Company Name: W.R. Grace & Co.
Public Availability Date: 02-29-1996
[INQUIRY LETTER 1]
W. R. GRACE & CO.
ONE TOWN CENTER ROAD
BOCA RATON, FL 33486-1010
TELEPHONE(407) 362-1645 January 08, 1996 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Omission of Shareholder Proposal from Proxy Materials Ladies and Gentlemen: On behalf of W. R. Grace & Co., a New York corporation ("Company"), I enclose
pursuant to Rule 14a-8(d) under the Securities Exchange Act of 1934, a proposal
("Proposal") and supporting statement submitted by the Amalgamated Bank of New
York LongView Collective Investment Fund ("Proponent") for inclusion in the
Company's Proxy Statement for its 1996 Annual Meeting of Shareholders. For the
reasons set forth below, the Company intends to omit the Proposal from such
Proxy Statement and respectfully requests that the Staff advise the Company that
it will not recommend any enforcement action to the Securities and Exchange
Commission ("Commission") if the Proposal is so omitted. The Company expects to
file its definitive Proxy Statement with the Commission on or about March 29,
1996. The Proposal The Proposal requests that the board of directors of the Company ("Board")
commit the Company to the goal of creating a "high-performance workplace" based
on policies of workplace democracy and meaningful worker participation, and to
prepare a report identifying the extent to which the Company is implementing a
high-performance workplace based on those policies, using the criteria set forth
in the U.S. Department of Labor's 1994 publication, Road to High-Performance
Workplaces: A Guide to Better Jobs and Better Business Results ("1994 DOL
Report"). The 1994 DOL Report discusses the criteria that the Proponent asks the Company
to use to measure its performance, including, among other things, employee
training, employee participation in workplace decisions, the Company's
organizational structure, labor-management partnerships, performance- and
skill-based compensation, the work environment and the integration of human
resource policies and workplace practices with business strategies. The Proposal
appears to ask the Board to cause the Company to implement the employment
practices described in the 1994 DOL Report. Reason for Omission The Company submits that the Proposal may be omitted from its Proxy Statement
pursuant to Rule 14a-8(c)(7) because it deals with a matter relating to the
conduct of the Company's ordinary business operations. A stockholder proposal "relating to the conduct of the ordinary business
operations" may be excluded from a company's proxy statement pursuant to Rule
14a-8(c)(7). In its 1976 interpretive Release, the Commission stated that "where
proposals involve business matters that are mundane in nature and do not involve
any substantial policy or other considerations, the (ordinary business
exception) may be relied upon to omit them." Release No. 34-12999 (November 22,
1976). The Staff has consistently recognized that proposals relating to
day-to-day employment practices involve a company's ordinary business operations
and may therefore be excluded pursuant to Rule 14a-8(c)(7). In the United
Technologies no-action letter (available February 19, 1993), the Staff
explained: "As a general rule, the staff views proposals directed at a company's employment
policies and practices with respect to its non-executive workforce to be
uniquely matters relating to the conduct of the company's 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 the employment and employee training and motivation." The Proposal relates to employee training and motivation, general compensation
issues not focused on senior executives, management of the workplace, employee
supervision and similar matters. Therefore, the Proposal falls squarely into the
list of matters which the Staff has deemed to be excludable. See also the following no-action letters in which the Staff has taken a
no-action position on the omission of proposals relating to the workplace:
American Brands, Inc. (available February 3, 1993) (the portion of a proposal
requesting that the company prepare a report describing its policies and
practices relating to smoking in the workplace relate to the conduct of the
company's ordinary business operations and may be excluded); The Boeing Company
(available February 24, 1993) (proposal requesting that the board of directors
explain publicly certain employment practices relating to compensation of
certain groups of engineers may be omitted because it deals with a matter
relating to the conduct of the company's ordinary business operations); Cracker
Barrel Old Country Store, Inc. (available October 13, 1992) (proposal requesting
that the board of directors implement nondiscriminatory employment policies
related to sexual orientation and add explicit prohibitions against such
discrimination to company policy statement may be excluded because it related to
the company's ordinary business operations); NYNEX Corporation (available
February 10, 1989) (proposal relating to a review of the risks associated with
the use of video display terminals by the company's employees relates to the
company's ordinary business operations and may be excluded). Moreover, the fact that the Proposal requests that a report be prepared for
dissemination to stockholders does not remove the proposal from the "ordinary
business operations" exception. The Commission has stated that the subject of a
requested report, rather than the fact that the information requested was in the
form of a report, will determine whether a proposal is excludable under the
"ordinary business operations" exception. Release No. 20091 (August 16, 1983).
