Company Name: GenCorp. Inc.
Public Availability Date: 12-15-1992INQUIRY LETTER
Gen Corp
175 Ghent Road
Fairlawn, Ohio 44333-3300
TELEPHONE(216) 869-4250 November 19, 1992 Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Attention: Office of Chief Counsel
Division of Corporation Finance Dear Sirs: Enclosed herewith for filing pursuant to Rule 14a-8(d) under the Securities
Exchange Act of 1934, as amended, are the following: 1. Six copies of a letter dated October 8, 1992 and addressed to this Company
from the Ursulines Eastern Province ("Proponent"), 323 East 198th Street, Bronx,
New York 10458 together with a single document setting forth a shareholder's
proposal ("Proposal") and statement in support thereof ("Supporting Statement")
for inclusion in the proxy materials related to the annual meeting of
shareholders of GenCorp Inc. to be held March 31, 1993. (The Company and its
consolidated subsidiaries hereinafter are referred to collectively as
"GenCorp".) 2. Six copies of this letter. GenCorp proposes to omit the Proposal and Supporting Statement from its proxy
statement and form of proxy for its 1993 annual meeting for reasons discussed
below: 1. The Proposal is not a proper subject for action by shareholders under the law
of Ohio, GenCorp's state of incorporation, and due to the Proponent's political
objective As shown below, the Proposal is not a proper subject for action by GenCorp's
shareholders under the laws of Ohio, where GenCorp is incorporated, and due to
the Proponent's political objective as disclosed in the Supporting Statement of
the Proposal. 1. The shareholder resolution proposed for action by the shareholders is stated
as follows: THEREFORE BE IT RESOLVED the shareholders request the Board of Directors to
provide a comprehensive report describing our Company's involvement in the
space-based nuclear defense system know as Star Wars or Strategic Defense
Initiative. The report should be available to shareholders on request within six
months of the 1993 annual meeting, may omit proprietary information and may be
prepared at reasonable cost.!1 Thus, the Proposal would require GenCorp to prepare, ostensibly for its
shareholders, a "comprehensive report" on its involvement in an extremely
limited area of its defense and aerospace business. 2. Under Ohio law, the power to decide whether and the extent to which business
information should be disseminated to shareholders is conferred exclusively to
the directors of a corporation. Thus, Section 1701.59(A) of the Ohio Revised
Code provides that: "Except where the law, the articles, or the regulations
require action to be authorized or taken by the shareholders, all of the
authority of a corporation shall be exercised by or under the direction of its
directors." In re Estate of Wurchet, 138 Ohio St.97, 102;33N.E2d15,18(1941), the
Ohio Supreme Court stated: Persons by becoming stockholders in a corporation impliedly agree to be bound by
the reasonable rules and practices adopted for the management of corporate
affairs. Business policies adopted by business men for the management of
business transactions ought not to be frustrated unless contrary either to some
rule of law or to fundamental ethical rules of right and wrong. 3. Quite clearly, the Proposal would transfer to the shareholders the power to
determine whether and the extent to which GenCorp should disseminate to its
shareholders and the public information about sundry aspects of its business
operations. As discussed above, any such transfer would be contrary to Ohio law
and the powers conferred exclusively to GenCorp's directors. 4. As the Commission has made clear, the proxy rules were not intended to permit
shareholders to present proposals for shareholder action on any and every
possible matter, but rather, only as to "proper subjects" for shareholder
action. Clearly, shareholder proposals which would usurp the powers of a
corporation's directors can hardly be deemed a "proper subject" for shareholder
action. 5. To characterize the shareholder proposal here involved as a "mere request"
and, therefore, a "proper subject" would not only ignore the intrinsic issue of
corporate governance, but moreover, would remove the long-standing limitation
imposed by the "proper subject" requirement. For in so doing, any shareholder
"request" would become a "proper subject" without regard to the specific action
proposed by a shareholder. 6. The Proposal here is not a "proper subject" for shareholder action for the
additional reason that the Proponent's objective is essentially political in
nature. This is evident from the Supporting Statement of the Proposal: The church-related sponsors of this resolution question the commercial and
political special-interest groups who lobby Congress to make weapons in space a
higher priority than meeting human needs. Persian Gulf War euphoria and
competitive interest in the potential profits Star Wars contracts could bring in
the relatively lean overall national defense environment conspire to keep
billions of dollars pouring in to the hands of weapons developers. As church
institutions and US citizens, the resolution sponsors are working to redirect
federal budget priorities toward national and international necessities such as
housing, health care, education and employment. (Emphasis added) Thus, the Proponent seeks to use the proxy procedures to publish its own private
views about the social, political and economic merits of the Strategic Defense
initiative and achieve its political goal of changing "federal budget
priorities". That the Proponent's dominant objective here is essentially
political is fully apparent from its proposal that the "comprehensive report" be
disseminated to shareholders only "upon request". As the Commission has ruled, shareholder proposals which deal with general
political, social or economic matters are not "proper subjects" for shareholder
action and forums, other than shareholder meetings, exist for the presentation
