Cracker Barrel Old Country Store, Inc.

Oct. 13, 1992

INQUIRY LETTER 1

BAKER, WORTHINGTON, CROSSLEY, STANSBERRY & WOOLF

1700 Nashville City Center, POST OFFICE BOX 2866

NASHVILLE, TENNESSEE 37219

(615) 726-5600

July 13, 1992

Securities and Exchange Commission

Corporate Finance Division

450 Fifth Street, N.W.

Judiciary Plaza

Washington, D.C. 20539

RE: Cracker Barrel Old Country Store, Inc.

Shareholder Proxy Proposal

Our File No. 020276.0043

Dear Sirs:

Cracker Barrel Old Country Store, Inc. ("Cracker Barrel") has requested that we, as counsel, respond on its behalf to a shareholder proposal (the "Proposal") submitted to it for inclusion in its proxy material for its 1992 Annual Meeting.

On November 26, 1991, Cracker Barrel received the Proposal from a "representative" of the New York City Employees Retirement System. No supporting statement was submitted in connection with the Proposal. On or about June 13, 1992, Cracker Barrel received a letter from the New York City Employees Retirement System, accompanied by a proposal identical to the one received on November 26 (copies of the proposal and transmittal letter are attached as Appendix A).

The proposed resolution requests that the Cracker Barrel Board of Directors (1) implement nondiscriminatory employment policies related to sexual orientation, and (2) add explicit prohibitions against such discrimination to the Company employment policy statement.

For the reasons set forth below, Cracker Barrel believes that it may omit this proposal from its proxy material pursuant to paragraphs (c)(7) and (c)(10) of Securities and Exchange Act Rule 14a-8, 17 C.F.R. §240.14a-8(c)(7), (c)(10) (1980).

Rule 14a-8(c)(7): Matters relating to ordinary business operations. The disputed proposal is excludable pursuant to Rule 14a-8(c)(7) because it concerns employment practices and policies which relate to the ordinary business operations of the Company. The SEC has previously treated similar proposals involving employment issues as matters concerning the ordinary business of the Company. For example, in April of 1992, the Division of Corporation Finance (the "Division") issued a no-action letter to Wal-Mart Stores, Inc., permitting exclusion of a shareholder proposal calling for a report to shareholders of certain employment information, including the following:

(1) A chart of Wal-Marts employees according to their sex and race in each of the nine major E.E.O.C. defined job categories for 1989, 1990 and 1991, by number of employees or percentages.

(2) A summary description of affirmative action programs to improve performance, especially in job categories where women and minorities are under utilized, and a description of major problems in meeting the companys goals and objectives in this area.

(3) A description of steps taken to increase the number of managers who are qualified females and ethnic minorities.

The Division concluded the above items involved the companys ordinary business operations, within the meaning of Rule 14a-8(a)(7), which shareholders should not be allowed to dictate. See, Division of Corporate Finance letter to Wal-Mart Stores, Inc., dated April 10, 1992.

Similarly, in 1991, a shareholder of Capital Cities/ABC, Inc. submitted a proposal that the companys board of directors prepare a report for shareholders and employees setting forth:

(1) a breakdown by race and sex of all employees in each of the nine major job categories, as defined by the E.E.O.C. for 1988, 1989, and 1990;

(2) a summary of affirmative action programs and timetables to implement these programs, and a description of major problems in meeting the goals of these programs at the companys ABC Television Network;

(3) a description of the actions taken with the producers of television programing to increase the number of female and ethnic minority writers, producers and directors; and

(4) a description of the actions taken with the producers of television programming to ensure that the content of those programs is responsive to the concerns of women and minorities.

The Division concluded that the above proposals could be omitted from proxy materials because they related to the ordinary business operations of the issuer. See, Division of Corporation Finance letter to Capital Cities/ABC, Inc. dated April 4, 1991.

In 1987, the Division permitted ABC to omit a shareholder proposal that requested, among other matters, that "the board of directors of the company report. . . on company policies regarding. . . the employment of racial minorities and women in acting roles and on production crews when developing and funding series." The Division stated that "the proposal appears to deal with matters relating to the conduct of the companys ordinary business operations (i.e., the nature, presentation and content of television programming)." See, Division of Corporation Finance letter to Capital Cities/ABC, Inc. dated March 23, 1987.

In 1989, the Division concurred with ABC that a shareholder proposal, designed to have shareholders express a "wish" to the Board of Directors that it make changes in the staffing of one of the departments of the company, was an improper intrusion of shareholders into the management of the company. See, Division of Corporation Finance letter to Capital Cities/ABC, Inc. dated February 24, 1989.

Other Division no-action letters support the conclusion that a companys employment policies and practices fall within the ambit of a companys ordinary business operations. See, Letters to: Angelica Corporation dated March 23, 1987, in response to a proposal to establish "a special committee to study and report on relations between the companys employees, management and shareholders"; Atlantic Energy, Inc. dated February 17, 1989, in response to a proposal involving "the company giving priority to hiring contractors and employees, within the service area of the company"; and CBS, Inc. dated  January 24, 1985, in response to a proposal involving "improvement of the companys relations with its employees."

More directly relating to the subject of the proposal in this case is the Divisions no-action letter to IBM Corp., issued in January of this year. There, a shareholder proposed that IBM give "spousal type benefits" to "committed domestic partners" of gay and lesbian employees of the company. The Division allowed exclusion of the proposal pursuant to 14a-8(c)(7), finding it was "directed to employment related decisions with respect to general employment benefits." See Division of Corporate Finance letter to International Business Machines Corporation, dated January 23, 1992.

As with the above shareholder proposals, the Proposal at issue in the present case relates to an employment matter within the province of Company management and should be excluded for this reason.

Rule 14a-8(c)(10): Proposal has been rendered moot. The Proposal is excludable pursuant to Rule 14a-8(c)(10) because Cracker Barrels policy is and has long been to prohibit discriminatory hiring. At the Cracker Barrel 1991 annual meeting, CEO and Chairman of the Board, Dan Evins, spelled out unequivocally:

Let me state once and for all for the record: Cracker Barrel Old Country Store is an equal opportunity employer that adheres to the letter and spirit of the law regarding non-discrimination in the work place. We hire and promote men and women solely on the basis of their qualifications and performance.

Our work force is diverse and representative of the communities in which our stores are located. Our hourly employee turnover is among the lowest in the industry. . . as is our management turnover. (Full statement attached as Appendix B).