Since the subject matter of the report requested in the Proposal is the
Company's employment practices and policies, the "ordinary business operations"
exception applies to this portion of the Proposal. Further, the fact that the Proposal is based on a report by the U.S. Department
of Labor does not mean that the Proposal involves "substantial policy or other
considerations." Governmental agencies prepare reports on a wide variety of
topics ranging from urgent matters of important national policy to mundane
matters of little significance. Government reports are one of many sources that
the Company considers in making ordinary business decisions like those covered
by the Proposal. In the past year, two other companies have requested that the Staff take
no-action positions with respect to high-performance workplace proposals made by
the Proponent on the grounds that the proposals related to the company's
ordinary operations and were excludable under Rule 14a-8(c)(7). Amdahl
Corporation (available February 16, 1995) and USAir Group, Inc. (available April
7, 1995). However, the Staff declined to express any view with respect to the
application of Rule 14a-8(c)(7) during the pendency of a lawsuit related to the
Cracker Barrel Old Country Store, Inc. no-action letter discussed above. A final
determination has subsequently been made in such lawsuit, permitting the Staff
to express views with respect to Rule 14a-8(c)(7), in general, and this request,
in particular. In accordance with Rule 14a-8(d), enclosed are six copies of this letter, the
Proposal and the supporting statement. I am also forwarding a copy of this
letter to the Proponent's counsel to notify it of our intention to omit the
Proposal from the Company's Proxy Statement. I would appreciate receiving the Staff's response on this matter as soon as
possible. Please contract the undersigned or Jeff Mattson of this office (407/362-1644) if
you have any questions or if you need any additional information. Very truly yours, Robert B. Lamm Enclosures cc: Cornish F. Hitchcock, Esq. (w/o encls.)
(Counsel to LongView Collective
Investment Fund) J. M. Mattson
[INQUIRY LETTER 2]
CORNISH F. HITCHCOCK
ATTORNEY AT LAW
1600 20TH STREET, N.W.
WASHINGTON, D.C. 20009-1001
TELEPHONE(202) 588-7724 December 11, 1995 Robert H. Beber, Esq.
Executive Vice President and General Counsel
W.R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010 Via Federal Express and facsimile (407) 362-2193 Re: Shareholder proposal for 1996 annual meeting Dear Mr. Beber: On behalf of the Amalgamated Bank of New York LongView Collective Investment
Fund, I hereby submit the enclosed shareholder proposal for inclusion in the
proxy statement which W.R. Grace & Co. plans to circulate to shareholders in
conjunction with the Company's 1996 annual meeting of shareholders. The proposal
is being submitted under the Securities and Exchange Commission's proxy
solicitation rules, and it asks the Board of Directors to commit the company to
the goal of a high performance workplace based on policies of workplace
democracy and meaningful worker participation and to prepare a report on the
subject. The Fund is the beneficial owner of more than $1000 of W.R. Grace common stock,
held of record by the Amalgamated Bank of New York; it has owned those shares
for over a year and plans to continue to own them through the date of the 1996
annual meeting. If you require additional information, please let me know. Very truly yours, Cornish F. Hitchcock
Counsel to LongView Collective Investment Fund SHAREHOLDER RESOLUTION RESOLVED: That the shareholders of W.R. Grace & Co. request that the Board of
Directors commit our Company to the goal of creating a high-performance
workplace based on policies of workplace democracy and meaningful worker
participation, and prepare a report at reasonable expense identifying the extent
to which the Company is implementing a high-performance workplace based on those
policies, using the criteria set out in the U.S. Department of Labor's 1994
report, Road to High-Performance Workplaces: A Guide to Better Jobs and Better
Business Results (the "1994 Report"). SUPPORTING STATEMENT The American workplace is undergoing significant changes and restructuring to
meet the challenges of global competition in the 21st century. W.R. Grace & Co.