of such views. (Release No 3638 under the Securities Exchange Act of 1934, 3
January 1945, 1945 SEC Lexis 233.) The long-standing exclusion of political
proposals from the proxy procedures is essential to preserving not only the
integrity of the proxy procedures, but also, the proper function of shareholder
meetings under Ohio law. Accordingly, we respectfully submit that the Proposal here is not a proper
subject for shareholder action and, therefore, may be omitted under Rule
14a-8(c)(1). Alternatively, we respectfully submit that the second and third
paragraphs of the Supporting Statement are not proper subject matter and,
therefore, may be omitted under Rule 14a-8(c)(1). II. The Proposal deals with and is directed to matters beyond the registrant's
power to effectuate As shown below, the penultimate paragraph of the Proposal's Supporting Statement
deals with and is directed to policy decisions of the legislative and executive
branches of the Federal Government, and any decision or action as to such
matters is beyond GenCorp's power to effectuate. 1. The last sentence of the penultimate paragraph of the Proposal's Supporting
Statement succinctly states the Proponent's dominant objective as follows: "As
church institutions and U.S. Citizens, the resolution sponsors are working to
redirect federal budget priorities toward national and international necessities
such as housing, health care, education and employment". Hence, the Proponent's
stated objective is to influence and affect "federal budget priorities" and,
therefore, the decisions and actions of the legislative and executive branches
of the Federal Government. 2. Neither GenCorp nor its directors have any power to effectuate any change in
the decisions and actions of either the legislative or executive branch of the
Federal Government concerning "federal budget priorities". Consequently, the
Proposal deals with a subject "matter beyond the registrant's power to
effectuate". 3. As discussed above, the Proponent's purpose is to involve GenCorp's directors
and shareholders in the Proponent's private political campaign to change the
policies and decisions of the Federal Government. Certainly, the decisions and
actions of the Federal Government in respect of "budget priorities" generally,
and the Strategic Defense Initiative specifically, Involve Important national
Issues which may be debatable, but meetings of the shareholders of private
corporations are an inappropriate forum for debate or even discussion of such
political, social and economic matters. 4. The subject matter for proxies must be limited to matters concerning the
specific interests of the registrant's shareholders qua shareholders and
operation of the registrant's business. As shown above, the Proponent here seeks
to use the proxy procedures solely as a means to accomplish its private social
and political objectives, not to promote the general interest of GenCorp's
shareholders. The Commission should not permit a shareholder to use the proxy
procedures as a means to achieve general social and political goals. Accordingly, we respectfully submit that the Proposal here is not a proper
subject for action by GenCorp's shareholders and, due to the inability of
GenCorp and its directors to effectuate decisions concerning the matter in
question, may be omitted under Rule 14a-8(c)(6). Alternatively, we submit that
the penultimate paragraph of the Supporting Statement is not a proper subject
for action by GenCorp's shareholders and, therefore, may be omitted under Rule
14a-8(c)(6). III. The Proposal and Supporting Statement contain statements and assertions
which are false and misleading or so vague and/or inconsistent as to be false
and misleading As shown below, both the Proposal and Supporting Statement contain statements,
insinuations and assertions which are false and misleading or so vague and
inconsistent as to cause confusion and render statements false and misleading. 1. The proposed shareholder resolution contains a request for a "report
describing the Company's involvement in the space-based nuclear defense system
known as Star Wars or Strategic Defense Initiative". Contrary to this statement,
the Strategic Defense Initiative is not based on either a "nuclear" defense
system nor a "space-based nuclear" defense system. Also, the Strategic Defense
Initiative is not solely a "space-based" defense system and includes
"ground-based" defense systems. Hence, the proposed shareholder resolution
contains material misstatements concerning the Strategic Defense Initiative,
which are both false and misleading. 2. The Proposal conveys the overwhelming impression that the Strategic Defense
System is essentially a "weapons system" and/or its primary content is a
"weapons system". Additionally, the Proposal insinuates that any company
involved in the Strategic Defense Initiative must be a developer or producer of
a "weapons system". Such implied assertions are erroneous. First, as a matter of
public record, the primary thrust of the Strategic Defense Initiative is to
provide a "detection system" designed to detect and, consequently, deter the
launch of hostile intercontinental ballistic missiles and its secondary purpose
is to provide means for the destruction of missiles whose launch is not deterred
by the launch detection system. Second, a company's involvement in the Strategic
Defense Initiative can be limited to the "detection system" and not may not
involve or relate in any significant manner to any "weapon" or "weapons system". 3. The first paragraph of the Supporting Statement contains statements,
insinuations and/or assertions which are false and misleading or are so vague
and/or inconsistent with other statements as to render them false and
misleading: (a) The first paragraph seeks information concerning the value of GenCorp's
outstanding contracts "to develop space weapons". The assertion implicit in this
question is that GenCorp has outstanding contracts "to develop space weapons".
