Company Name: E.I. du Pont de Nemours and Co.
Public Availability Date: March 6, 2000
Document Sections:
LETTER OF INQUIRY 1
APPENDIX
LETTER OF INQUIRY 2
STAFF REPLY LETTER
[LETTER OF INQUIRY 1]
December 29, 1999
VIA OVERNIGHT COURIER
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
Attention: Office of the Chief Counsel
Division of Corporation Finance
Mail Stop 3-3, Room 3028
E.I. DU PONT DE NEMOURS AND COMPANY
PROXY STATEMENT2000 ANNUAL MEETING
Ladies and Gentlemen:
This statement and the accompanying materials are submitted on behalf of E. I.
du Pont de Nemours and Company ("DuPont") pursuant to the provisions of Rule
14a-8 of the Securities Exchange Act of 1934. In my opinion, the proposal
submitted by the International Brotherhood of DuPont Workers ("IBDW") may be
properly omitted from DuPont's proxy statement for the reasons set forth in the
attached legal opinion. I request that the staff not recommend any enforcement
action if the proposal is so omitted.
By copy of the statement and the attached opinion, the IBDW is being notified of
DuPont's intention to omit the proposal and supporting statement from its proxy
materials for the 2000 Annual Meeting.
If you have any questions regarding this matter or require additional
information, please call me at (302) 773-7145 or Mary Bowler at (302) 774-5303.
Very truly yours,
Calissa W. Brown
Senior Counsel and Assistant Secretary
CWB: msm
Attachment
99ibdwshareholderprop
cc: with attachment
Carl J. Goodman
President
International Brotherhood of DuPont Workers
P.O. Box 16333
Louisville, KY 40256-0333
[APPENDIX]
December 29, 1999
E. I. du Pont de Nemours and Company
1007 Market Street
Wilmington, Delaware 19898
2000 Proxy Statement
Shareholder Proposal
I am providing this opinion in support of the position that E. I. du Pont de
Nemours and Company ("DuPont" or the "Company") may omit from its 2000 Annual
Meeting Proxy Statement, the shareholder proposal and supporting statement
(together the "Proposal") submitted by the International Brotherhood of DuPont
Workers (the "IBDW"). The Proposal requests DuPont's Board of Directors to
"consider the following nonbinding proposal: That it create a committee, with
members drawn from the employee work force of DuPont, union leadership of
DuPont, the management of DuPont, and any necessary independent consultants, to
report to the Board of Directors regarding the impact to communities as a result
of the closure of DuPont plants and alternatives that can be developed to help
mitigate the impact of such closures in the future." The Proposal is attached as
Exhibit A.*
In my opinion the Proposal may be omitted from DuPont's 2000 Annual Meeting
Proxy Statement under paragraphs (i)(2), (i)(3) and (i)(7) of Rule 14a-8.
Supporting authorities cited in this opinion are attached as Exhibit B.
1. The Proposal will cause the Company to violate
federal law. Rule 14a-8(i)(2).
Under Rule 14a-8(i)(2), a registrant may omit from its proxy statement a
proposal which would cause the registrant to violate federal law. If
implemented, this Proposal would cause DuPont to violate the National Labor
Relations Act.
DuPont is subject to the provisions of the National Labor Relations Act, ("NLRA"
or "Act") which, among other purposes, gives employees the right to bargain
collectively with their employer through duly constituted and recognized
bargaining representatives. 29 U.S.C. Sec. 141 et. seq. Once a union is
recognized under the Act as the representative of employees in a given
bargaining unit, that union becomes the exclusive bargaining agent for the unit.
29 U.S.C. Sec. 158(a)(5). The Act requires the employer to bargain with the
union representatives of that unit over wages, hours and other terms of
employment. Id. Furthermore, as long as the union maintains its status under the
Act, it is unlawful for the employer to engage in negotiations over such terms
and conditions of employment with anyone other than the union representatives of
the bargaining unit. Id.
