Texas Instruments Incorporated (TXN) Earnings Call Transcript & Summary

All right. Good morning, everyone. We are about to get started. Thank you for your attention.

Good morning. The 2023 Annual Meeting of Stockholders of Texas Instruments Inc. is hereby called to order. I'm Rich Templeton, Chairman of the Board of Directors. Cynthia Trochu, Secretary of the company, will act as secretary of this meeting. Our meeting today will focus solely on business items outlined in the proxy statement. The Board of Directors has appointed an independent inspector to conduct the vote at this meeting. Cynthia has advised me that holders of about 89% of the outstanding common stock are represented at the meeting in person or by proxy. This constitutes a quorum. Our purpose at this meeting today is to vote on 5 company proposals, including Director nominees and 2 stockholder proposals. All nominees for election to the TI Board are with us this morning. At this time, I am pleased to introduce the nominees for election to the TI board. As I introduce the Director nominees, I ask that they please stand, face the audience and remain standing. In addition to myself, those nominees are Mark Blinn, Todd Bluedorn, Janet Clark, Carrie Cox, Martin Craighead, Curt Farmer, Jean Hobby, Haviv Ilan, Ron Kirk, Pam Patsley and Robert Sanchez. All except for Mr. Farmer were elected at last year's Annual Meeting. Thank you, Directors. You may now be seated. Each of these nominees and their qualifications are listed in the proxy statement. TI's bylaws require advance notice of proposed Director nominations. Since no notice of other nominations have been submitted, in accordance with the bylaws, the nominations are closed. The polls are open for voting. The right to vote directly at this meeting is limited to stockholders of record and proxy holders. Stockholders of record and proxy holders who have not already submitted votes -- their votes or who wish to change a previously submitted vote may do so now. Please raise your hand if you need a ballot. Please remember that if you have already voted, it is not necessary to vote again. After voting, please return ballots to the administrator in the aisle. I see no hands. On the ballot today for -- on the ballot for today's meeting are 5 company proposals: a vote to elect the Director nominees, a vote to approve the extension of the TI employees' 2014 stock purchase plan, an advisory vote on the frequency of future advisory votes on named Executive Officer compensation, an advisory vote on named Executive Officer compensation and a vote to ratify appointment of Ernst & Young as the company's independent registered public accounting firm for 2023. The full text of these items are in the proxy statement. The Board of Directors ask for a vote in favor of each of them. Also on the ballot for today's meetings are 2 stockholder proposals. The first stockholder proposal on the ballot for today's meeting was submitted by Mr. John Chevedden. It will be presented by his representative, Mr. Frank Rauscher, We'll have 3 minutes for remarks regarding the proposal. Please step up to the microphone to begin your remarks.

Mr. Chairman, thank you for the opportunity to speak. Please don't shoot the messenger. I was -- sometimes I'll do these things for Mr. Chevedden as a favor to a third party that I've been indebted to. And so I did not realize the -- I would say, the proposal as far as the language and so forth. They called me, and I told Chevedden and I would go to make the remarks I have. Mr. Kirk, I apologize to you. I would never be reading those kinds of comments. You're a [indiscernible] man, a Mayor, arbitrator. You're a patriot. You are a gem, and I don't think he knows that. And I just apologize to you that you were brought up. The reality is he's upset because you guys outsmarted him. It's a simple thing with regard to the shareholder rights and so forth. John is involved. He's involved in trying to do some things to find -- to tweak companies a little bit, but also he likes the attention that this brings. I've told him this but I'll -- anyway, that's all I'm going to say with regard to it. The votes are in, and [ they're cast ]. I'm not trying to persuade anybody to change anything. Maybe after the meeting is over, if you all want to have some conversation with him about what all is going to happen if it's going to be a next step or not, you all can make that. But that's my comments to him. But again, I apologize to you, sir. The second one -- can I now speak about the second proposal, sir?

Yes, please.