Any such assertion is false. GenCorp does not have any contract to develop any
"space weapon". (b) The first sentence of the second paragraph seeks information concerning the
amount of "the corporation's own money (versus funding from the Department of
Defense). . . being spent on in house research and development in space
weaponry". The question is not limited to "space weaponry" which is part of the
Strategic Defense Initiative and, hence, the question seeks information beyond
the scope of the proposed report. Since "space weaponry" is not a term of art,
it could include bullets and other missiles fired or otherwise discharged into
the air (i.e., space). In any event, the assumption implicit in this question is
that a government contractor, such as GenCorp, receives no compensation from the
government in respect of "its own" money spent on in-house research and
development. Any such assumption is false and misleading. (c) The second sentence of the second paragraph reads as follows: "How do our
company's efforts to reduce dependence upon its weapons business affect this
segment of its aerospace and defense division?" The assertion implicit in this
question is that GenCorp has a "space-based weapons business" and, additionally,
seeks to reduce dependence upon its space-based "weapons business". Any such
assertions are false and misleading. (d) The third paragraph states: "How do proposed federal SDI cuts affect our
company?" The assertion implicit in this question is that "proposed cuts" can
affect GenCorp in some material manner. Any such assertion is false and
misleading. "Proposed" cuts simply have no effect and, if never implemented, may
have no affect, except perhaps to cause temporary anxiety about future business
prospects. (e) The fourth question states: "Is GenCorp planning to conduct or participate
in materials-processing in space experiments?" Quite clearly, this question is
not limited to "space-based weapons" or even to the Strategic Defense
Initiative. To the extent that this question seeks information not so limited,
it is inconsistent with the Proponent's stated objectives and proposed
shareholder resolution, thereby rendering either one or all such statements
false and misleading. (f) The fifth paragraph states: "Has an internal policy or direction for the (i)
commercial development of space and/or (ii) development of weapons for space
been determined by management?" Quite clearly, a company policy related to
commercial development of space has nothing to do with either "space-based
weapons" or the Strategic Defense Initiative. To the extent that this question
seeks information concerning any company policy on commercial development of
space, it is inconsistent with the Proponent's stated objectives and proposed
shareholder resolution, thereby rendering either one or all such statement false
and misleading. Accordingly, we respectfully submit that the Proposal contains statements,
insinuations and implied assertions which are false and misleading or are so
vague and/or inconsistent with other statements in the Proposal as to render
them false and misleading and, therefore, the Proposal may be omitted under Rule
14a-8(c)(3). Alternatively, we respectfully submit that each of the foregoing
statements may be omitted under Rule 14a-8(c)(3). IV. The Proposal would require GenCorp to violate federal law or incur the risk
of disseminating to its shareholders a false and misleading report The Proposal would require GenCorp to prepare a "comprehensive report"
describing GenCorp's involvement in the Strategic Defense initiative. As shown
below, GenCorp cannot disseminate any such "comprehensive report" without
violation of federal law or incurring the risk that such report would be false
and misleading. 1. The Strategic Defense Initiative includes projects and programs which are
classified for national defense purposes. Thus, in his annual report to Congress
concerning the Strategic Defense Initiative, the Secretary of Defense must
separately report unclassified and classified programs and projects comprising
the strategic Defense Initiative. 10 USCA Section 2431. 2. Under federal law, it is a crime for a person who has classified information
relating to national defense to communicate such information to any person who
is not authorized to have such information. 18 USCA Section 793(d). U. S. v.
