Company Name: Chittenden Corp.
Public Availability Date: 03-10-1987
INQUIRY LETTER 1
BROWN & WOOD
ONE WORLD TRADE CENTER
NEW YORK, N.Y. 10048
TELEPHONE(212) 839-5300
January 02, 1987
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Fiduciary Plaza
Washington, D.C. 20549
Re: Rule 14a-8(d) under the Securities Exchange
Act of 1934 - Proposed Omission of the
Shareholder Proposals of John Jennings Crapo
Gentlemen:
This letter is submitted on behalf of Chittenden Corporation ("Chittenden")
pursuant to Rule 14a-8(d) under the Securities Exchange Act of 1934 with regard
to Chittenden's intention to omit from its proxy material for its 1987 Annual
Meeting a resolution containing three proposals submitted by shareholder John
Jennings Crapo (the "Proponent"). Pursuant to Rule 14a-8(d) we are furnishing
you six copies of this letter. A copy has also been sent to the Proponent.
The Proponent's proposals are as follows:
"Resolved:
1) Directors shall be elected so that equal opportunities shall be provided for
opposition candidates for Director. The provisions to elect said opposition
Directors shall be included with the notice of each annual shareholders meeting.
Further reasonable notice shall be given Shareholders who might wish to be such
Director Candidates so their names, biographies, and photographs will appear in
Annual Shareholders Meeting Notices.
2) All Director Candidates shall list on the Shareholders Annual Meeting Notices
their beneficial ownership of stock in other business enterprises such as banks,
utilities, insurance companies, and the like, as well as partnerships and solely
owned businesses.
3) Corporation By-Laws, as well as Shareholders Annual Meeting and Special
Meeting By-Laws shall be sent to each shareholder every time a proxy vote is
solicited or shareholders meeting is held."
The Supporting Statement provided by the Proponent is set forth below.
"Dear Fellow Shareholder:
I'm a social worker. As a six year old I lived in an Episcopalian Orphanage at
Washington, D.C. I had parents, a material grand-father at Falmouth,
Massachusetts, and many Aunts and Uncles living in the New Bedford, Cape Cod,
and Boston Areas. Also there were numerous foster homes. At Newton,
Massachusetts when I finished 12th grade, it was after attending seven high
schools, and twelve elementary schools. I know oppression first hand. At Boston
University, I worked in dining rooms and cleaning up Chaplains' toiletts on work
scholarships. At Harvard University, it has been night school, after an
exhausting day of work. Also, I belong to various groups, the D.A.V., the
American Legion, and the Gerontological Society of America, inter alia.
We, as shareholders, must consider the public image and confidence of our
Corporation. Our Nation has a history of oppressing some minorities, Blacks,
Homo-Sexuals, Women, Asiatics, and poor. The Corporation as an Affirmative
Action and Equal Opportunity employer can promote employment of minorities and
the like by holding out the possibility of advancement to Directors. The Board
of Directors should serve as role models for all Corporation Personnel, and more
minorities, women, Blacks, Lesbian, Gays, etc. as Directors can serve as
incouragement "XADsic"XBD to qualified personnel seeking upward mobility.
Technically, opposition candidates are presently allowed -- as write ins but
that process is actually a ploy by incumbent Directors to keep control because
most ballotting is by mail. Opening up the process of electing Directors can,
too, help inspire greater confidence by those who might become our customers.
Shareholders are frequently called upon to sanction Directors' decisions. It's
reasonable that Corporate By-Laws be included when we get something by mail from
them -- to help us decide the legal and financial implications. Do we need to be
reminded of the troubles of Bank of America, Texaco, and Union Carbide; and
mergers are a real possibility. Thank you."
A copy of the Proponent's letter dated October 13, 1983 setting forth the
proposals and supporting statement is enclosed.
Background
Chittenden, a Vermont corporation, was incorporated in 1971, and is a registered
bank holding company under the Bank Holding Company Act of 1956 doing business
in Vermont through Chittenden Trust Company (the "Bank"), the largest bank in
the State of Vermont. To manage its operations, Chittenden has always sought out
highly-qualified candidates for election to its Board of Directors. To help find
such candidates, among other methods, Chittenden has established procedures
whereby the shareholders can provide input in the selection of possible
candidates for the Board of Directors. As in all public corporations,
shareholders are entitled to submit, for review, the names and qualifications of
any persons they would like nominated for election as directors. Chittenden's
Proxy Statements contain a statement that shareholder nominations should be
submitted in writing to its Nominating Committee which is in the form of the
Directors Succession Committee. All potential candidates are given full and
careful consideration in the nominating process.