The Proposal also asks that an "explicit prohibition against discrimination because of sexual orientation be added to the Cracker Barrel employment policy statement." Cracker Barrels Operations Manual and its Employment Handbook both contain an equal opportunity statement clearly setting forth the Companys non-discriminatory hiring policies:

Employment opportunities at Cracker Barrel are open to all qualified applicants solely on the basis of their experience, aptitude, and qualifications.

Qualified applicants are considered for all positions and for advancement without regard to race, color, religion, sex, national origin, age, marital status, or the presence of a disability. Advancement is based entirely on an individuals achievement, performance, attitude, and potential for promotion.

Cracker Barrel will not tolerate any form of discrimination or harassment of its employees due to race, color, religion, sex, national origin, marital status or disability. Employees who believe they have been subjected to unlawful discrimination or harassment should immediately advise their Manager, District Manager, Supervisor, or the Corporate Operations Services Department. (Applicable pages attached as Appendix C).

The above language makes abundantly clear the Companys non-discriminatory hiring policies.

Based upon the foregoing, the Company respectfully requests that the Staff confirm at its earliest convenience that it will not recommend enforcement action if the Proposal referenced herein is excluded from the Companys 1992 proxy.

Please call the undersigned at (615) 726-5600 if you have any questions regarding this matter or as soon as a Staff response is available.

Sincerely,

Robert G. McCullough

RGM/dgb

Attachment

cc: Ms. Elizabeth Holtzman

INQUIRY LETTER 2

COMPTROLLER OF THE CITY OF NEW YORK

1 CENTRE STREET

NEW YORK, N.Y. 10007-2341

(212) 669-3500

June 12, 1992

June 12, 1992

Mr. Dan Evins

President

Cracker Barrel Old Country Store

Hartman Drive

P.O. Box 787

Lebanon, TN 37088

Dear Mr. Evins:

I am custodian of the New York City Employees Retirement System. The Board of Trustees of this fund has passed a resolution calling on your company to implement non-discriminatory employment policies relating to sexual orientation and to add explicit prohibitions against such discrimination to your corporate employment policy statement.

I therefore offer the enclosed initiative for shareholders to consider and approve at your next annual meeting. It is submitted to you in accordance with 14a-8 of the Securities Exchange Act of 1934 and I ask that it be included in your proxy statement.

I also enclose a letter from Citibank, N.A. that certifies the New York City Employees Retirement Systems ownership for over a year of 81,104 of common stock in your company. The fund intends to continue to maintain ownership of at least $1,000 worth of shares through the date of your annual meeting.

I would be happy to discuss this initiative with you. Should you decide to endorse its provisions as company policy the fund will ask that the proposal be withdrawn from consideration at the annual meeting.

Sincerely,

Elizabeth Holtzman

Comptroller

EH:PD:kw

CRACKER BARREL OLD COUNTRY STORE, INC.

Whereas, in February, 1991 the management of Cracker Barrel Old Country Stores restaurants announced a policy of discrimination in employment against gay men and lesbians; and,

Whereas, although Cracker Barrel management asserts that this discrimination policy has been rescinded, the company has refused to rehire fired workers and media reports have indicated that gay and lesbian workers continue to be dismissed on the basis of their sexual orientation; and,

Whereas, employment discrimination on the basis of sexual preference may deprive corporations of the services of productive employees, leading to less efficient corporate operations which in turn can have a negative impact on shareholder value; and,

Whereas, public demonstrations, boycott campaigns and negative editorial and news coverage concerning discriminatory practices by the company can undermine consumer confidence and lead to a loss of business revenue;

RESOLVED, Shareholders request the Board of Directors to implement non-discriminatory policies relating to sexual orientation and to add explicit prohibitions against such discrimination to their corporate employment policy statement.

INQUIRY LETTER 3

Citibank, N.A.

III Wall Street

New York, NY 10043

June 08, 1992

Re: New York City Employees Retirement System

To Whom I May Concern:

This is to advise you that the New York City Employees Retirement System held 81,104 shares of Cracker Barrel Old Country Store Common continuously for over one year in the name of Cede and Company.

Larry OFee

Assistant Vice President

INQUIRY LETTER 4

BAKER, WORTHINGTON, CROSSLEY, STANSBERRY & WOOLF

1700 NASHVILLE CITY CENTER, POST OFFICE BOX 2866

NASHVILLE, TENNESSEE 37219

TELEPHONE(615) 726-5600

July 27, 1992

Mr. William Carter

Securities and Exchange Commission

Corporate Finance Division

450 Fifth Street, N.W.

Judiciary Plaza

Washington, D.C. 20539

RE: Cracker Barrel Old Country Store, Inc.

Shareholder Proxy Proposal

Our File No. 020276.0043

Dear Mr. Carter:

Pursuant to our conversation on this date, I enclose herein a copy of Cracker Barrels opposition to the New York Retirement System shareholder proposal. The enclosed contains exhibits A, B, and C. If you should have questions in this matter, please do not hesitate to contact me.

Sincerely,

Kelly R. Duggan

INQUIRY LETTER 5

THE CITY OF NEW YORK, OFFICE OF THE COMPTROLLER

MUNICIPAL BUILDING

NEW YORK, N.Y. 10007-2341

TELEPHONE(212) 669-7778

July 30, 1992

BY OVERNIGHT MAIL

William E. Morley, Esq.

Chief Counsel

Securities and Exchange Commission

Division of Corporate Finance

450 Fifth Street, N.W.

Washington, D.C. 20549

Re: Cracker Barrel Old Country Store, Inc.-- New York City Employees Retirement System Proposal

Dear Mr. Morley:

I am writing on behalf of the New York City Employees Retirement System ("NYCERS"), in response to the July 13, 1992 letter to you from Robert G. McCullough, attorney for Cracker Barrel Old Country Store, Inc. ("Cracker Barrel"), requesting permission to omit the NYCERS shareholder proposal from Cracker Barrels proxy materials for its 1992 Annual Meeting. Cracker Barrel believes that the proposal, which asks Cracker Barrel to implement non-discriminatory policies relating to sexual orientation and to add explicit prohibitions against such discrimination to its corporate employment policy statement, may be omitted under the exception for ordinary business operations, as set forth in Rule 14a-8(c)(7). Cracker Barrel also argues that the proposal may be omitted under Rule 14a-8(c)(10) because it is moot. As General Counsel to the New York City Comptroller, it is my opinion that the proposal may not be omitted by Cracker Barrel because it does not relate to a matter of "ordinary business," and it is not moot.

