Company Name: Pacific Telesis Group
Public Availability Date: 02-01-1993
[INQUIRY LETTER 1]
Pacific Telesis Center
130 Kearny Street, Suite 3609
San Francisco, California, 94106
TELEPHONE(415) 394-3535 December 04, 1992 Securities and Exchange Commission
Division of Corporation Finance
Judiciary Plaza
450 Fifth Street N.W.
Washington, D.C. 20549 Ladies and Gentlemen: Pursuant to Rule 14a-8(d) under the Securities Exchange Act, as amended, Pacific
Telesis Group ("Telesis") hereby gives notice that it intends to omit from its
1993 Proxy Statement two of the three shareowner proposals and supporting
statements described below. Telesis currently has three shareowner proposals related to executive
compensation for inclusion in its 1993 Proxy Statement. Mr. Chris Rossi
submitted his proposal and supporting statement in his letter dated July 6, 1992
(the "Rossi Proposal"), Mr. Robert Eisenstadt submitted his proposal and
supporting statement in his letter dated August 27, 1992 (the "Eisenstadt
Proposal") and Mr. Robert Kopach submitted his proposal and supporting statement
in his letter dated November 3, 1992, all attached hereto as Exhibits A,B and C,
respectively. It is my opinion as counsel to Telesis that the Rossi and Kopach Proposals may
be omitted from its 1993 Proxy Statement on the grounds that they are
substantially duplicative of the Eisenstadt Proposal and are therefore
excludable under Rule 14a-8(c)(11). Since the Rossi Proposal was received prior
to the Eisenstadt and Kopach Proposals, Telesis would normally include the Rossi
Proposal in the Proxy and exclude the other two duplicative proposals. However,
the Eisenstadt Proposal is more comprehensive than the Rossi Proposal in that it
would apply to all executive officers. The Rossi Proposal addresses only the
compensation of the Chief Executive Officer ("CEO") and not that of the other
executive officers. Therefore, Telesis proposes to omit the Rossi and Kopach
Proposals and include the Eisenstadt proposal in the 1993 Proxy Statement. As an additional ground for omission, Telesis proposes to omit the Kopach
Proposal on the grounds that it is not a proper subject for shareowner action
and would deprive the Telesis Board of its statutory function of managing the
business of Telesis. The Kopach Proposal is therefore excludable under Rule
14a-8(c)(1). The Proposals On July 6, 1992, Telesis received the Rossi Proposal: "Resolved, that the stockholders of Pacific Telesis recommend that the board of
directors adopt the following policy: As relates to future contracts, the Chief
Executive Officer's total compensation will be determined as follows: The
C.E.O.'s beginning total compensation will be 25 times more than the average
Pacific Telesis employee's 1992 annual wages or salary. The C.E.O.'s total
compensation will go up or down in direct proportions to the company's
performance. To be determined as follows: One half of the compensation shall go
up or down gauged against the eight year average earnings per common share
(adjusted for stock splits) from 1984 to 1991. The remaining one half shall go
up or down gauged against the eight year average dividends per common share
(adjusted for stock splits) from 1984 to 1991." SUPPORTING STATEMENT "The purpose of this proposal is to pay the Chief Executive Officer based
entirely on the company's performance. To do this you must pay gauged against
past performance. If the C.E.O. performs better the C.E.O. will be paid more, if
the C.E.O. performs worse, the C.E.O. will be paid less. You also need a
starting point, a base rate of 25 times more than the average employee's
compensation. For example, if the average Pacific Telesis employee earned $32,000.00 in 1992,
the C.E.O. would have a beginning total compensation of 25 times more or
$800,000.00. Pacific Telesis eight year average earnings per share in $2.51. If
Pacific Telesis earnings per share in 1993 rose 20% to $3.01, one half of the
C.E.O.'s compensation would go up 20% from $400,000.00 to $480,000.00. On the
other hand if Pacific Telesis earnings per share in 1993 fell 20% to $2.01, one
half of the C.E.O.'s compensation would fall 20% to $320,000.00. The other half
of the C.E.O.'s compensation, $400,000.00 would rise, fall or stay the same
gauged against Pacific Telesis eight year average dividend per share of $1.72.
