Company Name: General Motors Corp. (Naylor)
Public Availability Date: April 10, 2000
Document Sections:
LETTER OF INQUIRY
APPENDIX
STAFF REPLY LETTER
[LETTER OF INQUIRY]
January 27, 2000
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
This is a filing, pursuant to Rule 14-8(d), to omit the proposal received on December 21, 1999 from Bartlett Naylor (Exhibit A) from the General Motors Corporation proxy materials for the 2000 Annual Meeting of Stockholders.
The proposal states:
"Resolved: The shareholders urge our board of directors to take the necessary steps to nominate at least two candidates for each open board position, and that the names, biographical sketches, SEC-required declarations and photographs of each candidate shall appear in the company's proxy materials (or other required disclosures) to the same extent that such information is required by law and is our company's current practice with the single candidates it now proposes for each position."
General Motors intends to omit the proposal pursuant to the provisions of paragraph (i)(8) of Rule 14a-8, which permits exclusion "[i]f the proposal relates to an election for membership on the company's board of directors or analogous governing body." The SEC has stated that "the principal purpose of [this grounds for exclusion] is to make clear, with respect to corporate elections, that Rule 14a-8 is not the proper means for conducting elections or effecting reforms in elections of that nature, since other proxy rules, including Rule 14a-11, are applicable thereto" (emphasis added). SEC Release No. 34-12598 (July 7, 1976).
The Staff has consistently permitted the omission of stockholder proposals that seek to mount election contests, or to establish procedures that would make election contests more likely. For example, in Amoco Corporation (February 14, 1990), a proposal to permit any stockholder with more than $100,000 worth of voting stock to nominate a candidate for the board of directors was deemed excludible, not because it applied to the election of any specific individual, but because it could result in contested elections for individual director vacancies. More recently, in Storage Technology Corp. (March 11, 1999), the registrant was permitted to omit a proposal requesting that the company amend its charter documents to permit stockholders in groups of at least three too include their own nominees to the board of directors in the company's proxy materials. The Staff's response stated that the proposal, "rather than establishing procedures for nomination or qualification generally, would establish a procedure that may result in contested elections, which is a matter more appropriately addressed under Rule 14a-11."
The current proposal, if adopted by General Motors' stockholders, would ensure that all elections of directors would become contested, and GM's proxy materials would include information regarding opposing candidates. The supporting statement shows that the proponent expects stockholders to use this procedure "to register dissent about a given candidate," or "to oppose a candidate that has failed" to perform his or her duties property or has "other problems." The proponent predicts "healthy competition for seats on the board" that "could encourage a discussion among shareholders about why specific nominees are best qualified." Such competition and discussion may indeed promote the selection of the best directors in some situations. At the same time, however, they are the essential elements of an election contest and should be subject to Rule 14a-11 and the restrictions that the proxy rules impose on proxy contests. The Commission has already determined that stockholder proposals under Rule 14a-8 should not be used to create procedures that are likely to result in election contests, and this proposal may therefore be omitted under Rule 14a-8(i)(8).
GM currently plans to print its proxy materials in early April. Please inform us whether the Staff will recommend any enforcement action if this proposal is omitted from the proxy materials for General Motors' 2000 Annual Meeting of Stockholders.
Sincerely yours,
Anne T. Larin
Attorney and Assistant Secretary
c: Bartlett Naylor
[APPENDIX]
Nancy Polis
Corporate Secretary
General Motors
Enclosed, please find a shareholder resolution that I hereby submit under the SEC's Rule 14a(8).. I have owned the requisite value for the requisite time period; will provide evidence of said ownership upon request as provided in the federal rule; intend to continue ownership of the requisite value through the forthcoming annual meeting in 2000; and stand prepared to present the resolution at the forthcoming shareholder meeting directly or through a designated agent. Please contact me by mail (1255 N. Buchanan, Arlington, Va. 22205) or email (bartnaylor@aol.com).
Your consideration is appreciated.Bartlett Naylor
Resolved: The shareholders urge our board of directors to take the necessary steps to nominate at least two candidates for each open board position, and that the names, biographical sketches, SEC-required declarations and photographs of such candidates shall appear in the company's proxy materials (or other required disclosures) to the same extent that such information is required by law and is our company's current practice with the single candidates it now proposes for each position.
Supporting statement:
Although our company's board appreciates the importance of qualified people overseeing management, we believe that the process for electing directors can be improved.
Our company currently nominates only one candidate for each board seat, thus leaving shareholders no practical choice in most director elections. Shareholders who oppose a candidate have no easy way to do so unless they are willing to undertake the considerable expense of running an independent candidate for the board. The only other way to register dissent about a given candidate is to withhold support for that nominee, but that process rarely/never affects the outcome of director elections. The current system thus provides no readily effective way for shareholders to oppose a candidate that has failed to attend board meetings; or serves on so many boards as to be unable to supervise our company management diligently; or who serves as a consultant to the company that could compromise independence; or other problems. As a result, while directors legally serve as the shareholder agent in overseeing management, the election of directors at the annual meeting is largely perfunctory. Even directors of near bankrupt companies enjoy re-election with 90%+ pluralities. The "real" selection comes through the nominating committee, a process too often influenced, if not controlled, by the very management the board is expected to scrutinize critically.
Our company should offer a rational choice when shareholders elect directors. Such a process could create healthy competition for seats on the board and could encourage a discussion among shareholders about why specific nominees are best qualified.
Such a process could also abate the problem of a chair "choosing" his own board, that is, selecting those directors he expects will reflexively support his initiatives, and shedding those who may sometimes dissent. While the same nominating committee might serve to select the competing candidates, the final decision really would be with shareholders.
We urge you to vote FOR this proposal.
[STAFF REPLY LETTER]
April 10, 2000
Response of the Office of Chief Counsel
Division of Corporation Finance
Re: General Motors Corporation
Incoming letter dated January 27, 2000
The proposal urges the board to take the necessary steps to nominate at least two candidates for each open board position, and provides that the names, biographical sketches, required disclosures, and photographs of these candidates shall appear in GM's proxy materials to the extent that is required by law and GM's current practice.
We are unable to concur in your view that GM may exclude the proposal under rule 14a-8(i)(8). Accordingly, we do not believe that GM may omit the proposal from its proxy materials in reliance on this rule.
Sincerely,
Jonathan Ingram
Attorney-Advisor