Background

Cracker Barrel announced its anti-homosexual policy in a January, 1991 press release.!¹ In that release, William A. Bridges, Cracker Barrels Vice President of Human Resources, stated:

Cracker Barrel is founded upon a concept of traditional American values, quality in all we do, and a philosophy of 100% guest satisfaction. It is inconsistent with our concept and values, and is perceived to be inconsistent with those of our customer base, to continue to employ individuals in our operating units whose sexual preferences fail to demonstrate normal heterosexual values which have been the foundation of families in our society. Therefore, it is felt this business decision is in the best interests of the company. (Emphasis supplied).

On the basis of this company policy, we understand that at least eleven workers were fired solely because they were Lesbian or Gay.!²

In February, 1991, after protests over the policy announcement, Cracker Barrel announced that it had "revisited its thinking on the subject," and that the policy "may have been a well-intentioned over reaction to the perceived values of our customers and their comfort levels with these individuals." Cracker Barrel did not announce that it had rescinded the policy, nor did the company rehire the fired workers or offer them compensation for wrongful discharge. Instead, the company stated that in the future it would "deal with any disruptions in our units, regardless of the cause, on a store-by-store basis."!³

On March 12, 1991, New York City Comptroller Elizabeth Holtzman and Commissioner of Finance Carol OCleireacain wrote to Dan W. Evins, the Chair and Chief Executive Officer of Cracker Barrel, asking him to clarify the companys policy regarding "the role of sexual preference in employment." Mr. Evins responded on March 19, 1991 that the policy had been rescinded, that the company had "admitted a mistake and apologized," and that the company had "no morally discriminating policies." On April 4, 1991, and again on October 10, 1991, Ms. Holtzman and Ms. OCleireacain wrote to Mr. Evins, reminding him that he had not clarified the companys policy regarding sexual orientation in employment decisions and that he had not provided information on remedial steps taken respecting the fired employees, both of which Ms. Holtzman and Ms. OCleireacain had requested in their March 12, 1991 letter. Mr. Evins has never responded to the April 4 or October 10, 1991 letters.!⁴

Despite Mr. Evinss statement in his March 19, 1991 letter to Ms. Holtzman and Ms. OCleireacain that Cracker Barrels anti-homosexual policy had been rescinded, at least three more Gay men were fired from Cracker Barrels Mobile, Alabama store in late June, 1991. These firings followed on the heels of several June, 1991 protest demonstrations at Cracker Barrel restaurants that resulted in nearly thirty arrests.!⁵ We understand that national and regionally-based Lesbian and Gay rights organizations have continued to organize picket lines at some stores and have called for a consumer boycott of the restaurants.

Cracker Barrel attempted to rectify the situation caused by the announcement of its anti-homosexual policy by claiming at its annual meeting that Cracker Barrel "is an equal opportunity employer that adheres to the letter and spirit of the law regarding non-discrimination in the work place."!⁶ However, because Cracker Barrel steadfastly refuses to adopt a corporate policy that reflects this verbal assurance, and because none of the fired workers has been rehired, the statement made at the annual meeting  rings hollow. In addition, the statement that Cracker Barrel adheres to the letter and spirit of the law regarding non-discrimination in the work place can only be viewed as disingenuous. Because there are no federal laws protecting gay and lesbian workers from discrimination in the workplace, and because Cracker Barrel does not operate in any state or municipality that has a Lesbian and Gay civil rights law, Cracker Barrel can correctly state that it follows "the letter of the law." But it certainly does not follow the spirit of anti-discrimination laws.!⁷

NYCERSs Proposal Does Not Deal with a Matter of "Ordinary Business" and May Not Be Omitted under Rule 14a-8(c)(7)

The Securities and Exchange Commission ("SEC") has declared that Rule 14a-8(c)(7) is not applicable to exclude proposals that raise important policy matters, but may be relied upon to exclude a proposal only if the issue raised is "mundane in nature." Thus, in promulgating the present version of Rule 14a-8(c)(7), the Commission stated in Release 34-12999 (November 22, 1976) that proposals "which have significant policy, economic or other implications inherent in them" will not be excluded by Rule 14a-8(c)(7) and that the Rule would restrict only those "proposals that deal with truly ordinary business matters. . . that are mundane in nature and do not involve any substantial policy or other consideration." Subsequent amendments to Rule 14a-8 were not intended to alter this interpretation of what constitutes "ordinary business." See Release 34-20091 (August 16, 1983).

The issue of discrimination, which is the basis of NYCERSs proposal is an important public issue, and Cracker Barrels policy of discrimination against Lesbians and Gay men clearly has significant policy and economic implications inherent in it that are not "mundane in nature." Thus, a shareholder proposal requesting that Cracker Barrel implement non-discriminatory policies relating to sexual orientation and add explicit prohibitions against such discrimination to its corporate employment policy statement does not deal with a matter of "ordinary business."

First, the issue of discrimination against Lesbians and Gay men is one that has occupied the national consciousness for many years. Six states (New Jersey, Connecticut, Massachusetts, Wisconsin, Hawaii, and Vermont) have anti-discrimination policies regarding Lesbians and Gay men. Many more states have executive orders that protect the employment rights of Lesbians and Gay men. Scores of municipalities and counties (including New York City) have enacted employment protection laws, and some major companies have acted to protect their Lesbian and Gay employees from discrimination (Eastman Kodak, Kellogg, General Motors, Aetna Life, and Levi Strauss, among others). Although it has not been passed, Congress has considered a national Civil Rights bill regarding the issue, called the Federal Lesbian and Gay Rights Law. In deciding whether this issue raises significant policy issues for purposes of Rule 14a-8(c)(7), there is no legal or logical basis for distinguishing discrimination against Lesbians and Gay men from prohibited discrimination against any other class of Americans.

