Company Name: General Electric Co.
Public Availability Date: 01-28-1997
[INQUIRY LETTER 1]
GENERAL ELECTRIC COMPANY
3135 EASTON TURNPIKE
FAIRFIELD, CT 06431
TELEPHONE(203) 373-2442 December 20, 1996 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549 Re: Omission of Share Owner Proposal by Paul J. Sheehan M.D. Gentlemen and Ladies: This letter is to inform you, pursuant to Rule 14a-8(d) under the Securities
Exchange Act of 1934 (the "Exchange Act"), that General Electric Company ("GE")
intends to omit from its proxy statement for its 1997 Annual Meeting the
following resolution and its supporting statement ("Proposal) that GE received
from Paul J. Sheehan M.D.: "Be it resolved that all future stock options be granted at the market price, in
U.S. dollars, of shares on the day options are granted, and the grant price be
indexed for inflation, from the date of grant until the date of exercise, using
the U.S. government determined CPI; And be it further resolved that previously granted options which remain
unexercised at the time of passage of this proposal be amended to reflect this
stock options grant cost determination change." A copy of the Proposal is enclosed. It is GE's opinion that the Proposal is excludable pursuant to: (i) Rule
14a-8(c)(7) because the Proposal relates to the ordinary business operations of
GE; (ii) Rule 14a-8(c)(1) because the Proposal is not a proper subject for
action by GE share owners; and (iii) Rule 14a-8(c)(9) because the Proposal is
counter to a proposal to be submitted by GE at the 1997 Annual Meeting. I. The Sheehan Proposal Relates to the Ordinary Business Operations of GE. Rule 14a-8(c)(7) states that a registrant may omit a shareholder proposal from
its proxy statement if the proposal "deals with a matter relating to the conduct
of the ordinary business operations of the registrant." Since the Proposal deals
with matters relating to GE's general non-executive program, GE may properly
omit the Proposal pursuant to Rule 14a-8(c)(7). Dr. Sheehan submitted the identical proposal to Central and South West
Corporation. By letter dated November 26, 1996, the Staff of the Division of
Corporation Finance ("Staff") advised Central and South West Corporation that
the proposal submitted to it could be excluded pursuant to rule 14a-8(c)(7). In
this regard, the Staff noted that the proposal was directed at matters relating
to the conduct of the Company's ordinary business operations (i.e., general
compensation matters). Accordingly, the Staff advised that it would not
recommend enforcement action to the Commission if the Company omitted the
proposals from its proxy materials in reliance upon rule 14a-8(c)(7). Central
and South West Corporation (November 26, 1996). As was the case with Central and South West Corporation, GE also grants options
to key employees far beyond the executive ranks. As disclosed in GE's 1996 proxy
statement, GE has granted options to almost 22,000 employees below the executive
officer level under its 1990 Long Term Incentive Plan (the "1990 Plan") as part
of its broad-based stock option program. The Proposal is not limited to options granted to executive officers of GE, but
rather clearly applies to "all future stock options" and "previously granted
options which remain unexercised," regardless of whether they are held by
executive officers or other key employees. Therefore, the Proposal clearly falls
within the "ordinary business operations" exclusion of Rule 14a-8(c)(7), and the
Staff of the Division specifically so held in Central and South West
Corporation, supra. II. The Proposal Is Not a Proper Subject for Action by GE Share Owners. Rule 14a-8(c)(1) states that a registrant may omit a shareholder proposal from
its proxy statement if the proposal is "not a proper subject for action by
security holders." The Proposal would require that GE grant only indexed
options, leaving no discretion to Board of in administering GE's stock option
program. A shareholder proposal "that mandates certain action by the
registrant's board of directors may not be a proper subject for shareholder
action." Note 1 to Rule 14a-8(c)(1). See, e.g., Ford Motor Company (February 29,
