Intel shareholders look to yank back ex-CEO, CFO compensation

Introduction to diving:

• Intel shareholder demands spit out Former CEO Pat Gelsinger, Chief Financial Officer and current co-interim CFO David Zinsner and other company leaders were awarded damages, according to a shareholder derivative lawsuit filed Tuesday. “all profits, benefits and other compensation,” arguing the leaders breached their fiduciary and contractual obligations.
• Shareholder LR Trust filed a lawsuit in the U.S. District Court for the Northern District of California on behalf of Intel, accusing Kissinger and Zinsner of breaching their fiduciary duties as company executives by issuing misleading disclosures and failing to accurately report relevant financial information. OEM business. Gelsinger and Zisner, along with other named defendants, including current and former members of the company’s board of directors, “exposed the company to substantial liability under various federal securities laws as a result of their misconduct,” the lawsuit says.
• “As a result of the breach of fiduciary duties and other misconduct by individual Defendants, Intel has suffered significant harm and irreparable harm to its reputation,” the lawsuit states. The lawsuit states that the officials received “unjust enrichment” as a result of the misconduct.

Diving Insights:

The lawsuit comes as the chipmaker struggles to regain the trust of shareholders after failing to execute a turnaround plan spearheaded by Kissinger. Kissinger, a 40-year veteran of the Santa Clara, Calif.-based company, suddenly Resign as CEO Chief Financial Officer Dive previously reported that the board members were effective Dec. 1 after the company reported a record quarterly loss of $16.6 billion in the third quarter, a loss tied to a turnaround.

The company subsequently appointed Zinsner and Intel Products CEO Michelle Johnston Holthaus as joint interim CEOs, with Zinsner remaining as chief financial officer to continue its restructuring efforts with the goal of $10 billion in cost savings.

The restructuring also includes significant layoffs across the business and a broad focus on the company’s foundry business – a key element of shareholder derivative actions.

Gelsinger’s turnaround plan includes a shift in Intel’s foundry strategy, with the former CEO looking to spin off the unit Go into your own independent business Chief Financial Officer Dive previously reported that the goal is to have Intel foundries produce chips for its competitors.

However, the lawsuit alleges that Gelsinger, Zinsner and other company leaders misled shareholders about the foundry unit’s financial performance. The two executives cited the foundry unit as a “significant driver” of Intel’s business in various statements and company documents, including the chipmaker’s earnings report for its full-year 2023 results, the lawsuit said.

However, in a retrospective revision to the company’s financial statements filed in April, the chipmaker revealed that Intel foundry was one of its major cost centers The sector lost $7 billion That will happen in 2023, according to filings with the U.S. Securities and Exchange Commission. The lawsuit alleges that the restructuring caused Intel’s stock price to drop 9.2% at the time. The news also prompted a class-action lawsuit alleging shareholders were misled on the issues. Losses related to its foundry businessAccording to a report in The Register at the time.

As a result, the chipmaker “has suffered and will continue to suffer significant losses as a result of the misconduct complained of herein, but the Board of Directors has not caused the company to take action to recover the losses suffered by the company and will continue to suffer losses as a result,” the December report said The shareholder derivative action alleges.

In addition to Zinsner and Gelsinger, the lawsuit names multiple current and former board members as defendants. Other defendants include former board member Lip-Bu Tan, who resigned suddenly in August due to concerns. Related to Kissinger’s Turnaround PlanThat’s according to a Reuters report from the time cited in the lawsuit.

The semiconductor maker remains focused on its foundry business after the leadership shift. Zinsner said at a conference days after being named co-interim CEO that Intel is still seeking to become a “world-class foundry.” So this could also be Kissinger’s Permanent successor as CEO He said at the time that he would have “some capabilities” in foundry manufacturing.

Intel declined to comment on the lawsuit. Weislaw, an attorney for the plaintiffs, did not immediately respond to a request for comment.