Morison, 844 F2d 1057 (4th Cir. 1988). The existence of a contract as well as
the subject matter thereof may be classified for national defense purposes. 3. Under federal law, GenCorp cannot lawfully disclose any contract or subject
matter which is classified as secret for national defense purposes. 4. Quite clearly, any "comprehensive report" of GenCorp's involvement in the
Strategic Defense Initiative would require disclosure of any such contract or
subject matter classified as secret for national defense purposes, if any.
Alternatively, if GenCorp were involved in any such classified projects and
programs, any report omitting mention or disclosure thereof could not be deemed
comprehensive and, consequently, could be deemed false and misleading. In brief,
then, GenCorp may be unable to disseminate a "comprehensive report" on its
involvement in the Strategic Defense Initiative which, if all relevant facts
were known, would not be false and misleading. Accordingly, we respectfully submit that the Proposal would require GenCorp to
violate federal law or incur the risk of disseminating to its shareholders a
report that is false and misleading and, therefore, may be omitted under Rule
14(a)-8(c)(2) and (3). V. The Proposal relates to operations which account for materially less than 5
percent of GenCorp's total assets and net sales and is not otherwise
significantly related to the Company's business As shown below, the Proposal relates to operations which account for less than (i)
5 percent of GenCorp's total assets at the end of its most recent fiscal year,
and (ii) 5 percent of its net earnings and gross sales for its most recent
fiscal year, and is not otherwise significantly related to GenCorp's business. 1. During both fiscal 1991 and 1992, GenCorp has had only three minor programs
related in any way to space-based weapons systems. (As stated above, none of
these programs called for GenCorp to develop or manufacture any space-based
weapons.) Such programs, in the aggregate, produced net sales of only $20.0
million during fiscal year 1991 compared to GenCorp's overall net sales of
$1,993 million for such fiscal year. Therefore, these programs contributed
barely 1% of GenCorp's total net sales. Moreover, such programs accounted for
only $2.4 million of assets at the close of the 1991 fiscal year or two-tenths
of one percent of GenCorp's aggregate total assets of $1,113 million at such
year end. 2. Two such programs are now completed, and even lower results are forecast for
fiscal 1992. Net sales related to space-based weapons systems are forecast at
only $17.2 million for the 1992 fiscal year, and are expected to account for the
use of only $1.7 million of GenCorp's assets. 3. The Proposal is not otherwise significantly related to GenCorp's business.
Although GenCorp's aerospace and defense segment's overall sales are
significant, amounting to $1,142 million in fiscal 1991, GenCorp is not involved
in the development or manufacture of either nuclear weapons or, except to the
minor degree discussed above, space-based weapons, both targets of the Proposal. 4. GenCorp's primary businesses are propulsion, including the design and
production of the Advanced Solid Rocket Motor for the United States Space
Shuttle Program, and electronic systems for various applications, including
space-borne sensors for defense support and environmental and meteorological
surveillance and measurement. GenCorp also maintains a modest ordnance business
which primarily involves manufacture of medium caliber ammunition and combined
effects munitions which are strictly Earth-based and are never utilized in
space-based applications. Therefore, proponent's proposal, aimed at space based
weapons and nuclear weapons, would not serve in the interest of the Company's
shareholders as it is not significantly related to the Company's business. Accordingly, we respectfully submit that the Proposal may be omitted under Rule
14a-8(c)(5). VI. The Proposal will yield a benefit solely to the Proponent in furtherance of
its own political interest The Proposal clearly expresses the Proponent's condemnation of the Strategic
Defense Initiative and the public policy decisions to fund the Strategic Defense
Initiative. Thus, the apparent basis for the Proposal is the Proponent's
political and social agenda, namely, to change "federal budget priorities" and
divert federal funds from national defense to international and nation "social
spending" programs. As discussed above, the core of the Proponent's condemnation
of the Strategic Defense Initiative, as expressed in the Proposal, is the
erroneous insinuations and assertions that the Strategic Defense Initiative is a
"weapons system" and, moreover, is a "nuclear" space-based weapons system. That the Proposal does not serve the general interests of GenCorp's shareholders
is fully evident from the misleading, if not false, insinuations and assertions
concerning the Strategic Defense Initiative and the nature of the business of
any government contractor, such as GenCorp, associated with the Strategic
