Company Name: Motorola, Inc.
Public Availability Date: 10-08-1987
[INQUIRY LETTER 1]
MARTHA B. LINDLEY
9TH FLOOR, HOGE BUILDING, 705 2ND AVENUE
SEATTLE, WA 98104
TELEPHONE(206) 623-1590 May 30, 1987 Mr. William Morley, Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Washington, DC 20549 Dear Mr. Morley: I am writing on behalf of the Domestic and Foreign Missionary Society of the
Protestant Episcopal Church of the U.S.A. and the Marianist Society,
Incorporated both of whom were proponents of a shareholder proposal submitted to
Motorola, Inc, and included in the proxy materials for action at the Annual
Meeting of Shareholders on May 4, 1987. The proponents had a representative at the meeting who moved the proposal when
called by the Chairman of the Board. The Chairman demanded a second to the
proposal; no one seconded the proposal. So, the Chairman refused to call for the
vote. The attached letter, which was sent to Motorola, sets forth our reasons for
believing that this was a clear violation of the Securities and Exchange
Regulations and the will of Congress that there be shareholder democracy in
American corporations. We ask that there be a full investigation of this matter. Sincerely, MARTA B. LINDLEY Enclosure-Letter to Motorola, Inc. dated May 29, 1987 cc: Robert W. Galvin, Motorola, Inc.
Secretary of State, Division of Corporations, State of Delaware
The Most Reverend Edmond L. Browning, Presiding
Bishop of The Episcopal Church
Richard Ullrich, Marianist Society, Inc.
[INQUIRY LETTER 2]
MARTHA B. LINDLEY
9TH FLOOR, HOGE BUILDING, 705 2ND AVENUE
SEATTLE, WA 98104
TELEPHONE(206) 623-1590 Mr. Robert W. Galvin
Chairman of the Board
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196 Dear Mr. Galvin: I represent the Domestic and Foreign Missionary Society of the Protestant
Episcopal Church of the U.S.A. and the Marianist Society, Incorporated both of
whom were proponents of a shareholder proposal submitted to Motorola, Inc. ("the
corporation") and included in the proxy materials for action at the Annual
Meeting of Shareholders on Monday, May 4, 1987. We strongly object to your intentional, and willful failure to vote the shares
represented at the meeting on the proponent's shareholder proposal which was
presented at the meeting. It is our belief that this failure may well evidence a
fraudulent solicitation of proxies for the meeting. In the proxy solicitation sent by the corporation to its shareholders, as
required by the Securities and Exchange Regulations ("the regulations") Rule
14a(4)(e), you made the following representation. "The enclosed proxy is
solicited by the Board of Directors of the Company. If the proxy in such form is
properly executed and returned, and choices are specified, the shares
represented thereby will be voted at the meeting in accordance with those
instructions." (emphasis added). Proxy Statement, page 1. Your failure to call for the vote is, in my opinion, a violation of the
regulations. The proxy materials state that the shareholder proposal, "if
properly presented to the meeting" will be acted upon. You did not state a
requirement that there be a second to the shareholder proposal in order for it
to be "properly presented at the meeting". The proxy materials, in fact, do not
state any "reasonable specified conditions", as required by Rule 14a(4)(e),
under which you will fail to vote the shares which you solicited. Motorola is incorporated under the laws of the State of Delaware. The general
corporation law of the State of Delaware in the section on Meetings of
Stockholders, states in part: (a) Meetings of stockholders may be held at such
place, either within or without this State, as may be designated by or in the
manner provided in the bylaws or, if not so designated, at the registered office
of the corporation in this State. (b) An annual meeting of stockholders shall be
held for the election of directors on a date and at a time designated by or in
the manner provided in the bylaws. Any other proper business may be transacted
at the annual meeting. DEL.CODE ANN. tit.8, §211(1983). No where in the
corporate laws of Delaware is there a requirement that there be a second for a
stockholder proposal in order for it to be presented to the shareholders of the
corporation. The regulations of the Securities and Exchange Commission, require that, in
addition to meeting the eligibility requirements with regard to share ownership,
the proponents or their representative be in attendance at the meeting. Rule
14a(8)(2) Had we not been in attendance, the proposal would not have been
"properly presented" as required by the regulations, and the corporation could
have omitted future proposals submitted by the proponents for any meeting held
in the following two calendar years. A subsequent omission of proposals,
however, would have required a determination that the proponents acted "without
good cause" in their failure to have a representative at the meeting. Such was
not the case. The proponents, in good faith, had their representative in attendance at the
meeting, in the person of Dorothy Pagosa. The regulation states, "A proposal may
be presented at the meeting either by the proponent or his representative who is
qualified under state law to present the proposal on the proponent's behalf at
the meeting." 17 C.F.R. §240. 14a-8(a)(2)(1986) Delaware corporation law
provides that "Each shareholder entitled to vote at a meeting of stockholders or
to express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy,.." DEL.CODE
ANN.tit.8, §212(b) The proponents authorized Dorothy Pagosa to act for them by
proxy and she presented the resolution at the meeting. Thus, she was qualified
under the laws of the State of Delaware and the proposal was properly presented
as required under the regulations by having her in attendance at the meeting. The Bylaws of Motorola, Inc. do not require a second to any matter brought
