SiliconBeat

We were going to start this post, “If at first you don’t succeed…,” then realized the aphorism didn’t quite fit.

For the second year in a row, shareholders at Ultratech, the San Jose supplier of chip-making equipment, will vote on a proposal at its annual meeting next month to change how the company’s board of directors is elected. Currently, elections are staggered, with half of the board standing for election each year, also known as the classified system. The proposal asks to declassify the board by having all directors face election every year.

The problem is, shareholders already voted overwhelmingly for this same thing last year, with 11.6 million shares in favor, 4.3 million against and fewer than 25,000 abstentions.

As with most shareholder proposals, the vote on this one was non-binding. Ultratech’s board, which claims it “has always taken and will always take the views of (its) stockholders seriously,” concluded, “after extensive review and deliberation,” that its current structure “continues to promote the best interests” of its stockholders.

Ultratech argues against this year’s proposal, saying its current set-up promotes “continuity and stability of leadership,” and “independence of non-employee directors by reducing pressure to act too quickly or in an uninformed manner”.

The company also points out “that a large number of well-respected companies have classified Boards, including many companies in the S&P 500.” What it doesn’t say is that a majority of S&P 500 boards are now elected every year, according to RiskMetrics Group, a financial research firm that advises investors on corporate elections.

In fact, declassifying boards was the number one topic of shareholder proposals this year, with 96 of them tracked by RiskMetrics, as of May 15. Make that 97 now.

The proposal at Ultratech was put forward by the comptroller of the city of New York on behalf of retirement funds for various city employee groups. He added another proposal this year to formally establish an “engagement process” with the proponents of shareholder proposals that get a majority of the votes cast.

It would require within four months of such a vote a meeting between the proposer and the independent members of the company’s board, who would then submit the matter to a vote of the entire board.

Ultratech is against this proposal, too, arguing that “adopting a specific, rigid procedure to be followed both in communicating with stockholders and in evaluating and acting on stockholder proposals in all instances is both inadvisable and inappropriate.”

Interested readers may want to go to our earlier post about Carl Icahn’s blog, where the most recent post is titled “Corporate Democracy is a Myth”.