Second, as a result of its own discriminatory policy and actions to enforce that policy, Cracker Barrel has created such huge negative publicity and media attention that even if the general subject of Lesbian and Gay rights were not already an issue of widespread public concern, Cracker Barrels own actions have elevated this issue, at least as it affects Cracker Barrel, to a level of concern that far exceeds ordinary, routine, or mundane business operations. Indeed, this point is driven home by looking at the way Cracker Barrel handled this new policy. Cracker Barrel did not simply create the policy and then enforce it in the unobtrusive or matter-of-fact way a company would be expected to enforce a routine personnel or employment policy. Rather, in furtherance of commercial gain in conservative locales, Cracker Barrel issued a press release announcing its institutionalized policy of discrimination. By its own marketing ploy, Cracker Barrel took this issue far beyond the pale of ordinary business operations.

Finally, the SEC Staff has repeatedly determined that shareholder proposals dealing with equal employment opportunity and affirmative action issues are beyond the realm of ordinary business. See American Telephone & Telegraph Co. (January 5, 1990) (proposal of White rights organization relating to phase-out of affirmative action program was not excludable under 14a-8(c)(7) because the program, "designed to assure equal employment opportunities for minority group members, involves policy issues that preclude its exclusion under that provision"). See also American Telephone & Telegraph Co. (December 21, 1988) (proposal asking company to describe hiring and performance appraisal processes, including safeguards to assure nondiscrimination,  describe company promotion policy, including efforts to ensure fair employment of minorities and women, and revise companys affirmative action program to ensure that minorities and women were not under-represented in management and executive positions was not excludable for same reasons as noted in January 5, 1990 AT&T Staff determination); Dayton Hudson Corporation (March 8, 1991) ("questions with respect to equal employment opportunity and affirmative action involve policy decisions beyond those personnel matters that constitute the Companys ordinary business"); CBS, Inc. (March 7, 1991) (same); General Electric Company (January 25, 1991) (same); Figgie International Inc. (March 23, 1989) (proposal for report to investors and employees regarding safety and health benefits available to women employees was not excludable under 14a-8(c)(7) because it involved "substantial corporate policy considerations"); Ruddick Corporation (November 20, 1989) (proposal involving company taking steps to ensure that one of its subsidiaries adhere to employees federal rights in employment discrimination and union participation not excludable under 14a-8(c)(7) because it "addresses policy matters with respect to the Companys attitude regarding compliance with federal employment discrimination, equal opportunity and labor laws that preclude omission as a matter of ordinary business"); V.F. Corporation (February 14, 1991) (proposal for report on companys equal employment and affirmative action programs not excludable under 14a-8(c)(7) because it related to "matters involving general policy decisions which are beyond the conduct of the Companys day-to-day operations"); Freuhauf Corp. (February 24, 1989) (proposal for report on religious discrimination in employment in Northern Ireland operations not excludable because it raised "questions with significant policy implications that are beyond the realm of the ordinary business"); The Boeing Company (February 8, 1989) (proposal for report on extent to which a supplier adhered to companys religious non-discrimination employment policies not excludable under 14a-8(c)(7) because it involved "corporate policy considerations that go beyond the conduct of the Companys ordinary business operations").

The fact that many of these proposals asked for reports on equal employment or affirmative action policies, as opposed to requesting specific remedial action, such as an addition to the policy for a certain minority group, is not a ground for distinguishing the cases. The SEC Staffs reason for determining that the proposals were includable was not that they merely asked for reports. Rather, the proposals were ruled includable because they concerned equal employment or affirmative action, and proposals concerning these subjects by definition are beyond the realm of ordinary business operations. NYCERSs proposal to Cracker Barrel raises the issue of equal employment opportunity and  discrimination. These issues involve policy decisions far beyond those "personnel matters that constitute ordinary business," and NYCERSs proposal is thus not excludable under 14a-8(c)(7).

By contrast, in U S West, Inc. (February 13, 1990), a shareholder proposal asked that the company refrain from promoting or condoning the existence of any homosexual organizations or activities within the corporation, and forbid the use of company facilities for meetings, the use of electricity, office equipment, mail services, mailing lists, office supplies, postage, or phone services for any activity relating to homosexual functions or organizations. The SEC Staff determined that this proposal was excludable under 14a-8(c)(7) because "the subject of the proposal is directed to employment related decisions with respect to employee benefits and activities which involve the use of the Companys facilities and partial financial support."

The U S West, Inc. proposal is distinguishable from NYCERSs proposal. The U S West proposal asked the company to take specific action concerning the companys ordinary, day-to-day operations, e.g., the availability of company facilities for meetings of a particular group of employees, and to deny to one group of employees activities and benefits that the company made available to other employee groups (i.e., veteran, women, Native American, Asian American, and African American employee groups). By contrast, NYCERS merely asks that the company institute a non-discrimination policy with respect to Lesbians and Gay men. This is plainly not a matter that would be excludable under the rationale of U S West, Inc., because it is not related in any respect to the companys employee benefits or activities.

A similar distinction renders all of the cases cited by Cracker Barrel in its July 13, 1992 submission irrelevant to the SECs determination of whether NYCERSs proposal is includable in Cracker Barrels proxy materials. In Capital Cities/ABC, Inc. (March 7, 1991), a shareholder proposed that the company prepare a report, covering the preceding three years, on the number, sex, and race of employees in EEOC-defined job categories. The proposal also requested a summary of affirmative action programs and timetables to improve performance in job categories where women and minorities were underutilized, a description of steps taken to increase the number of qualified female and ethnic minority writers, producers, and directors, and the procedures used to make program content more responsive to women and minority concerns. Although the SEC Staff determined that the proposal was not excludable under 14a-8(c)(7) because "questions with respect to affirmative action involve policy decisions beyond those personnel matters that constitute the Companys ordinary business  operations," the SEC Commission reversed the Staff decision on April 4, 1991, holding that the proposal could be omitted under 14a-8(c)(7) because it "appears to deal with matters relating to the conduct of the Companys ordinary business operations. In this regard, the proposal involves a request for detailed information on the composition of the Companys work force, employment practices and policies, and selection of program content." (Emphasis supplied).

Similarly, a year later, in Wal-Mart Stores, Inc. (April 10, 1992), a proposal requested a report that would include the following information: a list of the companys employees according to sex and race in each of nine EEOC job categories for the last three years; the companys affirmative action plan; the companys steps to increase minority and female management; the companys efforts at encouraging such policies among others; and the companys provision for set-asides for minority and female business enterprises. The SEC Staff determined that this proposal could be excluded under 14a-8(c)(7) because it dealt with a matter relating to the conduct of the companys ordinary business matters. The Staff noted that the proposal involved a "request for detailed information on the composition of the companys work-force sic, its employment practices and policies as well as its relationships with suppliers and other businesses." (Emphasis supplied).

