Company Name: TRW Inc.
Public Availability Date: January 24, 2001
Document Sections:
LETTER OF INQUIRY
APPENDIX
STAFF REPLY LETTER
[LETTER OF INQUIRY]
December 14, 2000
Securities and Exchange Commission
Office of the Chief Counsel
Division of Corporation Finance
Judiciary Plaza
450 Fifth Street, NW
Mail Stop 4-2
Washington, DC 20549
Re: Exchange Act Rule 14a-8
Shareholder Proposal Submitted by
Thomas Wallenberg for Inclusion in the 2001 Proxy Statement of
TRW Inc.
Dear Sir or Madam:
TRW Inc. has received a proposed shareholder resolution from Mr. Thomas
Wallenberg (the "Proponent") for inclusion in the proxy materials to be
distributed in connection with TRW's 2001 Annual Meeting of Shareholders. The
Proponent has appointed Mr. John Chevedden as the Proponent's legal proxy to
represent him and his shareholder proposal in connection with the TRW Inc. 2001
Annual Meeting of Shareholders. The proposal relates to declassifying the
Company's Board of Directors by providing for annual election of each Director
and requiring a shareholder vote to reinstitute a classified board.
As Assistant General Counsel and Assistant Secretary of TRW, I hereby notify you
of the Company's intention to omit the Proposal (as defined below) from its 2001
proxy materials for the reasons stated below, and request the Staff of the
Division of Corporation Finance of the Securities and Exchange Commission to
confirm that it will not recommend any type of enforcement action to the
Commission if TRW does so.
In accordance with Rule 14a-8(j) under the Securities Exchange Act of 1934, as
amended, the undersigned, on behalf of TRW, hereby files six copies of this
letter, the Proposal and the exhibits referred to in this letter.
I. PROCEDURAL HISTORY
On October 12, 2000, the Company received from the Proponent a letter and a
proposed shareholder resolution and supporting statement (the "Original
Proposal") for inclusion in the proxy statement to be distributed to TRW
shareholders in connection with its 2001 Annual Meeting. A copy of the letter
received by the Company on October 12, 2000, and a copy of the Original Proposal
are attached hereto as Exhibit A.
Upon its receipt of the Original Proposal, the Company determined that
eligibility and procedural requirements set forth in subparagraph (d) of Rule
14a-8 under the Exchange Act had not been met. On October 25, 2000, the Company
sent a letter (Exhibit B) to Mr. Chevedden by overnight mail and by facsimile
(with a copy to the Proponent by overnight mail) stating that the Company
intended to exclude the Proposal from the proxy statement and related materials
related to its 2001 Annual Meeting of Shareholders (the "Proxy Materials")
unless certain deficiencies were corrected within 14 days. Specifically, the
Original Proposal contained well in excess of 500 words, exceeding the limit set
by Rule 14a-8(d).
On October 30, 2000, the Company received a letter from Mr. Chevedden along with
a revised proposal and supporting statement (the "Proposal"). A copy of Mr.
Chevedden's letter and the Proposal is attached hereto as Exhibit C.
II. SUMMARY OF THE COMPANY'S POSITION
The Company intends to exclude the Proposal from its Proxy Materials for TRW's
2001 Annual Meeting of Shareholders for the following reasons:
A. Mr. Chevedden is not eligible to submit the Proposal to TRW, as he is not a
shareholder of the Company; and
B. the Proposal violates the proxy rules' prohibition of materially false or
misleading statements in proxy materials and, therefore, may be properly
excluded pursuant to Rule 14a-8(i)(3).
III. DISCUSSION
A. Ineligibility of Mr. Chevedden to submit the Proposal as Agent for Thomas
Wallenberg.
Mr. Chevedden is not a shareholder of TRW Inc. and, as such, is not eligible to
submit shareholder proposals to the Company pursuant to Rule 14a-8(b)(1). Rule
14a-8 is intended to provide a simple and inexpensive way for shareholders of a
particular corporation to make their views known to other shareholders of the
same corporation and to enlist support for those views. Rule 14a-8 is not
intended as a mechanism for shareholder activists who are not shareholders of a
particular company to express or enlist support for their views on that
company's performance or corporate governance in the proxy statement.