before the meeting. They are entirely silent as to the manner in which business
is to be conducted. No where in either the Securities and Exchange Regulations,
Delaware corporate law, or the Bylaws of Motorola, Inc. is there a requirement
that the proponent have a second for a shareholder proposal. Yet the chair
insisted on a second: there was no second and the matter was not voted. The resolution was properly presented as required by the regulations, the laws
of Delaware and the Bylaws and yet you failed to vote the shares as you
represented you would in the solicitation. It appears to me that the corporation made a false statement in its proxy
solicitation in violation of Rule 14a-9. You stated that the shares would be
voted in accordance with the instructions of the shareholders. The proxies were
submitted in the good faith belief that the shares would be so voted. That was
your representation to us, the owners of the corporation. Yet you did not vote
the shares which were represented at the meeting. It appears that you,
willfully, made a false statement in the proxy solicitation. If you had no
intention of voting those shares on the shareholder proposal, you perpetrated a
fraudulent solicitation. Such a fraudulent solicitation renders the proxies held
by the corporation void and the Annual Meeting a nullity. That being the case,
the officers and directors should repay the corporation for the monies which
they expended and received for the meeting. In the 10-K report filed by the corporation for the fiscal year 1986 you
reported that Motorola's Government Electronics Group (GEG) has been subpoenaed
for records in connection with a federal criminal investigation. The report
indicated that the investigation appears to involve allegations of defective
pricing and whether Motorola improperly charged labor expenses under certain
government defense contracts. You further indicated that an indictment could
result in the corporation being suspended from eligibility for awards of any new
government contracts for one year and that a conviction also could result in
debarment from government contracts for one year or more. Under those
circumstances it seems particularly appropriate for the Board to be paying
special attention to the issue of the solicitation and management of defense
contracts with the government. You may have feared an open discussion and
questions but I believe that it was a particularly appropriate time for the
shareholders to have this issue before them for questions and discussion. That
is the purpose of shareholder democracy. That Congress clearly intended to continue the tradition of corporate democracy
in America is evidenced by the extensive hearings on the matter which lead to
the rule revisions of 1983, as amended in 1985. Congress has found that, if they
fall within the limitations set by the rules, it is in the best interest of
corporations to have shareholder proposals presented for consideration by fellow
shareholders. We are appalled that you would attempt to subvert the process of
shareholder democracy. We request that you re-hold the annual meeting after resoliciting the proxies or
that you call a special meeting of the shareholders to consider this matter. We
are asking that the Securities and Exchange Commission investigate this matter. Sincerely, Martha B. Lindley cc: Securities and Exchange Commission
Secretary of State, Division of Corporations, State of Delaware
The Most Reverend Edmond L. Browning, Presiding
Bishop of The Episcopal Church
Richard Ullrich, Marianist Society, Inc.
The Social and Ethical Responsibility in Investment
Committee of the Episcopal Church
Dorothy Pagosa
Tim Smith, Interfaith Center on Corporate Responsibility
Mr. Lewis Gilbert
Investor Responsibility Research Center
Senate Armed Services Committee, Sen. Sam Nunn, Chair
House Armed Services Committee, Rep. Les Aspin, Chair
Senate Standing Committee on Securities, Sen. Donald W.
Riegle, Jr., Chair
House Committee on Energy and Commerce, Sub-committee
on Oversight and Investigations, Rep. John D. Dingle, Chair
[STAFF REPLY LETTER]
October 8, 1987 Martha B. Lindley, Esq.
9th Floor, Hoge Building
705 2nd Avenue
Seattle, Washington 98104 Re: Motorola, Inc. (the "Company") Dear Ms. Lindley: This will respond to your letter dated May 30, 1987, regarding the failure of
the Chairman of the Company's board of directors to call for a vote on a
shareholder proposal submitted by your clients, The Domestic and Foreign
Missionary Society of the Protestant Episcopal Church of the U.S.A. and the
Marianist Society, Incorporated. Your clients' proposal was included in the
Company's proxy material for the annual meeting of shareholders held on May 4,
1987. We have also received correspondence from Company counsel regarding this
matter. In the view of this Division, a requirement that a matter be "seconded" before
the vote is called on that matter is not the type of condition that must be
specified pursuant to Rule 14a-4(e). It is also our view, however, that, because
Rule 14a-8(a)(2) does not require a "second", the voting of proxies received
with respect to a shareholder proposal included in a company's proxy material
pursuant to Rule 14a-8 should not be conditioned upon the proposal being
"seconded" at the meeting, absent a "second" being required by state law or by a
company's governing instruments. Accordingly, because neither Delaware law nor
the Company's certificate of incorporation or by-laws requires a "second" as a
condition to calling a vote on a matter introduced for shareholder action at the
Company's shareholder meetings, it is our view that the Company-imposed
requirement of a "second" was not a valid condition to the voting of proxies
received with respect to your clients' proposal. Sincerely, Cecilia D. Blye
Special Counsel cc: Michael G. Timmers, Esq.
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