should be a leader in creating a workplace that allows it to compete in a global
marketplace. At present, some companies are working to create "high-performance workplaces"
through policies that emphasize employee training, compensation linked to
performance, direct and effective employee involvement in corporate
decision-making, employment security, and a supportive work environment. In an August 1993 report entitled High Performance Work Practices and Firm
Performance (the "1993 Report"), the U.S. Department of Labor found that
high-performance work practices are positively related to both productivity and
long-term financial performance, and that innovative workplace practices may be
crucial to the competitiveness of American industry. In its 1994 Report, the Labor Department published a detailed checklist of
criteria which companies can use to measure their progress towards achieving a
high-performance workplace. We believe that high-performance work practices will enhance the Company's
ability to attract, develop and keep good people. In recent year, Fortune's
annual survey of most admired corporations has placed a company's ability to
attract, develop and keep good people among the top three measurements of
corporate reputation. Effective employee participation is crucial to developing a high-performance
workplace. Moreover, Congress has recognized the value of a more supportive and
productive workplace by enacting such laws as the Family and Medical Leave Act
and the Americans with Disabilities Act. The Labor Department's 1993 Report indicated that "there appears to be a
widespread firm interest in using new workplace practices." The Labor Department
is encouraging companies to create high-performance workplaces as a way to boost
American competitiveness, and it has encouraged investors to consider workplace
practices in making their decisions. However, investors may lack sufficient data
to evaluate corporate efforts to create a high-performance workplace. Therefore
we ask the Company to affirm its commitment to these principles and to prepare a
report on its actions implementing them. WE URGE YOU TO VOTE FOR THIS RESOLUTION!
[INQUIRY LETTER 3]
CORNISH F. HITCHCOCK
ATTORNEY AT LAW
1600 20TH STREET, N.W.
WASHINGTON, D.C. 20009-1001
TELEPHONE(202) 588-7724 January 25, 1996 Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Shareholder proposal of Amalgamated Bank of New York
LongView Collective Investment Fund of W.R. Grace & Co. Ladies and Gentlemen: On behalf of the Amalgamated Bank of New York LongView Collective Investment
Fund (the "Fund"), I write in response to the letter from W.R. Grace & Co. dated
8 January 1996. The Grace letter asks you to issue a no-action letter stating
that the Division will not recommend enforcement action to the Commission if
Grace omits the Fund's resolution from the proxy materials which the company
plans to circulate in anticipation of its annual meeting. Based on my review of
the arguments submitted by Grace, and for the reasons stated below, the Fund
respectfully asks you to advise Grace that the Division will recommend
enforcement action should Grace carry out its stated intention to omit the
Fund's resolution from its proxy materials. In brief, the Fund's proposal asks the board of directors to commit Grace to the
goal of creating a high-performance workplace, based on policies of workplace
democracy and meaningful worker participation, and to prepare a report
identifying the extent to which Grace is implementing such a high-performance
workplace, using criteria set out by the U.S. Department of Labor in its 1994
report entitled ROAD TO HIGH-PERFORMANCE WORKPLACES: A GUIDE TO BETTER JOBS AND
BETTER BUSINESS RESULTS. By way of background, the Fund submitted this proposal to several companies last
year, and it came to a vote at three of them: Southwest Airlines, where it
obtained 14.5% of the vote, USAir Group, Inc., where it obtained 9% of the vote,
and Amdahl Corporation, where it obtained 4.6% of the vote. The "ordinary
business" exclusion which Grace cites as its reason for omitting the Fund's
resolution was raised by USAir and Amdahl with the Division last year, but the
Division declined to consider the issue, owing to the pendency of the Cracker
Barrel litigation. Thus, the issue is one of first impression for the Division. Policy significance of the high-performance workplace issue under Rule
14a-8(c)(7). Grace argues that the Fund's resolution relates to its "ordinary business
operations" and can thus be excluded under the Rule 14a-8(c)(7). The (c)(7)
exclusion, as construed in a 1976 Release which accompanied that rule, Exchange
Act Release No. 12999, 41 Fed. Reg. 52994 (1976), consists of a two-part test
which asks whether proposals involve business matters that are "mundane in
nature" and also "do not involve any substantial policy or other
considerations." The courts have uniformly held that this criterion still
governs here. New York City Employees' Retirement System v. SEC, 43 F.3d 7 (2d
Cir. 1995); Amalgamated Clothing and Textile Workers Union v. Wal-Mart Stores,
Inc., 821 F. Supp. 877 (S.D.N.Y. 1993)("ACTWU v. Wal-Mart"); Roosevelt v. E.I.