These cases have no relevance here. First, the Commissions decision in Capital Cities has no precedential effect, because it was ultimately vacated at the request of the parties involved. See Remarks of Richard Y. Roberts, Commissioner of the SEC, before the American Society of Corporate Secretaries -- New York Chapter, October 5, 1991, p. 12. Second, given that there is no indication that the SEC Commission in its reversal in Capital Cities, or the SEC Staff in its determination in Wal-Mart, viewed the subjects of affirmative action or equal employment issues as not significant or not matters of policy, and that these two decisions were evidently premised on the request for "detailed" information, the determinations in Capital Cities and Wal-Mart must be narrowly construed.!⁸ In any event, given that affirmative action programs  are presumably in place at Capital Cities and Wal-Mart, proposals asking for specific, "detailed" information on the day-to-day operations of the programs can logically be interpreted as proposals involving ordinary business operations.

NYCERSs proposal cannot be compared with those presented to Capital Cities or Wal-Mart. NYCERSs proposal does not ask for the type of detailed information on an ordinary business matter that the proposals in Capital Cities and Wal-Mart requested. The proposal does not even suggest that a specific equal employment or affirmative action program be implemented. Rather, NYCERSs proposal asks only that the company institute a non-discrimination policy ensuring that a workers sexual orientation will play no part in Cracker Barrels hiring and promotion decisions. This is merely the "flip side" of proposals requesting that affirmative action programs be phased out. See American Telephone and Telegraph (January 25, 1988; December 21, 1988), discussed above. If a proposal requesting the phase-out of a program designed to rectify past discrimination may not be excluded under 14a-8(c)(7), a proposal asking for the declaration of an anti-discrimination policy cannot be omitted under this exception.

Cracker Barrel cites three other cases that have no bearing on the SEC Staffs decision in this case. CBS, Inc. (January 24, 1985), Atlantic Energy, Inc. (February 17, 1989), and International Business Machines Corp. (January 23, 1992) are all cases where the proposals clearly involved matters of ordinary business operations. The CBS proposal asked the company to "take the necessary steps to improve the deteriorating employee-employer relationship." The Atlantic Energy proposal asked the company to give priority to hiring contractors and employees "from the area served by the Company." The IBM proposal asked the company to provide spousal benefits to "committed domestic partners" of Lesbian and Gay employees. Plainly, all of these proposals deal with routine business matters, as they involve day-to-day business decision-making and the provision of specific employee benefits. NYCERSs proposal, by contrast, involves the very significant policy issue of discrimination, an issue that Cracker Barrels own actions in publicizing its discriminatory practices for commercial gain elevated to an issue far beyond an ordinary, day-to-day business matter.

In Capital Cities/ABC, Inc. (March 23, 1987), also cited by Cracker Barrel, a proposal requested a report on company policies regarding the presentation of sensitive, controversial, or violent portrayals, the expression of contrasting views, and "criteria established regarding utilization of racial minorities and women in acting roles and production crews when developing and funding  series." The SEC Staff determined that the entire proposal could be omitted under the exception for ordinary business operations because it dealt with the "nature, presentation and content of television programming." Although the Staff did not specifically discuss the employment issues raised by the proposal, and although it is not immediately apparent what the point of that portion of the proposal was, it seems clear that the proposal asked for information regarding specific employment decisions in the utilization of racial minorities and women, rather than for any kind of sweeping employment policy for racial minorities and women. Accordingly, the SECs Staffs determination that this portion of the proposal involved ordinary business operations seems appropriate. This case has no bearing on the includability of the NYCERS proposal, which does not ask for detailed information regarding specific employment decisions, but, instead, asks for a broad company policy against discrimination.

Capital Cities/ABC, Inc. (February 24, 1989) and Angelica Corporation (March 23, 1987) are similarly off the mark. In Capital Cities, the proposal requested that the company reverse certain personnel changes in its Broadcast Standards and Practices Department, because the companys actions "weaken. . . safeguards designed to maintain high standards of accuracy, decency and good taste in programming and advertising." The SEC Staff determined that there appeared to be some basis for omitting the proposal under 14a-8(c)(7) because it "appears to involve primarily the companys decisions with respect to the adequate staffing of its broadcast standards department." The proposal in Angelica Corporation asked the company to establish a special committee to study and report on relations between the companys employees, management, and shareholders, and what policies the directors and senior executive officers of the corporation had implemented to create the "spirit of partnership and goodwill among its employees, its management and its shareholders that is necessary to enhance profitability." The proposal also asked that the committee study and report on all aspects of employee relations, including the policies of senior management, how those policies had been communicated to junior management, and the actions taken over the past three years that exemplified the policies. The SEC Staff determined that the proposal could be excluded under 14a-8(c)(7) because it dealt with the companys "ordinary business operations (i.e., relations between the Company and its employees)."

These two proposals, in contrast to the NYCERS proposal, plainly seem to request highly detailed, specific information regarding the "minutiae" of day-to-day business decision-making and company operations. NYCERSs proposal requests only that the company adopt an overarching non-discrimination policy.

Contrary to the assertion in Cracker Barrels July 13, 1992 submission, company policies that not only condone, but actively promote, discrimination do not concern "employment practices and policies which relate to the ordinary business operations of the Company." Nor is this serious matter with such far-reaching policy implications simply an "employment matter within the province of Company management." By definition, a corporate policy that allows discrimination against workers is not an "ordinary" business practice or routine "employment issue." Moreover, in light of the picketing and boycotts against Cracker Barrel because of its refusal to adopt an anti-discrimination policy, there are significant economic issues involved that take the subject matter of NYCERSs proposal outside the ordinary business operations exception and render the proposal includable in Cracker Barrels proxy materials.

The question at issue is whether discrimination on the basis of sexual orientation is a significant policy issue such that proposals concerning the matter cannot be excluded from proxy materials under the ordinary business operations exception. Thus, it is not relevant that no federal or state law of the states in which Cracker Barrel operates prohibits Cracker Barrel from discriminating against Lesbians and Gay men. An issue is not rendered a matter of ordinary business simply because no federal or state law applies to the issue. Rather, the significance of the policy issues involved in the subject dictate its classification as a matter of ordinary business operations or a matter that is beyond the realm of ordinary business. For the reasons stated above, the issue of discrimination on the basis of sexual orientation, like any other form of discrimination, is a significant policy issue that goes beyond the realm of ordinary business operations. Accordingly, NYCERSs proposal concerning this issue cannot be omitted under Rule 14a-8(c)(7).

