The California Public Employees' Retirement System (CalPERS) sent out a letter to fellow Advanced Micro Devices shareholders asking them to vote for a resolution calling for the replacement of chairman and CEO Jerry Sanders with an independent chairman of the board.
The letter previews the showdown that will likely take place between CalPERS, which owns 500,000 shares of AMD stock, and the colorful and the sometimes controversial Sanders at the AMD stockholder's meeting April 30 in New York.
CalPERS's criticism of Sanders owes to the below-par performance of the stock. In its letter to shareholders, CalPERS asserted that $100 invested in a peer group of stocks (the Technology 500) on December 31, 1992, would have been worth $369 on December 31, 1997. This same $100 invested in AMD's stock would have been worth a mere $98.
James E. Burton, chief executive officer for CalPERS, told shareholders that AMD is suffering because W. J. "Jerry" Sanders serves as both board chairman and CEO.
"When the board's chairperson is also an officer, employee, or otherwise closely related to the company's management, it is difficult for that person to objectively perform this monitoring and evaluation function," said Burton in a prepared statement. "We believe that an independent chairperson would best ensure that the interests of shareholders are served, rather than the interests of management.
Our proposal asks that the board's leader be a person who is independent of the company and its officers. Through this proposal, we seek to promote strong, objective leadership on the board."
The letter, faxed to AMD shareholders today and posted on the Web, urges votes for its shareholder proposal, which is item No. 4 on the proxy statement for the company's annual shareholder meeting.
CalPERS met with Sanders January 20 to discuss performance and corporate governance concerns shortly before publicly naming the computer chip manufacturer to the its target list of corporate America's financial underperformers.
"From our point of view, we do not believe splitting the office of the chairman and the CEO are in the corporation's interest at this time," said Scott Allen, an AMD spokesman.
Sanders has also been criticized for excessive compensation. Earlier in the year, documents filed by AMD with the Securities and Exchange Commission showed that Sanders received a slight reduction in compensation in 1997, a year when AMD was unprofitable and plagued by manufacturing problems. All in all, however, his total compensation came to $1.7 million.