1996); Amoco Corporation (February 8, 1994). In the absence of a specific provision giving the power directly to the share
owners, a New York corporation's business and affairs are managed under the
direction of the board of directors. See Section 701 of the New York Business
Corporation Law (the "NYBCL"). No provision of New York law confers such power
or the share owners directly, and no provision of the GE Articles of
Incorporation or By-Laws does so either. Under New York law, the Board of
Directors of GE determines the form and level of compensation for employees and
directors of GE. Section 505(a)(1) of the NYBCL specifically provides that the
board of directors (or a committee of the board), not the share owners, of New
York corporations may grant options and other rights to acquire securities of
the corporation. Accordingly, the Proposal cannot properly mandate that GE take any action with
respect to options. Therefore, it is not a proper subject for share owner action
under Rule 14a-8(c)(1). III. The Proposal Is Counter to a Proposal To Be Submitted by GE at the 1997
Annual Meeting. Rule 14a-8(c)(9) states that a registrant may omit a shareholder proposal from
its proxy statement if the proposal is "counter to a proposal to be submitted by
the registrant at the meeting." At the present time, GE intends to submit for
share owner action at the 1997 Annual Meeting a proposal to amend and restate
the 1990 Plan. That management proposal does not include any requirement that
options granted under the 1990 Plan be indexed for inflation as would be
required by the Proposal, but rather specifically provides the Committee with
broad discretion to determine the purchase price per share of option grants,
provided that the purchase price is not less than the market price of the stock
on the date of grant. The Proposal, which calls for the indexing of all options, would clearly be
counter to the GE proposal to amend and restate the 1990 Plan because an
affirmative vote on both proposals would result in an inconsistent, ambiguous
and inconclusive mandate from the share owners. Under the 1990 Plan, as it
currently exists and as it is to be submitted to share owners at the 1997 Annual
Meeting, the Committee has and will have broad discretion to fashion the terms
and conditions of option grants, including the grant price. The Proposal would
be inconsistent with that broad discretion and would, if adopted, lead to
ambiguous and inconclusive results at the 1997 Annual Meeting. The Staff has stated in such circumstances that shareholder proposals regarding
stock option plans which are counter to management proposals regarding such
plans to be submitted at the same meeting of shareholders may be properly
omitted pursuant to Rule 14a-8(c)(9). See, e.g., SBC Communications, Inc.
(February 2, 1996); Cellular Communications, Inc., supra; IBS Financial
Corporation (December 7, 1994); U.S. West, Inc., supra; American Home Products
Corporation (December 10, 1993); International Banknote Company, Inc. (March 31,
1988); Metro-Goldwyn-Mayer, Inc. (October 15, 1979); Richardson-Merrell Inc.
(July 31, 1979); General Mills, Inc. (July 6, 1979). * * * For the foregoing reasons, GE respectfully requests the concurrence of the Staff
in GE's determination to omit the Proposal from GE's proxy statement for its
1997 Annual Meeting. Five additional copies of this letter and attachment are enclosed pursuant to
Rule 14a-8(d) under the Exchange Act. By copy of this letter, the proponent is
being notified that GE does not intend to include the Proposal in its proxy
statement. It is expected that GE's definitive proxy materials will be filed with the
Commission on or about March 11, 1997, the date on which GE will begin mailing
the proxy statement to its share owners. In order to meet the printing and
distribution requirements, GE intends to start printing the proxy statement on
or about February 9, 1997. GE's 1997 Annual Meeting is scheduled to be held on
April 23, 1997. If you have any questions, please do not hesitate to call me at (203) 373-2442. Very truly yours, Eliza W. Fraser Enclosure cc: Paul J. Sheehan M.D.