The following year the process would repeat itself." On August 18, 1992 Telesis received the Eisenstadt Proposal: "The Shareholders of Pacific Telesis Group recommend that the Board of Directors
amend the current Corporate Executive Officer Compensation Program to strengthen
the linkage between corporate performance and executive compensation. The
amended compensation program will eliminate all executive bonus incentives i.e.
cash, stock options, generous severance packages, low interest loans and so
forth, during any fiscal year in which corporate earnings per split adjusted
share decrease from the previous year. All other aspects for the compensation
plan are to remain in place without significant changes. The amended plan is to
be phased in as existing executive contracts expire. This measure will maximize shareholder value at Pacific Telesis Group for the
following reasons: I.) Linking compensation to performance sends a powerful positive message to the
investment community that Pacific Telesis Group has progressive management that
is confident in the future growth and success of the firm. II.) It encourages excellent performance. The current compensation plan provides
extensive cash and other benefits to corporate officers during poor years. You
are urged to look over the executive compensation section of your proxy
materials, and decide if the compensation is appropriate. III.) Reducing executive compensation during lean years demonstrates to all
employees of Pacific Telesis Group that management is serious about cutting
costs and is willing to set an example. This improves employee moral, and
productivity, which boosts profitability and shareholder value. IV.) Pacific Telesis Group will be able to attract talented corporate executives
with the amended compensation plan. The traditional argument is that these
compensation benefits are market driven and that executives at competing
corporations get extra benefits every year regardless of performance, thus
Pacific Telesis Group must follow suit. Executive officers of Pacific Telesis
Group receive large sets of stock options (refer to proxy materials). The
additional increase in share holder value due to this amended compensation plan
should more than offset decreased executive cash compensation because executive
stock options will become more valuable. From a long term view it will be easier
to attract talented corporate officers with this amended compensation plan. Please read over the discussions for and against this compensation plan, review
executive compensation data and corporate performance and decide what is in your
best interest as a shareholder and vote accordingly." On November 3, 1992 Telesis received the Kopach Proposal: "Resolved: I recommend that the current short term and long term incentive plan
for the executive officers be abolished. The only incentive to be awarded would
be tied proportionately to the price of the stock at the end of the year.
Example if stock price is up 20% from previous year then the incentive is 20% of
salary. "Reasons 1. Management is adequately compensated as illustrated in the cash compensation
table. Executives should only receive extra compensation if stock price is up.
That's the incentive, they are rewarded as are the shareholders if stock price
is up. 2. Under the current short & long term incentive plan the executive officers
received over 100% to 200% of their salary last year. This is excessive and
ridiculous. The stock price certainly hasn't increased significantly over the
last year or two. 3. Management needs to be held accountable to the shareholders. Based on my
incentive plan tied to stock price executive officers would be justly
compensated if stock performs well. 4. A vote for this proposal will send a clear message to management that they
need to be responsive to the shareholders." Substantially Duplicative Rule 14a-8(c)(11) allows for the omission of a proposal if it is substantially
duplicative of a proposal previously submitted, which proposal will be included
in the registrant's proxy material. The Staff has taken the position in various
letters that proposals do not have to be identical to be excluded under Rule
14a-8(c)(11). The test is whether the core issues addressed by the proposals are
substantially the same, even though the proposals may differ somewhat in terms
or breadth. Pacific Enterprises (available February 26, 1992); Procter & Gamble
Company (available June 15, 1983); Union Camp Corporation (available January 24,
1990). The core issues addressed by the Rossi, Eisenstadt and Kopach Proposals
are substantially the same in that they all address executive compensation.