As a public company, Chittenden has always acted to ensure that shareholders are
kept abreast of developments concerning the management and operations of
Chittenden and the Bank. Chittenden has provided periodic and annual reports and
proxy statements to its shareholders and has filed all necessary disclosure
statements with regulatory bodies. Chittenden also regularly issues press
describing significant events affecting its operations. The proposals put forth
by the Proponent seek to make changes in the way Chittenden selects its
qualified directors and communicates with its shareholders. Chittenden is of the
opinion that these proposals should be excluded pursuant to Rule 14a-8 for a
variety of reasons.
Proposal One
Chittenden believes that this proposal should be excluded from the proxy
material under Rule 14a-8(c)(8). This rule provides that matters may be omitted
if they relate to an election to office. The Proposal states that Directors
shall be elected so that equal opportunities shall be provided for opposition
candidates for Directors. Although the proposal seems to relate merely to the
procedure for the election of Directors, the proposal in essence seeks to have
representatives of specific groups placed on the Board of Directors. This intent
is clear in the supporting statement accompanying the proposals. The statement
concludes by saying, "The Corporation as an Affirmative Action and Equal
Opportunity employer can promote the employment of minorities and the like by
holding out the possibility of advancement to Directors. The Board of Directors
should serve as role models for all Corporation Personnel, and more minorities,
women, Blacks, Lesbians, Gays, etc. as Directors can serve as incouragement "XADsic"XBD
to qualified personnel seeking upward mobility."
The Commission has over the years concurred with the exclusion of proposals
which relate to the election to office of representatives of specific groups
(BankAmerica Corporation, January 7, 1980, Pacific Gas and Electric Co.,
February 12, 1979, Chrysler Corporation, January 25, 1977). In those cases, the
Commission did not recommend enforcement on the exclusion of proposals relating
to the election of grassroots ratepayers, minority group members, consumer
advocates and representatives of pension funds. Although couched in different
terminology the Proponent's proposal seeks to request the type of action the
Commission has determined can be excluded.
The first proposal may also be excluded under Rule 14a-8(c)(6) which permits the
Issuer to omit a proposal which is beyond the Issuer's power to effectuate. The
election of the directors to represent minority or "oppressed" groups is a
matter which is solely in the power of the shareholders. Chittenden agrees with
the Proponent that it is important to ensure equal opportunity for all, whether
they are employees or candidates for director. However, Chittenden believes that
current procedures allow shareholders sufficient opportunity to propose for
consideration candidates for director who are qualified to serve on the board of
a sophisticated and highly regulated entity such as a bank holding company. The
Proponent, in his supporting statement, notes that Chittenden has already
provided a mechanism for the nomination of opposition candidates. The Commission
has recognized that proposals calling for the election of representatives of
specific groups are beyond the power of the Board of Directors to effectuate and
therefore may be omitted pursuant to Rule 14a-8(c)(6). (GTE Corporation, January
10, 1984, and American Information Technologies Corporation, December 13, 1985.)
Proposal Two
The Proponent's second proposal would require all candidates for director to
list all of their beneficial ownership of stocks in other business enterprises
as well as partnerships and solely-owned businesses. This proposal should be
permitted to be excluded pursuant to Rule 14a-8(c)(7), which allows the omission
of a proposal which deals with a matter relating to the conduct of the ordinary
business operations of the issuer.
Regulation S-K, in conjunction with the Proxy Rules, mandates disclosure of
certain information deemed pertinent by the Commission for consideration by
shareholders in the election of directors. The decision to require additional
disclosure of personal information about directors, which information would be
of questionable value to shareholders, should be a decision left to Chittenden's
Board of Directors. This proposal could have a significant adverse effect on
Chittenden's management by placing an undue and unnecessary burden on candidates
for directors, thereby discouraging qualified persons from seeking election to
the Board of Directors. Given the lack of benefit gained by shareholders and the
potential adverse consequences to management, the decision to require this type
of disclosure should be left to management to review on a case-by-case basis. In
a somewhat analogous situation, the Commission determined that a proposal to
require financial disclosure, which was not required by law, could be excluded
under Rule 14a-8(c)(7) since it dealt with a matter relating to the conduct of
the company's ordinary business operations. (Santa Fe Southern Pacific, January
30, 1986.)
Proposal Three
The final proposal put forth by the Proponent would require Chittenden to mail a
copy of its by-laws with every proxy solicitation that is sent out. This
proposal should be permitted to be excluded under Rule 14a-8(c)(7) because it
deals with matters relating to the ordinary business operations of Chittenden.
The decision as to how to prepare and disseminate Chittenden's by-laws does not
involve any significant policy decision. By-laws are obviously available for
inspection by shareholders on request. Additional distribution of the by-laws is
a decision relating to the conduct of the ordinary business operations of the
issuer.