Du Pont de Nemours & Co.,
958 F.2d 416 (D.C. Cir. 1992). Contrary to Grace's
arguments, the high-performance workplace issue is not "mundane," and is plainly
not devoid of "any substantial policy or other considerations," as we now
explain. The concept of a high performance workplace has been a topic of much policy
debate in recent years. As the economy becomes more global in nature, companies
have increasingly sought to introduce innovative workplace practices which make
them more nimble and better able to compete. Those practices generally focus on
fast-paced decision making, few layers of command, team-based operations and
other techniques which give employees more rights and responsibilities, as well
as greater voice in the company. Such practices are known collectively as
high-performance workplace practices and include the following common
characteristics: greater employee involvement in corporate decision-making;
compensation being linked to performance; firm training programs; job security;
and a supportive work environment. The U.S. Department of Labor summarized the available research on this emerging
area in a 1993 report, which the Fund's resolution also cites, entitled HIGH
PERFORMANCE WORK PRACTICES AND FIRM PERFORMANCE. A copy of the text portion is
enclosed for your convenience. The DOL 1993 report states (at 15) that,
according to the available evidence, "there is a positive correlation between
high performance work practices and long-term financial performance." The
specific evidence was said to show that "specific practices such as training,
alternative pay systems, and alternative pay systems, and employee involvement
are often associated with higher productivity." Moreover, the "analysis of
financial indicators reinforces the findings that stronger firm performance is
associated with systems of high performance work practices." Id. There is not unanimity on the subject, however. The Department's 1993 report
noted "some reluctance by firms and workers to adopt such practices," a
reluctance fueled in part by "a lack of understanding or information about high
performance work systems." To remedy that "information gap," the Labor
Department explained it was undertaking a "comprehensive" effort to "disseminate
information and knowledge about new workplaces and their effects, and to foster
further investigation." Id. The Labor Department's 1994 report, which the Fund's
resolution also cites, sought to reduce the information gap by setting out 33
criteria which companies can ask themselves to see if they are using
high-performance workplace principles. To the same effect is HIGH-PERFORMANCE WORKPLACES: IMPLICATIONS FOR INVESTMENT
RESEARCH AND ACTIVE INVESTING STRATEGIES, a 1994 report prepared by the Gordon
Group for the California Public Employees' Retirement System. A copy is enclosed
for your convenience. That report analyzed the performance of companies with
good workplace practices and some of those identified as having sub-standard
practices, and it made a series of findings, one of which (at 2) is that
high-performance workplace practices "may be beneficial for corporate
performance." The Gordon report noted a dearth of publicly-available information that
investors could use to evaluate the extent to which companies are successfully
implementing high-performance workplace practices. It explained that in the
aggregate, "firms with poor workplace practices have lower valuations than their
peers with reputations for positive workplace practices." Id. at 3. Thus, it may
be reasonable for indexed investors (such as the Fund) to "consider using
workplace practices as one input into its selection of firms on which it will
concentrate as part of its active corporate governance program." Id. The Gordon report continued: "At such companies, efforts to improve the quality
of the workplace, in conjunction with efforts to improve the quality of other
aspects of corporate policy and performance, may have a positive long-run effect
on valuation and, hence on stock returns. If it is possible to engender positive
changes in these practices at poorly-performing companies, the result may be a
reduction in the performance shortfall and an increase in valuation for
companies that are regarded as having poor practices in this area." Id. High-performance workplace practices have also been considered by a blue-ribbon
committee convened by the Secretaries of Labor and Commerce and known informally
as the "Dunlop Commission" after its chairman, former Labor Secretary John T.