Okay. So the second one, I'm also here representing the Friends Fiduciary Corporation. So I'll read what they asked me to read for you. Good morning, fellow shareholders and members to the Board. My name is Frank Rauscher, the company's appointed associate, as representative of lead filer, Friends Fiduciary Corporation, a Quaker, faith-based, socially responsible investment firm and a long-term shareholder of Texas Instruments. I hereby move item #7, the shareholder proposal asking Texas Instruments' 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 are related to the violations of international law. Russia's ongoing invasion of Ukraine has been characterized by work crimes carried out by the Russian military, including the targeting of civilians and civilian infrastructure. The United States government has deployed an unprecedented number of sanctions against the Russian slate, our state and its affiliated companies and in the process of tightening export controls related to microelectronics. So Texas Instruments' products included recently manufactured dual-use semiconductors and then some of the most widely discovered components in 27 Russian defensive weapon systems, including crews and ballistic missiles, tanks, precision munitions and electronic warfare. Investors are becoming increasingly alarmed by the human rights and financially material risks associated with operations and relationship with Russia, especially those linked to work crimes perpetrated by Russia's military. Our company states that it's compliant with current sanctions, but this is the minimum required in the face of Russian aggression. If nonprofit organizations are able to trace the use of our company's products for point of manufacturer to point of protected use, we expect Texas Instruments would be able to do more. Our company has stated that the complexity and volume of their supply chains make traceability of products unachievable. Yet peer semiconductor and other tech companies have agreed to take necessary steps to address the risk raised of this proposal. Finally, data indicates that our company's products are still being diverted to Russian and Chinese, Turkish and other intermediaries to be sold to the Russian military, created an additional sense of urgency for the company to take action. As investors, we are asking our company to commission a third-party report to better assess the escalated legal, regulatory and reputational risks through heightened human rights and know your customer due diligence processes in Russia and Ukraine and across the conflict affected in high-risk areas to assess their products are misused. So the proposal will assist our company in doing just that. And then you all have had the company's response with regard to it. And the comment I would make to you is that I know that you think that you're doing all that you can. But I'm going to just tell you, there are some areas that I'm aware of that you're not doing all that you can. And that has to do with the topic of supply chain management and forced labor and trafficking and so forth and analyzing the suppliers and the supply chain in very close detail. You're a member of the Responsible Business Association (sic) [ Alliance]. It used to be called the Electronic Industry Citizenship Coalition, which wrote -- and in it, you have committed that you will work on the supply chains to make sure that they're not involved in forced labor and so forth. The fact that you really aren't involved in that, and it's an opportunity -- you're a great company. You guys could be doing so much work with so little money and time just by enforcing the things that are in your supply chain and getting closer to your supply chain and their sub vendors. I realize you've got languages in your vendor agreements and so forth that say that you're doing that. You're not doing that. So my point to you is, as the Board, I think that you're going to find that you aren't going to be approached by organizations. And we like at least look at your supply chains, get a closer handle on it because I assure you, you don't have it. And even in some conversations I've had with the TI employees, they know that you're only doing what you really do in the middle. So again, thank you very much. I appreciate the opportunity to have come before you.

Thank you, Mr. Rauscher. For the reasons detailed in the proxy statement, the Board of Directors recommends a vote against this proposal. . I will now open the floor to questions about the ballot items. As a courtesy to all present or listening via webcast, please limit your questions to a total of 3 minutes and one topic or question. Please raise your hand if you'd like to ask a question. I see no hands. We have no additional questions related to the business of the meeting, and it appears that we have no more votes coming in. Since everyone has had the opportunity to vote, the polls are now closed. I will note that the votes for our 401(k) participants and the votes submitted prior to the start of this meeting, either by mail, phone or Internet, have already been counted. We have the preliminary votes -- results of the voting. And according to our independent inspector, all company proposals have passed, and the stockholder proposals did not pass. We will report the final voting results in an 8-K filing with the SEC within the ordinary course. With that, the Annual Meeting is adjourned. Thank you for coming today.