Additionally they would all link executive compensation to corporate
performance, but using differing formulas and measures. In addition, requiring inclusion of these substantially duplicative proposals
would create the possibility of an inconsistent shareowner vote, leaving the
Telesis Board of Directors without a clear expression of shareowner sentiment on
this issue. The Board would be placed in the untenable position of having to
guess at what the shareowners intended. The purposes of Rule 14a-8(c)(11) would
be served by allowing Telesis to omit the Rossi and Kopach Proposals. Telesis
would include the Eisenstadt Proposal in the 1993 Telesis Proxy Statement. In Champion International Corporation ("Champion") (available March 4, 1991) the
Staff did not concur with Champion's position that two shareowner proposals were
substantially duplicative. The Staff noted that one of the proposals contained
many other elements than the other. The first proposal received by Champion
requested that it become a signatory to the Valdez Principles. The Valdez
Principles require signatories to commit to ten different principles including,
among other things, protection of the biosphere, reduction and disposal of
wastes, marketing of safe products and services, disclosure, and also including
the establishment of a board committee with responsibility for environmental
affairs. The second proposal received by Champion dealt only with recommending
that the board establish a board committee on environmental affairs. By allowing
for the inclusion of both Proposals, shareowners who wished to vote only for a
board committee on environmental affairs could do so without at the same time
voting additionally for all of the other Valdez Principles. We believe our
situation is distinguishable from Champion. The subject of all three of the
Telesis Proposals is executive compensation. All three address the compensation
of the CEO, but two of the three are more comprehensive in that they also
address the compensation of the other executive officers as well. Rule
14a-8(c)(11), we believe, applies to the three Telesis Proposals and, pursuant
to that Rule, we plan to omit the Rossi and Kopach Proposals as substantially
duplicative of the Eisenstadt Proposal. The Eisenstadt Proposal and the Kopach Proposal each propose to link corporate
performance and executive compensation generally, although using different
measurements and formulas. The Rossi Proposal would apply yet a third formula
and set of measurements to determine executive compensation, but the Rossi
Proposal only applies to the CEO. Rule 14a-8(c)(11) allows for the omission of a proposal that is substantially
duplicative of a proposal previously submitted, which proposal will be included
in the registrant's proxy material. The Rule would appear to require Telesis to
include the Rossi Proposal, which Telesis would normally do. However, the SEC's
purposes in allowing shareowners to vote on executive compensation would be
better served by allowing for a vote on the more comprehensive Eisenstadt
Proposal which was received after the Rossi Proposal. Telesis therefore,
proposes to include the Eisenstadt Proposal in its Proxy Statement to allow the
Telesis shareowners an opportunity to vote on a more comprehensive proposal that
addresses the compensation of all executive officers, rather than only that of
one officer. The Kopach Proposal also addresses the subject of executive
compensation. As the Kopach Proposal was received last, and assuming that one of
the earlier received proposals will be included in the Telesis 1993 Proxy
statement, it is excludable on that basis. If the Staff disagrees with Telesis' view that it may omit the Rossi Proposal,
but agrees with our "substantially duplicative" argument, then we would include
the Rossi Proposal and omit the Eisenstadt and Kopach Proposals in the 1993
Proxy Statement. Not a Proper Subject for Shareowner Action Under Rule 14a-8(c)(1), a proposal may be excluded if, under the laws of the
registrant's domicile, the subject is not a proper one for action by security
holders. Telesis is a Nevada corporation, and under Section 78.120 of the Nevada
Revised Statutes, the board of directors of a corporation shall have full
control over the affairs of the corporation. Similarly, the Telesis By-Laws
provide that the business of the corporation shall be managed by or under the
direction of the Board of Directors. . . (Article III). The Kopach Proposal is phrased in a way that, if adopted, would deprive the
Telesis Board of its statutory function of managing the corporation's business.