The Proponent's supporting statement reveals that he may have intended to have
Chittenden's corporate minutes included with the proxy solicitations rather than
the by-laws. This presents even a stronger case for exclusion under Rule
14a-8(c)(7). While minutes of shareholder meetings would ordinarily be made
available to shareholders on request, minutes of Board of Directors and
Committee meetings are not ordinarily available to the public.
Disclosures of sensitive material in the minutes could have an adverse impact on
Chittenden's business. As a highly regulated entity, many of Chittenden's
corporate records are required by law to remain confidential. Additionally,
Chittenden's management is frequently involved in sensitive business decisions
which are properly recorded in its corporate minutes. The Directors may not be
inclined to engage in free and open discussion or pursue sensitive issues if
they know that a record of the discussions would be passed along to the
shareholders. The decision regarding the dissemination of information concerning
corporate decision-making is properly left to the Directors. This type of
activity is a business decision which is the very essence of their role as
managers of Chittenden. It would be all but impossible to look for the
instructions, advice or guidance of the shareholders in such an area. If a
general mailing of corporate minutes was the intention of the Proponent's third
proposal, it should be permitted to be excluded under Rule 14a-8(c)(7) as it
involves matters concerning the conduct of ordinary business.
Other Considerations
In addition to the reasons stated, Chittenden believes that the first, second
and third proposals presented by the proponent should also be excluded under
Rule 14a-8(c)(4), which permits exclusion of a proposal if it furthers a
personal interest, which benefit or interest is not shared with the other
security holders at large.
The Proponent, as evidenced by his statement of support, obviously has very
deeply held beliefs about the role of corporations in society, as well as the
level of shareholder involvement in the day-to-day management of such
corporations. These proposals are attempts to bring Chittenden more in line with
the Proponent's personal vision of Chittenden's proper role. These proposals
are, however, not without cost. The measures required by the proposals will bear
a significant cost, both in terms of money to be spent and a potentially less
effective Board of Directors. Although the personal benefit of these proposals
to the Proponent is clear, it is not clear that the other Shareholders share
this vision, or desire to pay its cost. These proposals should be permitted to
be excluded pursuant to Rule 14a-8(c)(4) because they further the Proponent's
personal interest and that interest is not necessarily shared by the other
shareholders at large.
Conclusion
For the reasons set forth above, Chittenden respectfully requests the
Commission's staff to advise Chittenden that it will not recommend enforcement
action if the Proponent's proposals are omitted from its proxy materials.
Communication with Chittenden should be made through Sheldon Prentice, Esq.,
General Counsel, Chittenden Corporation, Two Burlington Square, Burlington,
Vermont 05402 (Telephone number (802) 658-4000).
Very truly yours,
Mitchell Kleinman
INQUIRY LETTER 2
JOHN JENNINGS CRAPO
P.O. Box 13
Cambridge,"B" MA 02140-0001
CERTIFIED MAIL, #p 327-199-925
Return Receipt Requested
John F. McAteer, Secretary
Chittenden Corporation
P.O. Box 820, Burlington, Vt. 05402
Sir:
I'm John Jennings Crapo of P.O. Box 13, Cambridge `B' MA 02140-0001 end the sole
owner of 122 shares of the Corporation Common Stock. I plan to attend the 1987
Annual Shareholders' Meeting and I do not intend this year or next to sell or
otherwise dispose of any of the Corporation Common Stock. The following is a
proposition which I want to appear before the meeting and on all proxy notices,
cards, and annual meeting notices sent to shareholders:
"Resolved:
1) Directors shall be elected so that equal opportunities shall be provided for
opposition candidates for Director. The provisions to elect said opposition
Directors shall be included with the notice of each annual shareholders meeting.
Further reasonable notice shall be given Shareholders who might wish to be such
Director Candidates so their names, biographies, and photographs will appear in
Annual Shareholders Meeting Notices.
2) All Director Candidates shall list on the Shareholders Annual Meeting Notices
their beneficial ownership of stock in other business enterprises such as banks,
utilities, insurance companies, and the like, as well as partnerships and solely
owned businesses.
3) Corporation By-Laws, as well as Shareholders Annual Meeting and Special
Meeting By-Laws shall be sent to each shareholder every time a proxy vote is
solicited or shareholders meeting is held."