The Commission's shareholder proposal rules have always included a requirement
that the person submitting a proposal be a security holder of the company to
which the proposal is submitted. In 1983, when the rules were amended to require
a minimum shareholding and a minimum holding period, the Commission said:
"A majority of the commentators specifically addressing this issue supported the
concept of a minimum investment and/or a holding period as a condition to
eligibility under Rule 14a-8. Many of those commentators expressed the view that
abuse of the security holder proposal rule could be curtailed by requiring
shareholders who put the company and other shareholders to the expense of
including a proposal in a proxy statement to have some measured economic stake
or investment interest in the corporation. The Commission believes that there is
merit to those views and its [sic] adopting the eligibility requirement as
proposed." (Release No. 34-20091, August 16, 1983).
With respect to TRW, Mr. Chevedden is a shareholder activist and not a
shareholder. He has neither an economic stake nor an investment interest in the
Company. Instead, Mr. Chevedden attempts to circumvent the procedural
requirements and purpose of Rule 14a-8 by having actual shareholders of the
Company appoint him as their proxy.
While we understand that on prior occasions the Staff has permitted Mr.
Chevedden to submit shareholder proposals in this manner, we respectfully ask
the Staff to reconsider this position. There is a marked contrast between
shareholders who appoint another person as their proxy in order to acquire their
advice, counsel and experience in addressing the shareholder's concerns with the
Company, and shareholders who are enticed to lend their shares to Mr. Chevedden
in order to permit Mr. Chevedden to further his own agenda. While the former
might be permissible, the latter clearly should not be, as it directly
contravenes the rules' requirements for an economic stake or investment
interest.
We suggest that the following factors be considered in differentiating those
shareholders who have legitimately sought out Mr. Chevedden's assistance from
shareholders who have conversely been sought out by Mr. Chevedden for the
purpose of permitting him to further his agenda of shareholder activism.
1. Was the same proposal submitted to many companies by the shareholder's proxy
(demonstrating that it was the proxy's proposal rather than the shareholder's
proposal)?
2. Did the shareholder's proxy take credit for the proposal in the publicity
surrounding the proposal?
3. Did the shareholder's proxy lack a substantial relationship with the
shareholder (sibling, friend, business associate, etc.)?
4. Did the shareholder's proxy do all or substantially all of the work
submitting and supporting the proposal?
5. Would the shareholder's proxy not otherwise qualify to submit the proposal in
his or her own right?
If these factors were applied to the Proposal, we believe it would be clear to
the Staff that, in this case, the Proponent was sought out by Mr. Chevedden to
further Mr. Chevedden's ongoing agenda with the Company.
First, the Proposal is substantially similar to proposals submitted during the
2000 proxy season to Raytheon, Honeywell and Maytag, not to mention the
proposals submitted to the Company during the 1999 and 2000 proxy seasons.
Copies of each of these proposals are attached as Exhibits D, E, F, G and H,
respectively. The Raytheon, Honeywell and Maytag proposals were each submitted
by Mr. Chevedden as a shareholder of those companies. The proposals submitted to
the Company during the 1999 and 2000 proxy seasons were submitted by Mr.
Chevedden on behalf of Emest Lopez, a shareholder of TRW.
For example, three of the proposals end with essentially the same statement:
"The best boards continue to raise the bar, said Business Week." Moreover, the
style of each resolution is substantially the same, each one stating, in
essence:
Resolved: Adopt shareholder proposal that won XX% shareholder approval in 19XX.
Additionally, throughout the supporting statements, the proposals use much of
the same language and the same style of excerpting select quotes from press
articles. It is clear simply from looking at the Proposal that it is
substantially the same as the proposals submitted in the 2000 proxy season by
Mr. Chevedden. The logical conclusion is that the Proposal is not the
Proponent's but rather Mr. Chevedden's proposal. Moreover, as we will discuss
below, the Proponent has in fact acknowledged to TRW that the Proposal was
prepared entirely by Mr. Chevedden.