The Proposal, if implemented, would require the committee to determine the
community impact of plant closures and alternatives to mitigate the impact. It
is unclear what is meant by mitigating alternatives, but alternatives could
include, among other things, changes to severance packages. Changes to severance
packages would be subject to bargaining under the NLRA. The IBDW suggests that
the committee include "DuPont union leadership"; however, there is no clear
DuPont union leadership. One or more unions are present at 23 DuPont sites. In
total, there are more than 30 bargaining units at DuPont. If representatives
from each union were included on the committee contemplated by the Proposal, it
would result in representatives, who are authorized to speak only on behalf of
their own unit, making decisions on behalf of other units. Such cross
representation is prohibited by Section 8 of the NLRA. In addition, the presence
of other employees, DuPont management, and independent consultants on the
committee would similarly violate the NLRA.
In Southwestern Bell Corporation, (available March 16, 1992), the Staff agreed
to refrain from enforcement action if the registrant omitted a proposal which,
if adopted, would require it to establish a committee composed of outside
directors and representatives of employees. The purpose of the proposed
committee was to weigh decisions on closing facilities, among other activities.
Id. The Staff found "some basis" for the view that the proposal, if implemented,
would require the company to violate the NLRA. Similarly, this Proposal, if
adopted, would cause DuPont to violate the NLRA by requiring it to form a
committee to determine certain terms and conditions of employment which must be
negotiated only with the recognized bargaining representative of a unit.
Therefore, the Proposal may be omitted under Rule 14a-8(i)(2).
2. The Proposal is contrary to the Commission's proxy
rules. Rule 14a-8(i)(3).
Rule 14a-8(i)(3) allows for the omission of a proposal from a proxy statement if
the proposal is contrary to any of the Commission's proxy rules and regulations.
Section 14(a) of the Securities Exchange Act, as amended, generally prohibits
the solicitation of proxies without delivering proxy statements and annual
reports. Rule 14(a)-3 states that a proxy statement must contain the information
specified in Schedule 14A. Rule 14a-3(b)(1) states that a proxy statement must
be accompanied or preceded by an annual report.
The IBDW has posted the Proposal on its Internet site. See excerpts from the
IBDW Internet site attached as Exhibit C. According to its Internet site, all of
the IBDW's members are employees of DuPont or its subsidiaries and joint
ventures. Id. From time to time, DuPont's Board of Directors has approved grants
of stock options to all full service employees of DuPont and certain
subsidiaries. In addition, the IBDW's Internet site is freely accessible to
anyone with Internet access. Therefore, it is likely that the Proposal has been
distributed to more than ten DuPont shareholders via its posting on the IBDW's
Internet site. Since the Proposal is not being delivered as part of a proxy
statement and with or preceded by the Company's 1999 Annual Report, the
solicitation of the Proposal is in violation of Rule 14a-3 and Rule 14a-3(b)(1).
To the best of my knowledge and belief, the foregoing fact pattern has never
been before the Staff prior to this request. However, the Staff has stated that
references to a proponent's Internet site in a proxy proposal may violate the
proxy process rules and, therefore, the Staff would not take action if the
proposals were omitted from the relevant proxy statements. See Templeton Dragon
Fund, Inc. (available June 5, 1998) (proposal which referenced Internet site in
supporting statement may violate proxy process requirements of paragraph (b)(1)
or Rule 14a-3); The Emerging Germany Fund, Inc. (available December 22, 1998)
(reference to Internet site in supporting statement may violate proxy process).
In Templeton Dragon Fund, Inc. and The Emerging Germany Fund, Inc. the Staff
based its decision in part on the fact that the proponents' Internet sites,
including the proposals, could be altered at will. Id. Similarly, the Proposal
as posted on IBDW's Internet site can be altered at will; therefore, the posting
of the Proposal subverts the proxy process rules.
