oust Sanders out of the chairman's office. Sanders, according to CalPers, was receiving exorbitant compensation for sub-par performance. Holding both the chairman's seat and CEO position also gave him an excessive amount of power. The vote failed.
Sanders has increasingly become a lighting rod for AMD detractors. A number of analysts have complained that his power in the company has hampered management. Some have also said that the board is tied too closely to him. In the past, the board has voted to re-price stock options, which worked to Sanders' benefit. As CEO, Sanders earned $1.7 million in compensation in 1997, although the company lost market share and suffered from manufacturing problems.
The CEO is also known for his extravagant personal style. In contrast to the conservative manner of many processor executives, Sanders favors designer suits and ties. At investment conferences, when many CEOs are scurrying away from crowds, the AMD chairman can typically be found talking to investors and the press at length and will rarely shy away from taking potshots at rival Intel.
His reputation for liking the good life is magnified by the fact that he lives in Bel-Air, California, and generally only works from AMD's Sunnyvale headquarters on Tuesday, Wednesday, and Thursday. He commutes by plane. (In all fairness, Intel CEO Craig Barrett works on a similar commuting schedule, according to an Intel spokesman. He lives in Arizona, but flies in to work at Intel's offices for the middle three days of the week.)
Nonetheless, change is in the air. Last year, Atiq Raza, a longtime AMD executive, was elevated to the post of co-chief operating officer and will become president and COO this year. Raza is fairly well respected within the industry, and the promotion was seen as a sign that he would begin to take over more responsibility from Sanders. Rich Previte, meanwhile, becomes vice-chairman this year.
"Atiq is a real sharp guy. He has made a difference in AMD getting its act together on microprocessors," said Nathan Brookwood, an analyst at Insight 64, said last year. "He brought a tremendous amount of design methodology that was sorely lacking at AMD." Sanders' contract runs until 2003.