1317 Fountainhead Drive
St. Louis, MO 63138-3333 Frank G. Zarb, Jr,
Special Counsel
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
[INQUIRY LETTER 2]
GENERAL ELECTRIC COMPANY
3135 EASTON TURNPIKE
FAIRFIELD, CT 06431
TELEPHONE(203) 373-2442 January 24, 1997 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549 Re: Omission of Share Owner Proposal by Paul J. Sheehan M.D. Gentlemen and Ladies: This letter supplements our previous submission to you dated December 20, 1996
(the "Initial Submission") informing you, pursuant to Rule 14a-8(d) under the
Securities Exchange Act of 1934 (the "Exchange Act"), that General Electric
Company ("GE") intends to omit from its proxy statement for its 1997 Annual
Meeting the following proposal which it received from Paul J. Sheehan, M.D. (the
"Proposal"): Be it resolved that all future stock options be granted at the market price, in
U.S. dollars, of shares on the day options are granted, and the grant price be
indexed for inflation, from the date of grant until the date of exercise, using
the U.S. government determined CPI; And be it further resolved that previously granted options which remain
unexercised at the time of passage of this proposal be amended to reflect this
stock options grant cost determination change. Copies of the Proposal and the supporting statement are attached to the Initial
Submission. As stated in the Initial Submission, it is GE's opinion that the Proposal is
excludable pursuant to (i) Rule 14a-8(c)(7) because the Proposal relates to the
ordinary business operations of GE; (ii) Rule 14a-8(c)(1) because the Proposal
is not a proper subject for action by GE share owners; and (iii) Rule
14a-8(c)(9) because the Proposal is counter to a proposal to be submitted by GE
at the 1997 Annual Meeting. As described more fully in the Initial Submission, GE believes that the Proposal
may be omitted under Rule 14a-8(c)(9) because it is counter to a proposal
sponsored by GE to amend and restate its 1990 Long Term Incentive Plan (the
"1990 Plan"). Since the date of the Initial Submission, it has come to our
attention that the Staff of the Division of Corporation Finance ("Staff") has
granted a no-action request based upon Rule 14a-8(c)(9) with respect to an
identical proposal by Mr. Sheehan. See AT&T Corporation (December 30, 1996)
("AT&T"). In AT&T, the registrant sought to omit the Sheehan proposal under Rule
14a-8(c)(9) based on its view that it directly conflicted with the terms and
conditions of a new employee stock option plan for which the registrant was
seeking shareholder approval at its annual meeting. In granting the no-action
request, the staff stated: There appears to be some basis for your view that the proposal may be excluded
pursuant to rule 14a-8(c)(9). You represent that a matter to be voted on at the
upcoming shareholders' meeting consists of a proposal sponsored by the Company
seeking approval of a new employee stock option plan with terms and conditions
for the issuance of options that conflict with those set forth in the proposal.
You indicate that the two proposals present alternative and conflicting
decisions for shareholders and that submitting both to a vote could provide
inconsistent and ambiguous results. Accordingly, this Division will not
recommend enforcement action to the Commission if the proposal is omitted from
the Company's proxy materials. As was the case with AT&T, and for the reasons stated in the Initial Submission,
the Proposal directly conflicts with the terms and conditions of GE's proposed
amendment and restatement of the 1990 Plan, and submitting both proposals to a
vote could provide inconsistent and ambiguous results. GE therefore respectfully
requests the concurrence of the Staff in GE's determination to omit the Proposal
from GE's proxy statement for its 1997 Annual Meeting. Five additional copies of this letter and the attachments are enclosed pursuant
to Rule 14a-8(d) under the Exchange Act. By copy of this letter, Mr. Sheehan is
being notified of GE's additional authority for not including the Proposal in
the proxy statement. As stated in the Initial Submission, it is expected that GE's definitive proxy
materials will be filed with the Commission on or about March 11, 1997, the date
on which GE will begin mailing the proxy statement to its share owners. In order
to meet printing and distribution requirements, GE intends to start printing the
proxy statement on or about February 9, 1997. GE's 1997 Annual Meeting is
scheduled to be held on April 23, 1997. If you have any questions, please do not hesitate to call me at (203) 373-2442. Very truly yours, Eliza W. Fraser Enclosures cc: Paul J. Sheehan, M.D.
1317 Fountainhead Drive
St. Louis, MO 63138-3333 Amy M. Trombly
Attorney Advisor
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
cc:
Sisters of Saint Dominic Sister Lorena Reilly
Attn: Sisters Patricia A. Daly,
OP General Treasurer
Corporate Responsibility Office Sisters of Charity of Saint Elizabeth
52 Old Swartswood Station Road P. O. Box 476
Newton, NJ 07860-9337 Convent Station, NJ 07961 Sisters of Charity New York Institute of the Sisters of Mary of the
Mount St. Vincent-on-Hudson Americas
6301 Riverdale Avenue Buffalo Regional Community
Bronx, New York 10471-9930 5245 Murphy Road
Orchard Park, NY 14217 School Sisters of Notre Dame Sister M. Cecile Paulik, Controller
ATTN: Sister Rosemary Dilli,
SSND SSM International Finance, Inc.