It is useful in this regard to consider the cases involving trade with South Africa and Northern Ireland. There were no laws dictating that companies who traded with South Africa and Northern Ireland or who had affiliates or subsidiaries in those countries had to adopt the Sullivan or MacBride Principles or that trade with such countries violated U.S. or foreign law. Nevertheless, the SEC Staff determined that shareholder proposals concerning racial and religious discrimination in these countries related to matters of significant social policy and could not be omitted from proxy materials under 14a-8(c)(7). See TRW (January 28, 1986), United Technologies (March 10, 1987), and Boeing Company (February 8, 1989) (SEC Staff rejected companies arguments that 14a-8(c)(7) was applicable to exclude proposals relating to the MacBride Principles and other Northern Ireland anti-discrimination issues).

Similarly, it was obviously not illegal for tobacco companies to produce tobacco products or market tobacco products in such a way that minors might be influenced to smoke. There were no laws mandating certain production or marketing activity. Nonetheless, the SEC Staff ruled that shareholder proposals requesting that companies cease tobacco production altogether could not be excluded from proxy materials because of "the growing significance of the social and public policy issues attendant to operations involving the manufacture and distribution of tobacco related products." See Philip Morris (February 13, 1990 and February 22, 1990). A similarly burgeoning significance of social and public policy issues is present in the subject matter of NYCERSs proposal.

The Proposal Is Not Moot and May Not Be Omitted Under Rule 14a-8(c)(10)

Cracker Barrel alleges that the NYCERS proposal has been "rendered moot" because "Cracker Barrels policy is and has long been to prohibit discriminatory hiring." However, this statement is a conspicuous attempt to dodge the issue. NYCERSs proposal specifically asks for implementation of a policy of non-discrimination based on sexual orientation. Cracker Barrels equal opportunity statement does not and never has contained such a policy. Thus, far from making "abundantly clear the Companys non-discriminatory hiring policies," as Cracker Barrel claims, Cracker Barrels equal opportunity statement proves NYCERSs point: the company does not offer its employees protection against discrimination based on sexual orientation. Rather, according to Cracker Barrels July 13, 1992 submission, Cracker Barrels Operations Manual and Employment Handbook state:

Qualified applicants are considered for all positions and for advancement without regard to race, color, religion, sex, national origin, age, marital status, or the presence of a disability. . . . Cracker Barrel will not tolerate any form of discrimination or harassment of its employees due to race, color, religion, sex, national origin, marital status or disability. (Emphasis added).

Nowhere does Cracker Barrel state that it has an anti-discrimination policy with respect to sexual orientation. Moreover, to our knowledge, Cracker Barrel has never publicly stated that it rescinded its discriminatory policy against Lesbians and Gay men. Nothing in Cracker Barrels final press release on this matter (see Exhibit C) gives any reassurance that Cracker Barrel is not continuing its policy quietly by refusing to hire workers it knows or believes are homosexual. Rather, the final press release skirts the issue entirely with this vague statement:

We have re-visited our thinking on the subject and feel it only makes good business sense to continue to employ those folks who will provide the quality service our customers have come to expect from us. . . . In the future, we will deal with any disruptions in our units, regardless of the cause, on a store-by-store basis.

This statement is a transparent attempt to appease without saying anything of substance. Thus, contrary to Cracker Barrels empty blandishments, there is no company policy that Cracker Barrel will not discriminate against Lesbians and Gay men.

Mootness is often interpreted to mean that a company has "substantially implemented" the proposal. See Reebok International Ltd. (March 16, 1992) (proposal not moot on grounds that it was "substantially implemented" because Staff unable to determine from information provided that questions raised by proposal were addressed by company). Because it is clear that Cracker Barrel does not provide Lesbians and Gay men any protection from discriminatory employment practices based on sexual orientation, NYCERSs proposal is plainly not moot, it has not been "substantially implemented," and it therefore may not be omitted under 14a-8(c)(10). See General Electric (January 25, 1991) (Staff refused to find proposal moot where it could not determine that the companys actions in addressing the representation of women and minorities had "substantially implemented" the concerns of the proposal).

Conclusion

As General Counsel to New York City Comptroller Elizabeth Holtzman, it is my opinion that the NYCERS proposal does not violate SEC Rule 14a-8, and therefore should be included in Cracker Barrels proxy materials for its 1992 annual meeting.

Very truly yours,

Paula L. Chester

General Counsel

PLC:LB

cc: Robert G. McCullough

INQUIRY LETTER 6

BAKER, WORTHINGTON, CROSSLEY, STANSBERRY & WOOLF

1700 NASHVILLE CITY CENTER, POST OFFICE BOX 2866

NASHVILLE, TENNESSEE 37219

TELEPHONE(615) 726-5600

August 11, 1992

William E. Morley, Esq.

Chief Counsel

Securities and Exchange Commission

Division of Corporate Finance

450 Fifth Street, NW

Washington, DC 20549

RE: Cracker Barrel Old Country Store, Inc.

Shareholder Proxy Proposal

Our File No. 020276.0043

Dear Mr. Morley:

This letter is in response to the July 30, 1992, letter of the General Counsel for the New York City Employees Retirement System ("NYCERS"), concerning the NYCERS shareholder proposal submitted for inclusion in the 1992 proxy materials of Cracker Barrel Old Country Store, Inc. ("Cracker Barrel" or the "Company"). This firm represents Cracker Barrel. The NYCERS proposal seeks to require Cracker Barrel to add language to its employment handbook, explicitly prohibiting employment discrimination based on sexual orientation.

First, it is apparent that NYCERS exaggerates the gay rights "problem" as it relates to Cracker Barrel.!¹ Some 18 months ago, eight gay employees (not 11 as the NYCERS letter states) were terminated over the course of a two-week period in January of 1991. On February 16, 1991, one more employee was terminated when she confronted her store manager with the fact that she was gay.!² Shortly thereafter, once Cracker Barrel senior management learned of this termination, the Company publicly apologized for these incidents. Since that time, there have been no other such terminations. The claim by the NYCERS that three Cracker Barrel employees were fired from the Cracker Barrel store in Mobile, Alabama in June of 1991 because they were gay is simply not true.