The following is my statement in support of the proposal:
"Dear Fellow Shareholder:
I'm a social worker. As a six year old I lived in an Episcopalian Orphanage at
Washington, D.C. I had parents, a material grand-father at Falmouth,
Massachusetts, and many Aunts and Uncles living in the New Bedford, Cape Cod,
and Boston Areas. Also there were numerous foster homes. At Newton,
Massachusetts when I finished 12th grade, it was after attending seven high
schools, and twelve elementary schools. I know oppression first hand. At Boston
University, I worked in dining rooms and cleaning up Chaplains' toiletts on work
scholarships. At Harvard University, it has been night school, after an
exhausting day of work. Also, I belong to various groups, the D.A.V., the
American Legion, and the Gerontological Society of America, inter alia.
We, as shareholders, must consider the public image and confidence of our
Corporation. Our Nation has a history of oppressing some minorities, Blacks,
Homo-Sexuals, Women, Asiatics, and poor. The Corporation as an Affirmative
Action and Equal Opportunity employer can promote employment of minorities and
the like by holding out the possibility of advancement to Directors. The Board
of Directors should serve as role models for all Corporation Personnel, and more
minorities, women, Blacks, Lesbian, Gays, etc. as Directors can serve as
incouragement to qualified personnel seeking upward mobility.
Technically, opposition candidates are presently allowed -- as write ins but
that process is actually a ploy by incumbent Directors to keep control because
most ballotting is by mail. Opening up the process of electing Directors can,
too, help inspire greater confidence by those who might become our customers.
Shareholders are frequently called upon to sanction Directors' decisions. It's
reasonable that Corporate By-Laws be included when we get something by mail from
them -- to help us decide the legal and financial implications. Do we need to be
reminded of the troubles of Bank of America, Texaco, and Union Carbide; and
mergers are a real possibility.
Thank you.
JOHN JENNINGS CRAPO, Shareholder."
INQUIRY LETTER 3
John Jennings Crapo
P.O. Box 13
Cambridge,"B" MA 02140-0001
February 26, 1987
Chief Counsel
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, D.C. 20549
Dear Sir:
This concerns my shareholder proposal to the Chittenden Corporation made in my
letter to its Corporation Secretary of October 13th, 1986, certified mail, and
which was received on October 31, 1986 at his office. I mailed the proposition
on October 29th, 1986. I enclose a copy of said letter.
In early January 1987, I received a letter of January 2nd, 1987 of Michael
Kleinman, Esquire, of Brown and Wood, New York City, New York. It was a copy of
his brief to the Division of Corporate Finance, Securities and Exchange
Commission. I enclose a copy of that brief.
I have heard nothing further since the copy of the Brown and Wood correspondence
was received by me dated January 2nd, 1987.
I assume that there was some delay in the Chittenden Corporation but I do have
the receipt that my proposal was received on October 31, 1986 at the Chittenden
Corporation (at P.O. Box 820, Burlington, Vermont, 05402). As I do want the
proposition to appear before the Shareholders Annual Meeting and on all the
proxy materials, I call the matter of my not hearing what the situation is from
the Chittenden Corporation to your attention and I ask you to take the legally
appropriate steps that might be required to insure my proposition be considered
by the shareholders.
I am sending a copy of this letter to John F. McAteer, Secretary, Chittenden
Corporation.
Thank you for your attention.
Very truly yours,
C.C.
John F. McAteer, Secretary,
Chittenden Corporation
P.O. Box 820, Burlington, Vt. 05402.
(Sent to Mr. McAteer by Certified Mail, # p 327 201 092,
Return Receipt Requested)
STAFF REPLY LETTER
10 MARCH 1987
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE
Re: Chittenden Corporation (the "Company")
Incoming letter dated January 2, 1987
The submission relates to the institution of a mechanism for the nomination of
opposition candidates; the disclosure, on Company annual meeting notices, of
certain information regarding nominees; and the distribution to shareholders of
the Company by-laws, in connection with every shareholder vote or meeting.
This Division does not concur in your view as to the applicability of paragraphs
(c)(4), (c)(6) and (c)(8) of Rule 14a-8 to the first numbered paragraph of the
submission. Accordingly, we do not believe that the Company may rely on any of
those provisions as a basis for omitting that paragraph from the Company's proxy
material.
There appears to be some basis for your view that the second and third
paragraphs of the submission may be omitted from the Company's proxy material
under Rule 14a-8(c)(7), since they appear to deal with matters relating to the
conduct of the Company's ordinary business operations (i.e., decisions regarding
the disclosure of biographical information not required by law, and the
determination to provide copies of the Company by-laws). Under the
circumstances, this Division will not recommend any enforcement action to the
Commission if the Company omits the second and third numbered paragraphs of the
submission, and the final paragraph of the supporting statement, from its proxy
material.
Sincerely,
Cecilia D. Blye
Special Counsel
|