For the foregoing reasons, the Proposal may be omitted from DuPont's 2000 Annual
Proxy Statement pursuant to Rule 14a-8(i)(3).
3. The Proposal is false and misleading. Rule
14a-8(i)(3).
Under Rule 14a-8(i)(3), a proposal may be omitted from the registrant's proxy
materials if it "is contrary to the proxy rules and regulations, including Rule
14a-9, which prohibits false and misleading statements in proxy soliciting
materials." The Staff has recognized that vague and indefinite shareholder
resolutions may be misleading and, therefore, may be omitted from proxy
materials. See, Philadelphia Electric Company (available July 30, 1992), U.S.
Industries, Inc. (available February 17, 1983).
The Proposal requests that "the Board of Directors consider the following
nonbinding proposal..." It is unclear whether the Proposal requests the Board
merely to consider forming a committee or actually to form one. Furthermore, the
word "nonbinding" makes it unclear whether the Board must take any action at all
if the Proposal were adopted. If the Proposal were adopted and a committee were
formed, it is unclear whether the committee's findings and decisions would be
binding on the Board or merely advisory. Finally, the Proposal requests that the
Company form a committee which would include "DuPont union leadership." There
are one or more unions present at 23 DuPont sites. In total, there are more than
30 bargaining units at DuPont. Therefore, there is not any recognizable "DuPont
union leadership."
The Staff has not recommended enforcement action against a registrant for
omitting a proposal from its proxy materials when the "action specified by the
proposal is so inherently vague and indefinite that shareholders voting upon the
proposal would not be able to determine with any reasonable certainty exactly
what action or measures would be taken in the event the proposal were
implemented." U.S. industries, Inc., Supra. For the foregoing reasons, the
Proposal is so vague and indefinite that shareholders could not determine with
any reasonable certainty what actions would be taken were the Proposal adopted.
Therefore, the Proposal may be omitted from DuPont's 2000 Annual Proxy Statement
pursuant to Rule 14a-8(i)(3).
In addition, the Proposal is false and misleading because of certain mistakes of
fact. The first paragraph of the Supporting Statement states that total "U.S.
employment has been cut virtually in half over the past decade, from about
100,000 to just over 50,000." In fact, adjusting for the divestiture of Conoco
Inc. in 1999, the number of DuPont employees in the U.S. has declined from
approximately 65,000 to around 50,000 over the past decade. The second, third
and fourth paragraphs of the Supporting Statement give the impression that
DuPont closed its plant in Martinsville, Virginia. In truth, DuPont continues to
operate the plant, albeit with a reduced staff. Therefore, the Supporting
Statement's allegations that the plant cannot be put to productive use and will
not be maintained, but allowed to gradually deteriorate are false.
For the foregoing reasons, the Proposal is false and misleading and may be
omitted from DuPont's 2000 Annual Meeting Proxy Statement pursuant to Rule
14a-8(i)(3).
4. The Proposal deals with the conduct of ordinary
business operations. Rule 14a-8(i)(7).
Under Rule 14a-8(i)(7), a registrant may omit a proposal from its proxy
materials if it "deals with a matter relating to the company's ordinary business
operations." The Proposal requests that the Board of Directors consider creating
a committee to report on the community impact of DuPont plant closings and to
suggest alternatives to mitigate the impact. Prior to 1989, the Staff did not
recommend enforcement action if similar proposals were omitted since they dealt
with "a matter relating to the conduct of the Company's ordinary business
operations." See Weyerhaeuser Company (available December 19, 1986), and United
Technologies Corporation (available February 22, 1989) (Staff would not
recommend enforcement action if proposals to establish a policy on plant
closings and describe measures to reduce impact on employees and communities
were omitted under Rule 14a-8(c)(7)).