The Proposal is therefore excludable under Rule 14a-8(c)(1) as an improper
subject for shareowner action. Chrysler Corporation (available January 6, 1992),
Bell Atlantic Corporation (available February 13, 1992). On November 24, 1992, we advised Mr. Kopach of this defect and asked him to cure
the defect within 21 days. If Mr. Kopach does not amend his proposal by December
15, 1992 to recommend that the Telesis Board take the steps necessary to
accomplish his Proposal, Telesis plans to omit the Kopach Proposal from the 1993
Proxy Statement pursuant to Rule 14a-8(c)(1). Conclusion For the above reasons, it is my opinion that the Rossi and Kopach Proposals are
excludable from the Telesis Proxy materials. Telesis requests confirmation from
the Staff that it will not recommend any enforcement action if management
excludes the Rossi and Kopach Proposals from Telesis' 1993 Proxy Statement. I
would appreciate hearing from you by January 15, 1993, so that we may finalize
our proxy materials for printing. As required by Rule 14a-8(d), copies of this
letter are being sent to Messrs. Rossi, Eisenstadt and Kopach as notice of our
intention regarding the omission of the Proposals as described above. If you have questions or comments regarding the foregoing, please call Kristina
Veaco, Esq. at (415) 394-3538 or the undersigned at the telephone number set
forth above in the letterhead. Sincerely, Duane G. Henry
Senior Counsel Attachments cc w/o attachments: Chris Rossi
Robert Eisenstadt
Robert S. Kopach
[INQUIRY LETTER 2]
Chris Rossi
P.O. Box 249
Boonville, Ca. 95415 Pacific Telesis
R.W. Odgers - Corp. Secretary
130 Kearny Street
San Francisco, Ca. 94015 CHRIS ROSSI PROPOSAL TO BE SUBMITTED IN THE 1993 PROXY Resolved, that the stockholders of Pacific Telesis recommend that the board of
directors adopt the following policy: As relates to future contracts, the Chief
Executive Officer's total compensation will be determined as follows: The
C.E.O.'s beginning total compensation will be 25 times more than the average
Pacific Telesis employee's 1992 annual wages or salary. The C.E.O.'s total
compensation will go up or down in direct proportions to the company's
performance. To be determined as follows: One half of the compensation shall go
up or down gauged against the eight year average earnings per common share
(adjusted for stock splits) from 1984 to 1991. The remaining one half shall go
up or down gauged against the eight year average dividends per common share
(adjusted for stock splits) from 1984 to 1991. Chris Rossi holder directly of 1000 common shares certificate # 2Q30026331,
2Q82148072, 2Q40146217 I request that my name and address be placed on the 1993 proxy material. If the
company has any objections to this proposal, I request that the company send
their objections to the S.E.C. immediately, so as to allow the proponent a fair
and ample time to respond and object if necessary. Chris Rossi SUPPORTING STATEMENT The purpose of this proposal is to pay the Chief Executive Officer based
entirely on the company's performance. To do this you must pay gauged against
past performance. If the C.E.O. performs better the C.E.O. will be paid more, if
the C.E.O. performs worse, the C.E.O. will be paid less. You also need a
starting point, a base rate of 25 times more than the average employee's
compensation. For example, if the average Pacific Telesis employee earned $ 32,000.00 in 1992,
the C.E.O. would have a beginning total compensation of 25 times more or $
800,000.00. Pacific Telesis eight year average earnings per share is $ 2.51. If
Pacific Telesis earnings per share in 1993 rose 20 % to $ 3.01, one half of the
C.E.O.'s compensation would go up 20 % from $ 400,000.00 to $ 480,000.00. On the
other hand if Pacific Telesis earnings per share in 1993 fell 20 % to $ 2.01,
one half of the C.E.O.'s compensation would fall 20 % to $ 320,00.00. The other
half of the C.E.O.'s compensation, $ 400,000.00 would rise, fall or stay the
same gauged against Pacific Telesis eight year average dividend per share of $
1.72. The following year the process would repeat itself. Shareholder Proposal to Link Executive Officer Compensation to Corporate
Performance. The Shareholders of Pacific Telesis Group recommend that the Board of Directors
amend the current Corporate Executive Officer Compensation Program to strengthen
the linkage between corporate performance and executive compensation. The
amended compensation program will eliminate all executive bonus incentives i.e.