Second, while there is limited publicity available so far this year for the
various shareholder proposals submitted, Mr. Chevedden has historically taken
credit for substantially similar proposals submitted to TRW under the same
circumstances. For example, in the December 3, 1999 edition of Corporate
Govemance Highlights, a publication of the Investor Responsibility Research
Center, TRW is noted as a "target company" of Mr. Chevedden for the 2000 proxy
season. The article states in relevant part:
"In more conventional moves, Chevedden is asking Caterpillar, AlliedSignal,
Airborne, TRW, Sempra Energy, Boeing and FirstEnergy to declassify their boards.
At TRW, Emest Lopez is offering the proposal on behalf of Chevedden, at Sempra
Energy Chris Rossi is submitting it for him, and at Boeing and FirstEnergy, Mr.
and Mrs. Ray T. Chevedden are proposing it on his behalf."
The IRRC is not alone in attributing various proposals to Mr. Chevedden, even
when he is purporting to act as a proxy for a named shareholder. For example,
The Corporate Library lists on its website as shareowner proposals filed by John
Chevedden for the 2000 proxy season several proposals (at Raytheon, PG&E and
EDS) where Mr. Chevedden was simply given a proxy to act on behalf of the named
shareholder. The Council of Institutional Investors likewise lists proposals
purportedly filed by named shareholders as proposals submitted by Mr. Chevedden.
The circumstances of these proposals are the same as the proposals submitted to
TRW in the past by Mr. Lopez and now by the Proponent. It is clear that Mr.
Chevedden is widely recognized as the true sponsor of these resolutions rather
than the shareholders under whose name the proposals are submitted.
Third, Mr. Chevedden had no prior relationship with Mr. Wallenberg. In a
conversation that I and Kristine Syrvalin, Senior Counsel for the Company, had
with Mr. Wallenberg on Monday, December 11, 2000, he informed me that he became
acquainted with Mr. Chevedden when he responded to inquiries over the Internet
from Mr. Chevedden for shareholders of TRW who would be willing to sponsor a
shareholder resolution. Mr. Wallenberg represented that while he has spoken to
Mr. Chevedden a few times over the telephone and has communicated with him over
the Internet, the two have never met. Clearly, then, the relationship between
Mr. Wallenberg and Mr. Chevedden is not substantial relationship but minimal at
best.
Fourth, in our conversation with Mr. Wallenberg, he represented that Mr.
Chevedden drafted the Proposal and characterized Mr. Chevedden as "the brains
behind" the Proposal. When asked what the Company would need to do to allow Mr.
Wallenberg to withdraw the Proposal, he indicated that he would defer to Mr.
Chevedden on this point and once again characterized the Proposal as "more or
less his [Mr. Chevedden's] baby". Mr. Wallenberg indicated that his primary
concern with the Company was stock price performance, but when we asked about
the relationship between this concern and the Proposal, he did not appear to
understand how Mr. Chevedden's Proposal to elect Directors annually would
address the issue of stock price performance. Mr. Wallenberg concluded our
conversation by stating that Mr. Chevedden has his own thoughts and that Mr.
Wallenberg is acting to support him and his efforts.
Even absent the explicit representations of Mr. Wallenberg in our conversation
with him, it would be clear to any objective observer that the Proposal was
prepared by Mr. Chevedden. The style and format, including as mentioned above
much of the wording and the references cited in the supporting statement, are
virtually identical to proposals submitted to TRW for inclusion in its 1999 and
2000 proxy statements and to Raytheon, Honeywell and Maytag during the 2000
proxy season. The type font of the Proposal is even the same as that of the
proposals submitted to the Company in the 1999 and 2000 proxy seasons and to
Raytheon during the 2000 proxy season. Considering that the proposals to
Raytheon, Honeywell and Maytag were submitted by Mr. Chevedden as a shareholder
of those companies and that these proposals are substantially similar to the
Proposal, we believe it would be difficult for any objective observer to deny
that the Proposal was, in fact, prepared by Mr. Chevedden rather than the
Proponent.