In Pacific Telsis Group, available February 2, 1989, the Staff diverged from its
earlier decisions and stated "(I)n light of recent developments, including
heightened state and federal interest in the social and economic implications of
plant closing and relocation decisions, the staff has reconsidered its position
with respect to the applicability of Rule 14a-8(c)(7) to proposals dealing
generally with the broad social and economic impact of plant closings and
relocations. It is the Division's view that such proposals...involve substantial
corporate policy considerations that go beyond the conduct of the Company's
ordinary business operations. Accordingly, we do not believe that the Company
may rely on Rule 14a-8(c)(7) as a basis for omitting the proposal from the proxy
material." Following Pacific Telsis Group, the Staff has refused to allow
registrants to use the conduct of ordinary business operations as grounds to
support the omission of proposals which appear to address significant economic
and other considerations attendant to closing corporate facilities. See Sprint
Corporation (available February 25, 1993), General Dynamics Corporation
(available February 8, 1993), United Telecommunications Inc. (available January
31, 1991).
In Pacific Telsis Group, the Staff stated that it had reconsidered its position
"in light of recent developments, including heightened state and federal
interests in the social and economic implications of plant closings and
relocation decisions." Pacific Telsis Group, Supra. In 1989 the November
unemployment rate for the civilian labor force was 5.4%. See excerpts from the
Bureau of Labor Statistics Internet site attached as Exhibit D. The unemployment
rate for the month of November rose steadily year over year until 1993 when it
began declining to a low of 4.1% in November of 1999. Id. I respectfully suggest
that "the state and federal interests in the social and economic implications of
plant closing and relocation decisions" have waned. Therefore, the Staff should
revert to its position prior to Pacific Telsis Group and treat proposals
concerning the community impact of plant closings as dealing with a company's
ordinary business operations and allow their exclusion from proxy statements
under Rule 14a-8(i)(7).
For the foregoing reasons, it is my opinion that, pursuant to paragraphs (i)(2),
(i)(3) and (i)(7) of Rule 14a-8, DuPont may exclude the Proposal from its 2000
Annual Meeting Proxy Statement.
* Not made Publicly available by the SEC
Very Truly Yours,
Calissa W. Brown
Senior Counsel
attachments
[LETTER OF INQUIRY 2]
January 7, 2000
SENT BY FAX WITHOUT ATTACHMENTS
SENT BY OVERNIGHT MAIL WITH ATTACHMENTS
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
Attention: Office of Chief Counsel
Division of Corporation Finance
Mail Stop 3-3, Room 3028
Re: E.I. Dupont DeNemours & Co. Proxy Statement, 2000 Annual Meeting
Response of Proponent International Brotherhood of Dupont Workers to
Dupont's Intention to Omit the Proposal and Supporting Statement
Dear Sir or Madam:
I serve as the general counsel for the International Brotherhood of Dupont
Workers (IBDW) and am writing to you at the request of Carl Goodman, the
president of the IBDW. Mr. Goodman has provided me with correspondence dated
December 29, 1999 from Dupont which requests that the Securities and Exchange
Commission (SEC) not recommend any enforcement action if the proposal submitted
on behalf of the IBDW is omitted from Dupont's proxy statement.
The first argument advanced by Dupont is that the proposal will cause the
Company to violate the National Labor Relations Act (NLRA). Dupont implicitly
argues that by including Union representatives on the committee, the
representative would be "making decisions on behalf of other units." This
misconstrues the fundamental purpose of the proposal in several respects.
First, the proposal requires Dupont to appoint a committee to submit a report to
the Directors, who are free to accept or reject the report. This is not
bargaining. In E.I. Dupont DeNemours & Co. 311 NLRB 893, 894 (1994) (relevant
portion attached), the NLRB held that if a committee makes no proposals to the
employer and the employer simply gathers the information and does what it wishes
with the information, the element of "dealing" is missing and no bargaining
takes place. Similarly, when an employer establishes a "brainstorming"
committee, which includes employees, the group's purpose is to develop ideas,
not to bargain. See also Polaroid Corporation, 329 NLRB No. 47 (1999) (relevant
portion attached). If there is no "bargaining" there can be no bargaining for
employees in another bargaining unit.
