Microchip Technology Incorporated. (NASDAQ:MCHP) 2024 Annual Shareholders Meeting August 20, 2024 12:00 PM ET
Company Participants
Steve Sanghi – Executive Chair
Rich Simoncic – Chief Operating Officer
Eric Bjornholt – Senior Corporate Vice President, CFO
Ganesh Moorthy – President & CEO
Lauren Carr – SVP, Global Human Resources
Mathew Bunker – Senior Corporate Vice President of Operations
Katie Carter – Director of Faith-Based Investing and Shareholder Engagement, Presbyterian Church (U.S.A.)
Rob Suffoletta – Managing Partner of Austin Office, Wilson Sonsini Goodrich & Rosati
Conference Call Participants
Operator
Good day, and thank you for standing by. Welcome to the Microchip Technology Fiscal 2024 Annual Shareholders Meeting. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Steve Sanghi, Chair of the Board. Please go ahead.
Steve Sanghi
Thank you very much, and good morning, everyone. It’s 9:00 a.m. and the 2024 Annual Meeting of the Stockholders of Microchip Technology Incorporated will please come to order. I’m Steve Sanghi, Chair of the Board of Microchip Technology.
I would also like to introduce additional members of the audience. First, I will introduce the other members of the Board of Directors. When I say your name, please stand up and be recognized. Ganesh Moorthy, President and CEO of Microchip Technology; Ellen Barker, retired Senior Vice President and Chief Information Officer of Texas Instruments; Matt Chapman, retired CEO of software assessment company, Northwest Evaluation Association; Karlton Johnson, CEO of National Space Society and CEO of DeLaine Strategy Group LLC; Karen Rapp, retired CFO of National Instruments; Robert Rango, retired President and CEO of Enevate.
Next, I will introduce the company’s executive staff that are in attendance today, starting with Rich Simoncic, Chief Operating Officer; Eric Bjornholt, Senior Corporate Vice President, Chief Financial Officer; Mathew Bunker, Senior Corporate Vice President of Operations; Lauren Carr, Senior Corporate Vice President, Global Human Resources; Mike Finley, Senior Corporate Vice President, Operations; Patrick Johnson, Senior Corporate Vice President, FPGA and Timing Business Units; Joe Krawczyk, Senior Corporate Vice President, Worldwide Client Engagement; and Sumit Mitra, Senior Corporate Vice President, 32-bit MCU, MPU and Wireless Business Units. The partner of the firm of Ernst & Young, the company’s independent registered public accountant firm is also here today, John Gaylord.
I would also like to introduce Rob Suffoletta. Rob Suffoletta, a partner with the law firm of Wilson Sonsini Goodrich & Rosati, who serves as the company’s outside legal counsel. Pursuant to the company’s bylaws, I have been appointed by the Board of Directors to serve as Chair of the meeting. Rob Suffoletta will serve as Secretary of the meeting. Notice of this meeting stating the time, place and purposes was mailed on or about July 8, 2024, postage prepaid, to each stockholder of record at the close of business on June 21, 2024. Affidavits of mailing have been received by the company and are available for inspection at this meeting. 536,505,077 shares of common stock were outstanding at the close of business on June 21, 2024, and are entitled to vote at this meeting.
Now with respect to the voting of your shares. If you have already mailed in your proxy and you do not want to change your vote, then you do not need to do anything at this time. If you did not turn in your proxy, if you wish to change a proxy you previously submitted, or if you hold a proxy to vote the shares of another stockholder, please submit those proxies to us at this time. Macy, please collect these proxies now. Anybody that need to turn in their proxy?
Lastly, if there’s anyone here who did not submit a proxy and who wishes to vote their shares in person, please raise your hand and Macy will distribute a ballot to you. We will collect those ballots when we open the polls for voting in a few moments. Anybody who needs a ballot?
In accordance with the provisions of Delaware law, the Board of Directors has appointed Rob Suffoletta to serve as the Inspector of Election at this meeting, and he subscribed the oath of his office prior to the meeting rather than inform me that a quorum is present, and I declare the meeting open for business. If there are any questions that relate directly to one of the proposals, I would like to receive that question at the time that we consider each of the proposals. Otherwise, we have reserved time after we complete the business matters of the meeting for a question-and-answer period. So please hold all questions not related to the proposals until the question-and-answer period.
First, election of directors. The first proposal is the election of the company’s directors to serve for the ensuing year and until their successors are elected and qualified. A nominee for director shall be elected if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. Nomination for directors will now be received. I recognize Rich Simoncic.
Rich Simoncic
My name is Rich Simoncic. I nominate Ellen Barker, Matthew W. Chapman, Karlton D. Johnson; Ganesh Moorthy, Robert A. Rango, Karen M. Rapp and Steve Sanghi for election as directors of the company.