Cracker Barrel has over 14,000 employees across the country. The number of employees affected by these incidents is de minimus and does not warrant the kind of attention to the issue the NYCERS seeks by insisting its proposal be included in the Cracker Barrel proxy.

On page 11, the NYCERS letter raises the specter of significant economic consequences to Cracker Barrels shareholders because of the gay rights issue. In fact, for the nine months ended April 30, 1992, the last period for which data is publicly available, the Companys sales have increased by 35% (including a 10% increase in same store sales), and its stock price has more than doubled from $14.22 (adjusted for stock splits) on February 1, 1991, to $33.125 on August 10, 1992. This hardly reflects the serious economic consequences to shareholders suggested by the NYCERS.

Cracker Barrels employment handbook is worded in a way which comports with the law. The NYCERS letter references that Congress has considered a national civil rights bill called the Federal Lesbian and Gay Rights Law, but noted this law was never passed. It seems the NYCERS proposal is trying to force the Company to do what the legislature has declined to force companies to do.

Day-to-day issues concerning hiring and other personnel matters are properly left to Company management, as is explicitly recognized in the Commissions Regulations. Hence, the Company reiterates the position stated in its July 13 letter that the NYCERS proposal is excludable from the Companys 1992 proxy materials.

Sincerely,

Robert G. McCullough

RGM/dbc

cc: Paula L. Chester, Esq.

INQUIRY LETTER 7

THE CITY OF NEW YORK OFFICE OF THE COMPTROLLER

MUNICIPAL BUILDING

NEW YORK, N.Y. 10007-2341

TELEPHONE(212) 669-7778

August 19, 1992

BY OVERNIGHT MAIL

Attention: William Carter

William E. Morley, Esq.

Chief Counsel

Securities and Exchange Commission

Division of Corporate Finance

450 Fifth Street, N.W.

Washington, D.C. 20549

Re: Cracker Barrel Old Country Store, Inc.

New York City Employees Retirement System

Shareholder Proposal

Dear Mr. Morley:

I am writing on behalf of the New York City Employees Retirement System ("NYCERS") in response to the August 11, 1992 letter to you from Robert G. McCullough, attorney for Cracker Barrel Old Country Store, Inc. ("Cracker Barrel").

The shareholder proposal NYCERS has submitted to Cracker Barrel asks Cracker Barrel to implement non-discriminatory policies relating to sexual orientation and to add explicit prohibitions against such discrimination to its corporate employment policy statement. Cracker Barrel has requested permission to omit NYCERSs proposal from its proxy materials, claiming, in part, that this issue is within the realm of ordinary business operations and is therefore excludable under Rule 14a-8(c)(7).

In its August 11, 1992 letter to you, Cracker Barrel argues that NYCERS "exaggerates the gay rights problem as it relates to Cracker Barrel," and that because the number of employees who were fired in accordance with Cracker Barrels discriminatory employment policy is "de minimus sic," this issue does not "warrant the kind of attention. . . NYCERS seeks by insisting its proposal be included in the Cracker Barrel proxy."

Cracker Barrels August 11, 1992 letter reveals that the company apparently misconstrues several important points of law  governing the includability of shareholder proposals in corporate proxy materials. I write to bring these apparent misconceptions to your attention and to point out that Cracker Barrels latest arguments should have no bearing on the SEC Staffs determination.

As a preliminary matter, Cracker Barrel incorrectly states that NYCERS has exaggerated the problem concerning the inability of Gay men and Lesbians to work for Cracker Barrel. Nor was NYCERS "inflammatory" in stating that Cracker Barrels discriminatory policy generated huge negative publicity and media attention. NYCERS merely set forth the facts as reported in many newspaper articles concerning this issue. Although Cracker Barrel claims that it is not true that three employees were fired from its Mobile, Alabama store in June, 1991 because they were gay, this fact was reported in several news articles at the time, copies of which I enclosed with my July 30, 1992 submission. Moreover, news reports show that Cracker Barrel restaurants throughout the South, in Michigan, and in Indiana have been the subject of marches, pickets, sit-ins, and weekly demonstrations, and that the company has become the subject of a national boycott. In addition, the issue was publicized nationwide in November, 1991 when ABC-TVs news program "20/20" ran a story on Cracker Barrels discriminatory policy. I enclose numerous magazine and newspaper articles which establish that NYCERS accurately stated that Cracker Barrels discriminatory employment policy has indeed generated huge negative publicity and media attention.

In any event, the size of a problem or the relative amount of publicity it receives are not the only concerns in deciding whether an issue is a matter that exceeds ordinary, routine business operations. Evaluating the size of a problem or whether the publicity generated by it is large enough to justify shareholder attention would involve extremely subjective estimations. To Cracker Barrel, the fact that Lesbians and Gay men are denied employment with the company and that three newspapers pick up the story may not be a huge issue. To the employee who is fired because of his or her sexual orientation, and to the shareholders who read about their companys discriminatory practices in even one newspaper article, it is a very important issue indeed.

Thus, the determination of whether an issue is within or beyond the ordinary business operations exception cannot lie only in the amount of interest generated by the issue and whether a company is "under siege" or not. Rather, includability of a shareholder proposal is determined by the inherent nature of the issue itself. Inherent in Cracker Barrels discriminatory policy are broad issues of basic human rights: the right to live without discrimination, the right to equal employment opportunities, due  process, and equal protection of the laws. As such, and contrary to Cracker Barrels claim, there is no more appropriate subject for a shareholder proposal.

Cracker Barrel further mischaracterizes the issue by claiming that the number of employees affected by its discriminatory policy is de minimis and that this is a reason for excluding NYCERSs proposal. Plainly, the number of employees affected by a discriminatory policy cannot dictate the determination of whether the policy is within or without the ordinary business operations exception. If the small number of employees affected by a discriminatory policy were an appropriate rationale for excluding a shareholder proposal seeking to end the policy, then Cracker Barrel could just as well claim that if it discriminated against African-Americans, but had only two African-American employees, its discriminatory policy would be a matter of ordinary business and thus not a proper subject for a shareholder proposal. It is the inherent nature of the issue involved that dictates its classification as a matter within or beyond the realm of ordinary business, not the number of employees who are affected by the issue.

