Ultratech shareholders kinda, sorta rebelled against the company on Tuesday.
On one hand, they re-elected three directors to the company’s board. On the other hand, they rejected the board’s advice by passing a proposal advocating that all directors stand for election each year. That’s a shareholder friendly measure that potentially makes it easier to overhaul the board.
Currently Ultratech’s board has two classes of directors, with members of each elected to two-year terms in alternating years. The idea was proposed by the New York City Employee’s Retirement System, which owns 111,227 shares:
We believe that the ability to elect directors is the single most important use of the shareholder franchise. Accordingly, directors should be accountable to shareholders on an annual basis. The election of directors by classes, for two-year terms, in our opinion, minimizes accountability and precludes the full exercise of the rights of shareholders to approve or disapprove annually the performance of a director or directors.
In addition, since only one-half of the Board of Directors is elected annually (currently the Company has seven directors, four of whom are elected one year and three the next), we believe that classified boards could frustrate, to the detriment of long-term shareholder interest, the efforts of a bidder to acquire control or a challenger to engage successfully in a proxy contest.
The board urged shareholders to reject the measure, which it allowed to be heard even though the company said it was not properly submitted under Ultratech’s bylaws.
The classified Board structure provides the Board of Directors with greater leverage to evaluate the adequacy and fairness of any takeover proposal, to negotiate on behalf of all stockholders and to consider alternative methods of maximizing stockholder value. The Company’s classified board structure and the leverage it creates takes on additional importance in light of the recent expiration of the Company’s shareholder rights plan.
Don’t hold your breath, though. The “non-binding” proposal would require an amendment to the company’s certificate of incorporation that would need to be presented “at a subsequent meeting of stockholders for approval.”
Ultratech’s sales last quarter dropped 22 percent from the year-before quarter to $27.4 million while its profit slipped to a loss.