cash, stock options, generous severance packages, low interest loans and so
forth, during any fiscal year in which corporate earnings per split adjusted
share decrease from the previous year. All other aspects for the compensation
plan are to remain in place without significant changes. The amended plan is to
be phased in as existing executive contracts expire. This measure will maximize shareholder value at Pacific Telesis Group for the
following reasons: I.) Linking compensation to performance sends a powerful positive message to the
investment community that Pacific Telesis Group has progressive management that
is confident in the future growth and success of the firm. II.) It encourages excellent performance. The current compensation plan provides
extensive cash and other benefits to corporate officers during poor years. You
are urged to look over the executive compensation section of your proxy
materials, and decide if the compensation is appropriate. III.) Reducing executive compensation during lean years demonstrates to all
employees of Pacific Telesis Group that management is serious about cutting
costs and is willing to set an example. This improves employee moral, and
productivity, which boosts profitability and shareholder value. IV.) Pacific Telesis Group will be able to attract talented corporate executives
with the amended compensation plan. The traditional argument is that these
compensation benefits are market driven and that executives at competing
corporations get extra benefits every year regardless of performance, thus
Pacific Telesis Group must follow suit. Executive officers of Pacific Telesis
Group receive large sets of stock options (refer to proxy materials). The
additional increase in share holder value due to this amended compensation plan
should more than offset decreased executive cash compensation because executive
stock options will become more valuable. From a long term view it will be easier
to attract talented corporate officers with this amended compensation plan. Please read over the discussions for and against this compensation plan, review
executive compensation data and corporate performance and decide what is in your
best interest as a shareholder and vote accordingly.
[INQUIRY LETTER 3]
Robert S. Kopach
4309 San Carlos Dr.
Fairfax, Va 22030
TELEPHONE(703) 591-5334 Dear Sir, As an owner of 83 shares of Pacific Telesis stock I am presenting the following
proposal for the 1993 annual meeting. Resolved: I recommend that the current short term and long term incentive plan
for the executive officers be abolished. The only incentive to be awarded would
be tied proportionately to the price of the stock at the end of the year.
Example if stock price is up 20% from previous year then the incentive is 20% of
salary. Reasons 1. Management is adequately compensated as illustrated in the cash compensation
table. Executives should only receive extra compensation if stock price is up.
That's the incentive, they are rewarded as are the shareholders if stock price
is up. 2. Under the current short and long term incentive plan the executive officers
received over 10% to 20% of their salary last year. This is excessive and
ridiculous. The stock price certainly hasn't increased significantly over the
last year or two. 3. Management needs to be held accountable to the shareholders. Based on my
incentive plan tied to stock price executive officers would be justly
compensated if stock performs well. 4. A vote for this proposal will send a clear message to management that they
need to be responsive to the shareholder. Sincerely Robert S. Kopach Mr. & Mrs. Robert Kopach
4309 San Carlos Dr.
Fairfax, VA 22030
703 (591-5334)
[STAFF REPLY LETTER]
FEB 01 1993 RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE Re: Pacific Telesis Group (the "Company")
Incoming letter dated December 4, 1992 The letter concerns the following three proposals: (1) total compensation for
the chief executive officer should be tied to the Company's performance; (2)
incentive compensation for executive officers should be tied to the Company's
performance; and (3) incentive compensation for executive officers should be
abolished. The Division is unable to concur in your view that the second proposal may
excluded under Rule 14a-8(c)(11) as substantially duplicative of the first
proposal because the second proposal is directed at a different category of
persons. Accordingly, we do not believe that Rule 14a-8(c)(11) may serve as a
basis upon which the Company may exclude the second proposal from its proxy
materials. There appears to be some basis for your view that the third proposal may be
omitted from the Company's proxy materials under Rule 14a-8(c)(11) as
substantially duplicative of the second proposal. Under the circumstances, the
Division will not recommend enforcement action to the Commission if the Company
omits the third proposal from its proxy statement in reliance on Rule
14a-8(c)(11). In reaching a position, the Division has not found it necessary to address the
alternative basis upon which the Company relies for the omission of the third
proposal. Sincerely, Amy Bowerman Freed
Special Counsel
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