But even if the number of employees affected by Cracker Barrels discriminatory policy were an appropriate reason to exclude NYCERSs proposal, Cracker Barrels assumption about the numbers involved is incorrect. Although Cracker Barrel claims to have fired only nine employees, this does not dictate the conclusion that only those employees are affected by Cracker Barrels policy. According to current statistical and demographic information, roughly ten percent of the population is homosexual. Accordingly, statistics alone tell us that at any point in time, roughly 10% of Cracker Barrels employees may be Lesbians or Gay men.

The fact that the numbers look so low to Cracker Barrel is merely a function of how many employees have so far informed Cracker Barrel of their homosexuality. And, of course, if Cracker Barrel has quietly continued its discriminatory employment policy, the number of affected employees will steadily drop. If low numbers of affected employees constituted a reason to exclude shareholder proposals concerning discriminatory practices, then a company could prevent a shareholder proposal regarding discrimination from ever reaching its proxy statements simply by continuing to discriminate so that it would have no affected employees. Plainly, that is not the law. Rather, a shareholder proposal involving the issues of discrimination and equal employment is by definition a proposal that goes beyond the realm of ordinary business operations. Contrary to Cracker Barrels  claim, NYCERSs proposal does not pertain to a "day-to-day issue concerning hiring and other personnel matters," and it thus cannot be excluded from proxy materials under Rule 14a-8(c)(7).

Finally, as Paula Chester, General Counsel to the Comptroller, noted in her July 30, 1992 submission, it is irrelevant that the federal government still does not recognize sexual orientation as a protected category in employment discrimination law. Shareholders may become interested in matters of public policy regardless of whether laws exist concerning the subject. Accordingly, Cracker Barrels statement that "It seems the NYCERS proposal is trying to force the Company to do what the legislature has declined to force companies to do," constitutes no reason to exclude the proposal under Rule 14a-8(c)(7).

Sincerely,

Sue Ellen Dodell

Deputy Counsel

SED/LB

cc: Robert G. McCullough

STAFF REPLY LETTER

October 13, 1992

RESPONSE OF THE OFFICE OF CHIEF COUNSEL

DIVISION OF CORPORATION FINANCE

Re: Cracker Barrel Old Country Store, Inc.

Incoming letters dated July 13, July 27 and August 11, 1992

The proposal requests that the Board of Directors implement hiring policies relating to sexual orientation and incorporate such policies into the corporate employment policy statement.

The company contends that the proposal is excludable pursuant to Rule 14a-8(c)(7). As a general rule, the staff views proposals directed at a companys employment policies and practices with respect to its non-executive workforce to be uniquely matters relating to the conduct of the companys ordinary business operations. Examples of the categories of proposals that have been deemed to be excludable on this basis are: employee health benefits, general compensation issues not focused on senior executives, management of the workplace, employee supervision, labor-management relations, employee hiring and firing, conditions of employment and employee training and motivation.

Notwithstanding the general view that employment matters concerning the workforce of the company are excludable as matters involving the conduct of day-to-day business, exceptions have been made in some cases where a proponent based an employment-related proposal on "social policy" concerns. In recent years, however, the line between includable and excludable employment-related proposals based on social policy considerations has become increasingly difficult to draw. The distinctions recognized by the staff are characterized by many as tenuous, without substance and effectively nullifying the application of the ordinary business exclusion to employment related proposals.

The Division has reconsidered the application of Rule 14a-8(c)(7) to employment-related proposals in light of these concerns and the staffs experience with these proposals in recent years. As a result, the Division has determined that the fact that a shareholder proposal concerning a companys employment policies and practices for the general workforce is tied to a social issue will no longer be viewed as removing the proposal from the realm of ordinary business operations of the registrant. Rather, determinations with respect to any such proposals are properly governed by the employment-based nature of the proposal.

This is to be distinguished from proposals relating to the compensation of senior executives and directors. The Commission continues to regard issues affecting CEO and other senior executive and director compensation as unique decisions affecting the nature of the relationships among shareholders, those who run the corporation on their behalf and the directors who are responsible for overseeing management performance. Consequently, unlike proposals relating to the rank and file workforce, proposals concerning senior executive and director compensation are viewed by the Commission as inherently outside the scope of normal or routine practices in the running of the companys operations.

Accordingly, it is the Divisions view that the instant proposal may be excluded from the Companys proxy material in reliance upon Rule 14a-8(c)(7).

Sincerely,

William H. Carter

Special Counsel

!¹A copy of this press release is attached to this letter as Exhibit A.

!²Copies of a "Separation Notice" and "Disciplinary & Termination Report" are attached to this letter as Exhibit B. These documents are examples of termination notices received by Lesbian and Gay workers in January and February, 1991. They state that the reason for termination was that the employees violated Cracker Barrels policy against employing homosexuals.

!³This press release is attached to this letter as Exhibit C.

!⁴Copies of the Holtzman/OCleireacain-Evins correspondence are attached to this letter as Exhibit D.

!⁵A copy of the press release announcing the protests, as well as copies of newspaper articles regarding the Cracker Barrel policy, reactions to it, and subsequent firings are attached to this letter as Exhibit E.

!⁶The text of CEO Dan Evinss Annual Meeting Statement is attached to this letter as Exhibit F.

!⁷On June 12, 1992, New York City Comptroller Elizabeth Holtzman submitted NYCERSs shareholder proposal for inclusion in Cracker Barrels 1992 annual meeting proxy materials. A copy of the proposal is attached to this letter as Exhibit G.

!⁸Indeed, it is clear that there was no intention to announce in Capital Cities that equal employment and affirmative action were no longer considered significant policy matters, because at the same time that the Commission reviewed and decided Capital Cities (March 7, 1991), the SEC Staff reaffirmed that proposals raising these issues are not excludable on (c)(7) grounds. See Dayton Hudson Corporation (March 8, 1991), and CBS, Inc. (March 7, 1991), discussed above.

!¹On page 5, the NYCERS letter states "as a result of its own discriminatory policy and actions to enforce that policy, Cracker Barrel has created such huge negative publicity and media attention that even if the general subject of Lesbian and Gay rights were not already an issue of widespread public concern, Cracker Barrels own actions have elevated this issue, at least as it affects Cracker Barrel, to a level of concern that far exceeds ordinary, routine, or mundane business operations." This language is inflammatory and gives the false impression the Company is under siege, which it very definitely is not.

!²This employee was offered reinstatement, but she placed such prohibitive conditions on her return that the offer was withdrawn.