Dunlop. In May 1994, the Dunlop Commission issued a 163-page document entitled
FACT FINDING REPORT: COMMISSION ON THE FUTURE OF WORKER-MANAGEMENT RELATIONS,
which summarized and sought public comment on the Commission's factual findings,
which were prepared after 17 days of hearings and testimony from over 350
witnesses. The preface to that report noted that one of the three principal questions the
Dunlop Commission was asked to address was "What (if any) new methods or
institutions should be encouraged, or required to enhance work-place
productivity through labor-management cooperation and employee participation?"
The report summarized the experience at a number of companies, and one of the
major factual findings was (at 46) that where employee participation is
sustained over time and integrated with other policies and practices, it
generally improves economic performance of the company. A copy of the summary of
this report is enclosed for convenience. Finally, in July 1994, the Labor Department issued Interpretive Bulletin 94-2,
codified at 29 C.F.R. §2509.94-2, which summarizes the Department's views with
respect to the duty of employee benefit plan fiduciaries to vote their proxies
appurtenant to shares of corporate stock held by their plans. See 54 Fed. Reg.
38860 (29 July 1994). Among other topics, paragraph (3) of that Bulletin advises
that corporate government activities by such investors are consistent with their
fiduciary obligations under ERISA if there is a reasonable expectation that
communications with management are likely to enhance the value of the plan's
investment in the corporation. See id. at 38864 (col. 3). Among the issues which this Labor Department Bulletin highlighted as appropriate
for shareholder activity are "the nature of long-term business plans, the
corporation's investment in training to develop its work force, other workplace
practices and financial and non-financial measures of corporate performance."
Id. That description fits the Fund's proposal here to a T. The SEC acknowledged that Labor Department's activity in Release No. 33-7101,
Safe Harbor for Forward Looking Statements, 54 Fed. Reg. 52723 (19 October
1994). In that Concept Release, the Commission noted that there "appears to be
increasing interest, on the part of both registrants and users of their
financial reports in the investor and analyst communities, in enhanced
disclosure of information that may affect corporate performance but is not
readily susceptible of measurement in traditional, quantitative terms. Id. at
52726 (footnote omitted). Among the qualitative information identified by the
Commission was "workforce training and development," the Commission adding that
Labor Secretary Reich had urged Chairman Levitt to provide for "more corporate
disclosure of the use of measure of `high performance workplace practices and
other nontraditional measures' of corporate performance. Id. (footnote omitted). Release No. 33-7101 went on to note that one large public pension fund "factors
labor-management relations and other aspects of human resource management into
analyses of portfolio company performance in connection with the fund's
investment and voting decisions, based on research indicating that workplace
practices can be linked to corporate performance." Id. The Release added that
"private pension fund fiduciaries such as the Fund are likely to follow this
example, given the Department of Labor's recent issuance of an interpretative
bulletin cited above urging such fiduciaries to monitor more closely portfolio
companies' investment in training and otherwise developing their workforce." Id.
(footnote omitted). Analysis. These authorities lead to several conclusions establishing that the Fund's
resolution cannot be excluded on "ordinary business" grounds. First, the available data suggest that the use of high-performance workplace
practices can have a positive effect on corporate productivity and, with it,
firm performance. Second, perhaps reflecting the emerging nature of this topic as a policy
question, publicly available data on a particular company's workplace practices
can be difficult to come by. As a result, institutional investors (such as the
Fund) use shareholder resolutions as a way to communicate with companies (such
as Grace) about what the company is doing to improve productivity and ultimately
performance. Third, the topic of high-performance workplace practices unquestionably has a
"substantial policy" component and cannot be dismissed as "mundane." By
submitting this resolution, the Fund is doing exactly what the Secretary of
Labor has approved as part of the Department's high-profile campaign to foster
public discussion of high-performance workplace practices. Nor is the Labor
Department the only entity which has focused on the issue, with the Dunlop
Commission contributing to the public debate through a series of hearings and a
report on the future of worker-management relations in the current economic
setting. The Fund's resolution thus raises "policy" issues at least as "substantial" as