Steve Sanghi
Please stand up and look behind to the audience when you speak. Eric Bjornholt?
Eric Bjornholt
I second the motion.
Steve Sanghi
Since no other nominations were received, the nominations are now closed.
Second proposal, 2004 equity incentive plan share increase. The second proposal is to approve the amendment and restatement of our 2004 equity incentive plan to increase the number of shares of common stock authorized for issuance thereunder by 8 million shares. The affirmative vote of the holders of a majority of the votes cast affirmatively or negatively at the meeting is required to approve this proposal. Is there any discussion on the proposal?
A motion calling for a vote on this proposal will now be received. I recognize Eric Bjornholt.
Eric Bjornholt
My name is Eric Bjornholt. I move for the adoption of the following resolution resolved to approve the amendment and restatement of our 2004 equity incentive plan to increase the number of shares of common stock authorized for issuance thereunder by 8 million.
Steve Sanghi
Ganesh Moorthy?
Ganesh Moorthy
I second the motion.
Steve Sanghi
The third proposal is to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2025. The affirmative vote of the holders of a majority of the votes cast affirmatively or negatively at the meeting is required to adopt the proposal. Is there any discussion on this proposal? A motion calling for a vote on this proposal will now be received. I recognize Ganesh Moorthy.
Ganesh Moorthy
My name is Ganesh Moorthy. I move for the adoption of the following resolution resolved, to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2025.
Steve Sanghi
Lauren Carr?
Lauren Carr
I second the motion.
Steve Sanghi
The fourth proposal is to hold an advisory non-binding vote regarding the compensation of our named executives. The affirmative vote of the holders of a majority of the votes cast affirmatively or negatively at the meeting is required to approve this proposal. Is there any discussion on this proposal? A motion calling for a vote on this proposal will now be received. I recognize Lauren Carr.
Lauren Carr
My name is Lauren Carr. I move for the adoption of the following resolution, resolved to approve on an advisory nonbinding basis, the compensation of our named executives.
Steve Sanghi
Mathew Bunker?
Mathew Bunker
I second the motion.
Steve Sanghi
The fifth proposal is a shareholder proposal requesting that our Board of Directors commission an independent third-party report at reasonable expense and excluding proprietary information on our due diligence process to determine whether our customers use of our products contribute or are linked to violations of international law. The affirmative vote of the holders of a majority of the votes cast affirmatively or negatively at the meeting is required to approve this proposal.
At this time, I would like to introduce Ms. Katie Carter, Director of Faith-Based Investing and Shareholder Engagement, Presbyterian Church (U.S.A.) who is a representative of the proponent of the shareholder proposal. Ms. Carter will have 4 minutes to present the shareholder proposal. Would Ms. Carter, please introduce ourselves and the proposal.
Katie Carter
Good morning, fellow shareholders and members of the Board. My name is Katie Carter with the Presbyterian Church (U.S.A.). I move Proposal 5 as a representative of on behalf of the Presbyterian Church (U.S.A.), a long-term shareholder of Microchip Technology through our Board of Pensions.
Proposal five asks Microchip Technologies Board of Directors to commission an independent third-party report on our company’s due diligence process to determine whether customers’ use of its products and services contribute or linked to violations of international humanitarian law. Like, everyone here, our church has deeply saddened and shocked by Russia’s unprovoked invasion, war of aggression, and occupation of democratic Ukraine.
Every day, the Russian military commits war crimes, including the targeting of civilians and civilian infrastructure such as hospitals, schools and apartment buildings, resulting in the death of more than 11,000 civilians and the displacement of millions more. The United States government and its allies and partners have deployed an unprecedented number of economic sanctions against the Russian state and its affiliated companies and is in the process of tightening export controls related to Russia and Iran’s ability to procure microelectronics.
Unfortunately, Microchip’s products, including recently manufactured dual-use semiconductors have been some of the more widely discovered components in 26 Russian offensive weapon systems, including cruise and ballistic missiles, tanks, precision munitions and electronic warfare complexes, examined by the Royal United Services Institute, the world’s oldest in the U.K.’s leading defense and securities think (ph) tanks. Our company’s products have also been found in Iranian kamikaze drones used to intentionally destroy Ukrainian energy infrastructure in advance of winter and in violation of international laws.
According to recent reporting on Russian trade data, approximately 2,400 shipments of Microchip products valued at nearly $14 million were made to Russia between January and May of last year, including to actors with ties to the Russian military. Investors remain alarmed by the human rights and financially material risks associated with operations and relationships in Russia, especially those linked to war crimes perpetuated by the Russian military.
Our company states that it is complying with current sanctions and trade regulations, but this is a legal minimum required in the face of Russian aggression. If non-profit organizations like the Royal United Services Institute are able to trace the use of our company’s products from the point of manufacturer to the point of prohibited end use by the Russian military, we expect Microchip to do everything in its power to limit its contributions to human rights violations in Ukraine and related financial material risks for the company and its investors.