Defense Initiative. Neither misleading statements, insinuations and assertions
nor proposals based thereon can serve the interests GenCorp's shareholders. That the Proponent does not seek to confer a benefit upon all shareholders also
is evident from its request that the proposed report be disseminated only to
shareholders who request same. Had the Proponent deemed the report to confer a
benefit on and serve the interests of all shareholders, Proponent would have
proposed that dissemination of such report to all shareholders be required. Accordingly, we respectfully submit that Proposal serves only the personal
interests of the Proponent, not the interests of all shareholders at large and,
therefore, may be omitted under Rule 14a-8(c)(4). Conclusion GenCorp hereby requests that the Commission staff confirm that it will not
recommend any enforcement action to the Commission if GenCorp omits the Proposal
from the proxy materials in connection with the Company's 1993 annual meeting of
shareholders pursuant to Rule 14a-8 for one or more of the reasons set forth
herein. We are informing the Proponents of GenCorp's intention to omit the Proposal from
its 1993 proxy materials by copy of this letter. If you have any questions concerning the foregoing, please contact the
undersigned at (216)869-4250 or Mr. E. R. Dye, Secretary and Assistant General
Counsel, at (216)869-4257. Sincerely yours, Charles R. Ennis jm(dsb1115) cc: Sister Joan Mclver, OSU
Ursulines Eastern Province
323 East 198th Street
Bronx, New York 10458
[STAFF REPLY LETTER]
December 15, 1992 RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE Re: GenCorp Inc. (the "Company")
Incoming letter dated November 19, 1992 The shareholder proposal requests that the board of directors provide to
shareholders a comprehensive report describing the Company's involvement with
the Strategic Defense Initiative. This Division does not concur in your position that the proposal or the
supporting statement may be excluded based on Rule 14a-8(c)(1). As the proposal
is phrased in precatory terms, the Division is unable to concur that the
proposal is not a proper subject for shareholder action under state law.
Accordingly, the Company may not rely on Rule 14a-8(c)(1) as a basis for
omitting either the proposal or the supporting statement. There appears to be some basis for your view that the proposal may be excluded
under Rule 14a-8(c)(2) as the proposal may be interpreted to require the
disclosure of classified information. If, however, the language of the proposal
were revised to specifically exclude classified information from the report, it
appears that the Rule 14a-8(c)(2) defect may be cured. If the proponent provides
the Company with a proposal revised in the manner indicated, within seven
calendar days after receipt of this response, the staff does not believe that
Rule 14a-8(c)(2) may be relied upon as a basis to omit the proposal from the
Company's proxy materials. This Division does not concur in your view that the proposal and portions of the
supporting statement may be omitted under Rule 14a-8(c)(3). The proposal does
not appear to be so inherently vague and misleading that shareholders voting on
the proposal would not be able to determine with any reasonable certainty what
actions or measures would be taken if the proposal were implemented.
Accordingly, this Division is of the view that the Company may not rely on Rule
14a-8(c)(3) as a basis for omitting the proposal and the supporting statement. This Division is also unable to concur in your position as the applicability of
Rule 14a-8(c)(4). The Company's principal arguments in support of its position
that the proposal may be excluded under this provision appear to be further
arguments in favor of the Company's assertions that the proposal is excludable
under Rule 14a-8(c)(3). Further, the fact that the report would be disseminated
only to shareholders who request the report, and not to shareholders at large,
appears insufficient to establish a personal benefit under Rule 14a-8(c)(4).
Accordingly, we do not believe that management may rely on Rule 14a-8(c)(4) as a
basis for omitting the Proposal. This Division does not concur in your view as to the applicability of Rule
14a-8(c)(5) to the instant proposal. The Division is of the view that the
proposal is "otherwise significantly related" to the Company's business.
Accordingly, we do not believe that the management may rely on Rule 14a-8(c)(5)
as a basis for omitting the proposal. Finally, this Division is unable to concur in your view as to the applicability
of Rule 14a-8(c)(6). The staff does not view the actions recommended by the
proposal, the preparation of a report to shareholders, as beyond the
registrant's power to effectuate. Accordingly, the Company may not rely on Rule
14a-8(c)(6) to omit the proposal or portions of the supporting statement from
its proxy material. Sincerely, Amy Bowerman Freed
Special Counsel
1 As discussed below, the assertion that the Strategic Defense Initiative is a
"nuclear" space-based defense system is false and misleading.
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