those in other resolutions on other topics. For example, in ACTWU v. Wal-Mart,
the district court enjoined a company from using the (c)(7) exclusion to omit a
resolution dealing with affirmative action and equal employment opportunity. As
evidence of the current "policy" significance of those subject, the district
court cited such factors as congressional passage of the Civil Rights Act and
the Glass Ceiling Act of 1991 shortly before the resolutions at issue there has
been submitted. Similarly, in New York City Employees' Retirement System v. Dole
Food Co., 795 F. Supp. 95 (S.D.N.Y.), vacated as moot,
969 F.2d 1430 (2d Cir.
1992), the district court enjoined Dole from excluding a proposal seeking a
report on the impact which various national health care proposals might have on
the company. The national debate on that topic, which in 1992 was still somewhat
inchoate, was a factor in the court's conclusion that the topic involved
something more than mundane questions about benefit levels for Dole employees. The Fund's resolution is valid under the SEC's 1976 criteria for determining
which proposals are properly excludable under the (c)(7) exclusion. In the
Release accompanying the 1976 rewrite of Rule 14a, the Commission cited an
example involving a proposal that PEPCO not use nuclear energy as a power
source. The staff at the time had agreed with PEPCO's claim that this proposal
could be excluded as involving only mundane issues about PEPCO's choice of fuel
mix and what type of electrical generation to use. The Commission cited that
letter as an example of how not to construe the "ordinary business" exception.
Just about any proposal can be characterized so as to make the issue seem
mundane, which is why the Commission stressed that a company should also be
obliged to show the absence of a substantial policy component. See 41 Fed. Reg.
at 52998. As the PEPCO example illustrated, a utility's decision to proceed with
a nuclear plant at a time of debate over the issue cannot be deemed mundane and
no more significant to shareholders than questions about who gets a spot in the
executive parking lot or whether the employee health plan should pay for dental
care. This analysis also answers the points raised by Grace in opposition to the
Fund's proposal. Grace acknowledges that the 1976 Release provides the proper starting point, but
it dismisses our reliance on the Labor Department statements and the like,
reasoning that government agencies issue reports all the time and the fact a
report has been issued does not give its subject matter a "policy" dimension. This argument tacitly concedes our point, for the pertinent question under the
1976 Release is whether the topic of a resolution "does not involve any"
substantial policy issue, and cannot prove the absence of such an issue. If
anything, Grace's argument misunderstands, and is unduly dismissive of, the
importance of the authorities we cite. At a time of limited government
resources, the Department of Labor and a national commission voluntarily decided
to deploy those scarce resources on the high-performance workplace, thus
limiting the government's ability to address other "policy" issues. This is a
good indication that a substantial policy question exists here. Moreover, we are
not dealing with a situation where the Labor Department was content to issue a
report and then sit back and let the report gather dust on a shelf. As the
Commission noted in Release No. 33-7101, the Secretary of Labor has urged the
Chairman of the Commission to provide for "more corporate disclosure of the use
of measures of `high performance workplace practices and other nontraditional
measures' of corporate performance." That is exactly the sort of investor
information the Fund seeks here. Without conceding the point, even if the issue of a high-performance workplace
was at one time an issue of limited or academic concern, these developments
indicate how it has crossed over into the "policy" domain, in much the same way
that the Division once viewed other issues (plant closings, executive
compensation, divesting tobacco-related divisions) as "ordinary business," but
held that those topics lost their "ordinary" character once they became the
subject of policy discussions in Congress and other public fora. The no-action letters cited by Grace are also light years away from this one and
provide no basis for granting Grace any no-action relief. Grace relies upon the Division's position in Cracker Barrel Old Country Stores,
Inc., 1992 SEC No-Act. LEXIS 984 (13 October 1992), later affirmed by the
Commission. Cracker Barrel stated that "the fact that a shareholder proposal
concerning a company's 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." Id.