Corporation Responsibility
Office 9056 North Deerbrook Trail
6401 N. Charles Street Brown Deer, WI 53223
Baltimore, MD 21212
Peter Lauer, Finance Director
Sisters of Saint Dominic Sisters of the Humility of Mary
555 Albany Avenue Villa Maria Community Center
Amityville, New York 11701 Villa Maria, Pennsylvania 16155 The Sisters of St. Francis of David A Todd, Trustee
Philadelphia Margaret Cullinan Wray Charitable
Our Lady of Angels Convent- Lead Annuity Trust
Glen Riddle 709 East Monroe Street
Aston Pennsylvania 19014 Austin, Texas 78704-3131 Sisters of Saint Joseph Amy Trombly
Mount Saint Joseph Convent Division of Corporation Finance
9701 Germantown Avenue Securities and Exchange
Philadelphia, PA 19118-2693 Commission
450 Fifth Street, N.W.
Glenmary Home Missioners Washington, DC 20549
P. O. Box 465618
Cincinnati, OH 45246-5618
[INQUIRY LETTER 3]
PAUL J. SHEEHAN M.D.
1317 FOUNTAINHEAD DRIVE
ST. LOUIS, MO 63138-3333
TELEPHONE(314) 355-1069 September 30, 1996 Benjamin W. Heineman, Jr.
Secretary
General Electric Company
Fairfield, Conn.06431 Dear Mr. Heineman: Please accept this letter as notification of submission of the following
resolution, to be voted on by the shareholders by proxy and in person at the
next annual meeting. Stockholder proposal concerning indexing stock options price to the Consumer
Price Index (CPI). Whereas stock options are granted to reward those individuals who are
responsible for enhancing shareholder value, as is reflected in increased stock
price, and Whereas real shareholder value is not enhanced at stock price appreciation
levels at or below the rate of inflation, and Whereas the U.S. government determined CPI is an objective and measurable index
of inflation, and Whereas the current stock options program does not take inflation into
consideration, Be it resolved that All future stock options be granted at the market price, in U.S. dollars, of
shares on the day options are granted, and the grant price be indexed for
inflation, from the date of grant until the date of exercise, using the U.S.
government determined CPI. And be it further resolved that
Previously granted options which remain unexercised at the time of passage of
this proposal be amended to reflect this stock options grant cost determination
change. In the following supporting example, representing the current non inflation
indexed options pricing practice, it is assumed that the stock price is
$100/share on the date options are granted, an optionee is granted options on
100,000 shares exercisable over 10 years, and the annual rate of inflation is
3%. A rise in stock price matching the rate of inflation over the 10 year option
period will be $100x(1.03)10--$134/share. If the stock price does nothing but
rise to match the rate of inflation, an optionee exercising all options after 10
years will realize a windfall of 100,000x$34/share--$3,400,000, without any real
shareholder value having been created. After implementation of this proposal, stock options will have no value unless
the stock price appreciation has exceeded the rate of inflation from the date
the options are granted through the date the options are exercised. When the
stock price appreciates at a rate higher than the rate of inflation, real
shareholder value is created. Only real shareholder value increase will result
in profit being realized when options are exercised. If you agree, please mark your ballot FOR this proposal. Please forward to me, at the above referenced address, any questions or
communications related to this proposal. Respectfully submitted Paul J. Sheehan M.D.
[STAFF REPLY LETTER]
January 28, 1997 RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE Re: General Electric Corporation (the "Company")
Incoming letter dated December 20, 1996 The proposal requires the Company to modify its stock option plan(s) so that
unexercised and future options are granted at the market price indexed for
inflation. There appears to be some basis for your view that the proposal may be excluded
pursuant to rule 14a-8(c)(9). You represent that a matter to be voted on at the
upcoming shareholders' meeting consists of a proposal sponsored by the Company
seeking approval of a new employee stock option plan with terms and conditions
for the issuance of options that conflict with those set forth in the proposal.
You indicate that the two proposals present alternative and conflicting
decisions for shareholders and that submitting both to a vote could provide
inconsistent and ambiguous results. Accordingly, this Division will not
recommend enforcement action to the Commission if the proposal is omitted from
the Company's proxy materials. In reaching a position, the staff has not found
it necessary to address the alternative bases for omission upon which the
Company relies. Sincerely, Amy M. Trombly
Attorney Advisor
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