Second, when employees or Union representatives are appointed to a committee, as
trustees of a Taft-Hartley Fund, or even as corporate directors, they cease to
act as representatives of the Union, and must take a broader view ... Amax Coal
Co. v. NLRB, 453 U.S. 322 (1981). Thus, any Union representatives on a committee
appointed by Dupont's Directors would not be functioning as Union officials but
as Dupont committee members.
Third, Southwestern Bell Corporation, 1992 (available March 16, 1992), which was
cited by Dupont in support of its position, is clearly distinguishable. First,
it predates the NLRB decision in Dupont and in Electromation, Inc. 309 NLRB 990
(1992), enf'd 35 F.3rd 1148 (7th Cir. 1994). Thus, the SEC's conclusion that
there is "some basis" to conclude that the proposal would violate the NLRA does
not reflect the current interpretation of the NLRA.
In addition, the proposals are different. The proposal in the instant case does
not require bargaining. It does not require the committee to reach agreement or
"weigh decisions". It does not create a bipartite committee structured like
opposing collective bargaining negotiators. Unlike the proposal in Southwestern
Bell, the instant proposal deals with past plant closings and their impact, with
a desire to develop alternatives that can mitigate the impact of closings in the
future. The proposal does not involve the evaluation of each plant closing
decision on a case by case basis as is envisioned by the proposal in
Southwestern. In this regard, the proposal in Southwestern Bell provides for the
committee to actually "weigh decisions on the closure of facilities..."
Moreover, the instant proposal provides only for a report to be made by the
committee to the Board of Directors, a report that is advisory in nature only.
Actions taken by the Company in response to that report would be subject to
negotiation with any union that represents employees at a particular location.
This in no way would interfere with the bargaining obligation of the Company.
Most importantly, in American Telephone & Telegraph Co., 1993 WL 22819
(SEC)(1993) (attached), the SEC distinguished Southwestern Bell. AT&T relied
exclusively on Southwestern Bell's successful argument to the SEC. The
shareholder argued that his proposal did not require "negotiations" but cited
the dictionary rather than NLRB precedent. The SEC rejected the Company's
position: "under the terms of the proposal the [Facilities Closure and
Relocation Work] Committee's deliberations appear to be only advisory in nature
and not binding on the Company's Board of Directors. Moreover, the Committee is
proposed to be comprised of outside directors and community representatives, and
the employee representatives." This rational disposes of Southwestern Bell.
It should also be noted that proposals similar to the instant one were permitted
in American Home Products Corporation (available March 6, 1992) (attached) and
in Sprint Corporation (available February 25, 1993) (attached to the Company's
memo).
The second argument advanced by the Company is that the proposal is contrary to
the Commission's proxy rules, citing the inclusion of the proposal on the
proponent's web site. All the IBDW did in this regard is include an exact copy
of the proposal on its web site, noting only that it had submitted this proposal
for inclusion in the proxy. As their duly elected representative, the IBDW is
obligated to keep it members informed of what actions it is taking on their
behalf. The IBDW did not solicit support of such proposal.
While the Company correctly points out that certain Union members do hold
Company granted stock options, these members do not have voting rights simply
because they hold options.
Furthermore, unlike the cases cited by Dupont, neither the proposal nor the
supporting statement contain a reference to the proponent's web site.
The third argument advanced by the Company is that the proposal is false and
misleading, asserting that those voting on the proposal are not able to
determine with reasonable certainty exactly what action or measures would be
taken in the event the proposal was implemented. Yet is clear that a vote for
the proposal is an expression of shareholder sentiment that a committee as
described be created. The proposal does not set forth by name who is to be on
the committee. Rather the members are to be chosen from general categories that
are set forth in the proposal. The mission of the committee is to file an
appropriate report with the Board of Directors, a mission that can hardly be
described, as alleged by Dupont, as "binding on the Board".