at *2-*3. That position was reaffirmed by the Division in another letter which
Grace cites, United Technologies Co., 1993 SEC No-Act. LEXIS 288 (19 February
1993), which was derivative of Cracker Barrel and did not involve the type of
policy considerations at issue here. We respectfully submit that this argument is untenable for two reasons. First,
it is inconsistent with the "substantial policy" criterion set out in the
Commission's 1976 Release. Indeed, ACTWU v. Wal-Mart held that Cracker Barrel
was flawed and should not be followed because it was inconsistent with the
"substantial policy" standard. 821 F. Supp. at 888-89. As that case pointed out,
the Division normally advises requesters of no-action relief that Division
interpretations are not definitive constructions of the Rule, while court
rulings are. Moreover, the Second Circuit's subsequent opinion in NYCERS v. SEC
did not opine on the substantive validity of Cracker Barrel in the course of
lifting the district court's injunction in that case, confining its analysis to
the procedural issues presented. Thus, we respectfully ask the Division to
adhere to the interpretation ratified in ACTWU v. Wal-Mart and to advise that
the resolution at issue here cannot be excluded under Rule 14a-8(c)(7). Second, and alternatively, even if the Division should regard Cracker Barrel as
stating a valid interpretation of Rule 14a-8(c)(7) in some circumstances, that
interpretation does not control here. The Cracker Barrel interpretation took the
position that employment-related issues that are "tied to a social issue" will
no longer be viewed as excludable. Questions about the high-performance
workplace are not "tied to a social issue" of the sort the Division identified
in granting no-action relief in BE Aerospace, 1995 SEC No-Act. LEXIS 527 (31 May
1995), which involved the "social issue" of Northern Ireland. We deal here with
a performance issue, one which has always been identified and analyzed as such
by the Department of Labor, the Dunlop Commission and the Gordon Group study. Additionally, for the reasons cited above, the Fund's resolution here is
distinguishable from the resolutions Grace cites which the Division deemed
excludable. The public policy issues surrounding the high-performance workplace
transcend "mundane" questions such as compensation for a certain non-executive
company engineers, Boeing Co., 1993 SEC No-Act. LEXIS 289 (24 February 1993);
the marketing of cigarettes, American Brands, Inc., 1993 SEC No-Act. LEXIS 147
(2 February 1993); the use of video display terminals instead of typewriters,
NYNEX Corp., 1989 SEC No-Act. LEXIS 230 (10 February 1989); as well as specific
questions about corporate policy on sick leave, vacation policy, employee
benefits, firing policies and the like. Conclusion. For all of these reasons, then, Grace has not carried its burden of persuading
the Division that the Fund's resolution can be excluded from its proxy
materials, and we ask the Division to so advise the company. The cited
authorities provide the foundation for concluding that high-performance
workplace practices are at the heart of a substantial policy debate now taking
place in corporate America, as companies seek to position themselves for the
competitive challenges lying ahead. The Fund is seeking to have a dialogue with
Grace and its shareholders over these issues, which affect productivity and firm
performance and which the Labor Department is urging investors to discuss with
companies as part of an investment strategy designed to boost productivity and
corporate performance. Surely, if the Department of Labor is engaged in a highly
visible campaign to focus public attention on workplace issues and has issued an
Interpretative Bulletin telling investors they may communicate with management
about a company's "investment in training to develop its work force," "other
workplace practices" and "non-financial measures of corporate performance" as
part of their investment strategy, it cannot be said that the issue is so devoid
of any policy content that the (c)(7) exclusion may properly be invoked. We appreciate this opportunity to respond to Grace's letter, as well as the
Division's consideration of the points made here. Please let me know if you have
any questions or if there is any further information the Fund can provide. Very truly yours, Cornish F. Hitchcock
Attorney for Amalgamated Bank of New York
LongView Collective Investment Fund cc: Robert B. Lamm, Esq.
Vice President and Secretary
W.R. Grace & Co.
[STAFF REPLY LETTER]
February 29, 1996 RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE Re: W.R. Grace & Co. (the "Company")
Incoming Letter dated January 8, 1996 The proposal requests that the board of directors commit the Company to the goal
of creating a "high-performance" workplace based on policies of workplace
democracy and meaningful worker participation, including training and continuous
learning programs for employees, information sharing by management and
employees, employee participation in quality control and safety, input involving
the organizational structure of the company, linking compensation to job
performance, employment security, supportive work environment, and management of
the workplace. The proposal also requests that the Company prepare a
stockholders' report for the next annual meeting detailing the extent to which
the Company has implemented the proposal. There appears to be some basis for your view that the proposal may be excluded
under Rule 14a-8(c)(7) since it deals with a matter related to the Company's
ordinary business operations (i.e., employment related matters). Accordingly,
the Division will not recommend enforcement action to the Commission if the
Company omits the proposal from its proxy materials. Sincerely, Andrew A. Gerber
Attorney-Advisor
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