Our company has also noted that the complexity and volume of multi-tier global electronic supply chains make 100% traceability of semiconductor products unachievable. We understand and accept these complexities. We are not requesting nor do we expect complete traceability. However, in response to the Russian invasion, peer semiconductor and other tech companies have taken steps beyond de minimis sanction compliance to address the human rights and financially material risks raised in this proposal.
As investors, we are asking our company to commission a third-party report to better assess the escalating legal, regulatory, reputational and moral risks through heightened human rights and know-your-customer due diligence, processes in Russia and Ukraine and across conflict-affected and high-risk areas. Basic sanctions compliance should be the floor of corporate action, not the ceiling. This proposal will assist our company in doing just that. We therefore urge shareholders to vote for its passage. Thank you.
Steve Sanghi
Thank you, Ms. Carter. Microchip does not support or condone the use of our products in Russian weapon systems or other weapon systems used against civilian. The U.S. government issued sanctions and export controls targeted at preventing advanced semiconductors from being used in weapons production by the Russian defense industry. As a result, U.S. exports of semiconductors to Russia plunged by more than 90% according to the U.S. government.
Microchip is committed to having robust export controls in place so that our products are used appropriately and in alignment with our guiding values. Further, Microchip voluntarily stopped selling our products into Russia and Belarus in March 2022 before these sanctions were implemented because we are against the actions of Russia against the Ukrainian people. Because we have corporate policies and practices addressing human rights and export controls, after careful consideration, our Board concluded that adoption of this proposal is not necessary.
We support regulatory and industry-driven efforts to appropriately limit the distribution of our products to authorized parties for permissible uses, we have described their efforts more fully in the proxy and the Board recommends a vote against this proposal. Is there any discussion on this proposal? A motion calling for a vote on this proposal will now be received. I recognize Ms. Carter.
Katie Carter
I move for the adoption of the following resolution resolved that Microchip Board of Directors commission an independent third-party report at reasonable expense and excluding proprietary information on its due diligence process to determine whether its customers’ use of its products contribute or linked to violations of international law as more fully described in the company’s proxy statement dated July 8, 2024.
Steve Sanghi
Is there a second to this motion? Although, there is no second to this motion, I hereby use my discretion as chair of this meeting to allow a vote on this proposal to proceed. The polls are now open for voting on the proposals before the meeting. The time and date of opening of the polls is 9:17 a.m. today, August 20, 2024.
Macy, please collect the ballots of those stockholders who wish to vote in person. If you have a ballot, please raise your hand so that we can collect them. Total of times for 1 minute. The polls are now closed. The time and date of closing of the polls is 9:18 a.m. today, August 20, 2024. Will the Inspector of Elections please announce the vote?
Rob Suffoletta
With regard to Proposal 1, the election of the Microchip Board of Directors, I hereby declare that all the nominees have been duly elected as directors of the company to serve for the ensuing year until their successors are elected and qualified.
With respect to Proposal 2, to approve the amendment and restatement of Microchip’s 2004 equity incentive plan to increase the number of shares of common stock authorized for issuance thereunder by 8 million, I hereby declare the proposal has been approved.
With regard to Proposal 3, to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2024, I hereby declare the proposal has been approved.
With respect to Proposal 4, an advisory nonbinding vote regarding the compensation of Microchip’s named executives, I hereby declare that the compensation of the named executive officers has been approved by a non-binding advisory vote.
With regard to Proposal 5, I hereby declare the stockholder proposal requesting that the Microchip Board of Directors commission an independent third-party report at reasonable expense and excluding proprietary information on its due diligence process to determine whether its customers’ use of its products contribute or link to violations of international law has not been approved.
Steve Sanghi
This concludes the formal portion of our meeting. Before I adjourn the meeting. Is there any further business? If not, I will entertain a motion to adjourn. Mathew Bunker?
Mathew Bunker
I move the meeting be adjourned.
Steve Sanghi
Ganesh Moorthy?
Ganesh Moorthy
I second the motion.
Steve Sanghi
All in favor, say aye? Any opposed, say no? Ayes have it, the meeting is adjourned. At this time, Ganesh Moorthy Murthy and I will entertain questions from stockholders.
Ganesh Moorthy
So we will have a microphone that we’ll run over to anybody who has a question, but I open it up to anyone in the room. If you have a question, please stand up, introduce yourself and then ask the question that you have.
Steve Sanghi
Any questions on the line?
Ganesh Moorthy
We — technical issues, we’re just doing it on the slide here itself. Doesn’t appear to be any questions from the room here itself. So…
Steve Sanghi
Okay. So the meeting is adjourned. Thank you for attending.
Operator
This concludes today’s conference call. Thank you for participating. You may now disconnect.
Question-and-Answer Session
End of Q&A
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