Insofar as the alleged mistakes of fact, why should the number of employees be
adjusted for the divestiture of Conoco? During the past decade, Conoco was a
wholly owned subsidiary of Dupont. With its sale, Conoco employees lost all
their ties to Dupont and all related benefits. Moreover, are we to ignore the
Conoco employees who were in fact laid off during the past decade while Conoco
was owned by Dupont?
With regard to the plant in Martinsville, how absurd can the Company get? During
the past decade, this plant went from having well over 2,000 employees to about
50 employees who now work in a separate building on the Martinsville property.
The main factory building is essentially vacant. If the Company would like this
so clarified, then so be it.
The fourth argument advanced by the Company is that the proposal deals with the
conduct of ordinary business operations. In this regard, the Company argues that
state and federal interest in the social and economic implications of plant
closing relocation decisions have waned due to the declining unemployment rate
and, as a result, the Pacific Telesis decision should be reversed. Such a view
ignores the painful realities of what happens in a town such as Martinsville
where a plant, particularly a plant of size, is closed down. Be assured that the
unemployment rate in that area is well above 4.1% and those who are fortunate
enough to obtain jobs are working at wage rates averaging far less than what
they earned while at Dupont.
For all of the above reasons, I request that the proposal of the IBDW be
included in Dupont's proxy statement, and, if it is not so included, that the
SEC take the appropriate enforcement action.
However, should the SEC believe it appropriate that the proposal be revised so
that there is no violation of law, the proponent is willing to take such action
if deemed necessary for inclusion of the proposal in the proxy. This is
precisely what was provided for in United Telecommunications Inc. (available
January 31, 1991) (attached). Such a revision is routinely permitted in the case
of an error in facts.
Very truly yours,
Kenneth Henley
General Counsel, IBDW
cc: Calissa Brown, Senior Counsel and Assistant Secretary (with attachments)
Carl Goodman, President, IBDW (with attachments)
[STAFF REPLY LETTER]
March 6, 2000
Response of the Office of Chief Counsel
Division of Corporation Finance
Re: E.I. du Pont de Nemours and Company
Incoming letter dated December 29, 1999
The proposal requests that the board of directors consider establishing a
committee, to be comprised of members drawn from specified groups, to report to
the board of directors regarding the impact to communities as a result of the
closure of DuPont plants and alternatives that can be developed to help mitigate
the impact of such closures in the future.
We are unable to concur in your view that DuPont
may exclude the proposal under rule 14a-8(i)(2). Accordingly, we do not believe
that DuPont may omit the proposal from its proxy materials in reliance on rule
14a-8(i)(2).
We are unable to concur in your view that DuPont
may exclude the entire proposal under rule 14a-8(i)(3). However, there appears
to be some basis for your view that portions of the supporting statement may be
false or misleading under rule 14a-9. In our view, the second sentence of the
first paragraph of the supporting statement must be revised so that it does not
reflect DuPont's divestiture of Conoco Inc., or that sentence may be omitted. In
addition, in our view, the third and fourth paragraphs of the supporting
statement must be revised, to clarify the current operating status of the
Martinsville plant, or the second, third, fourth and fifth sentences of the
third paragraph of the supporting statement and the reference to Martinsville in
the fourth paragraph of the supporting statement may be omitted. Accordingly,
unless the proponent provides DuPont with proposal revised in this manner,
within seven days after receiving this letter, we will not recommend enforcement
action to the Commission if DuPont omits only these portions of the supporting
statement from its proxy materials in reliance on rule 14a-8(i)(3).
We are unable to concur in your view that DuPont
may exclude the proposal under rule 14a-8(i)(7). Accordingly, we do not believe
that DuPont may omit the proposal from its proxy materials in reliance on rule
14a-8(i)(7).
Sincerely,
Jonathan Ingram
Attorney-Advisor
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