Further, TRW has been instructed by the Proponent to direct all correspondence
with respect to the Proposal to Mr. Chevedden. Additionally, in our conversation
with Mr. Wallenberg, he indicated that he had no intention of attending the
Annual Meeting in April but that Mr. Chevedden would attend. It is quite
apparent that Mr. Chevedden has done all of the work in preparing and submitting
the Proposal to this point and will continue to do all or substantially all of
the work in connection with supporting the Proposal and presenting it at the
Annual Meeting.
Fifth, as we noted earlier, Mr. Chevedden is not eligible in his own right to
submit shareholder proposals to the Company as Mr. Chevedden, to the best of our
knowledge, is not currently and never has been a shareholder of TRW.
Applying the five factors suggested above to the Proposal, it is clear that in
this case Mr. Chevedden was not solicited by the Proponent to assist him in
submitting a proposal raising his own concerns with the Company. Instead, Mr.
Chevedden sought out the Proponent and is in essence using him in order to
submit a proposal to the Company furthering Mr. Chevedden's own personal agenda
with the Company. Mr. Wallenberg acknowledged as much in our conversation with
him when he indicated how he had become acquainted with Mr. Chevedden and that
the Proposal was the product of Mr. Chevedden's efforts. Mr. Wallenberg, as he
acknowledged, is simply lending his support to Mr. Chevedden's efforts. This is
a flagrant abuse of the shareholder proposal rules set forth in Rule 14a-8 and
should not be permitted.
TRW believes that it can exclude Mr. Chevedden's proposals from its proxy
statement for its 2001 Annual Meeting of Shareholders because Mr. Chevedden, who
is not eligible to submit proposals to the Company since he is not a shareholder
of the Company, is the true proponent of the Proposal. The Company respectfully
requests an indication from the staff that it will not recommend enforcement
action if the Proposal is omitted on this basis.
B. The Proposal Contains False and Misleading Statements in Violation of Rule
14a-9 and Therefore May Be Omitted Pursuant to Rule 14a-8(i)(3).
We have also concluded that the proposal contains false and misleading
statements in violation of Rule 14a-9 and therefore may be omitted pursuant to
Rule 14a-8(i)(3). At the outset, we note that a proposal purporting to address
the issue of classified boards is accompanied by a supporting statement that
uses a majority of its 500-word limitation to attack the Company in unrelated
matters (e.g., stock performance, the quality of the Company's new CEO and the
Chairman's pay). This leads us to believe that the overall purpose of the
proposal may be misleading. The fact that the proponent mischaracterizes and
omits important facts from his supporting statement, however, leads us to
conclude that the proposal itself contains false and misleading statements in
violation of Rule 14a-9 and therefore may be omitted under Rule 14a-8(i)(3).
Rule 14a-8(i)(3) allows a registrant to exclude a proposal "if the proposal or
supporting statement is contrary to any of the Commission's proxy rules,
including Rule 14a-9, which prohibits materially false or misleading statements
in proxy soliciting materials."
As we will demonstrate with specific examples in the paragraphs that follow, the
Proposal is filled with statements that are false and misleading. The overall
tone and effect of these statements and, as a result, the Proposal, taken as a
whole, is to impugn the character, integrity and personal reputation of the
Company's Directors and management, and to imply that the Company has acted
improperly. While we recognize the Proponent's right to speak freely and
acknowledge that criticizing the Company, its Directors and management is not,
in and of itself fraudulent, permitting the Proponent to make such criticisms
through a series of misstatements and omissions that would not be tolerated by
the Staff in the Company's own proxy materials is a wholly different matter. As
such, in our opinion, redaction would not be sufficient to cure the violations
of Rule 14a-9 presented by this Proposal and the entire Proposal should be
excluded. The Staff has previously found that a proposal is properly excludable
in its entirety where the overall tenor of the proposal suggests that the
company has acted improperly without providing any factual support for that
implication. See The Detroit Edison Company (March 4, 1983).
Moreover, the primary mission of the Securities and Exchange Commission is to
protect investors and maintain the integrity of the securities markets. To
permit an experienced and seasoned shareholder proponent like Mr. Chevedden to
continue, year after year, to abuse the shareholder proposal process by
submitting proposals that consist primarily of false and misleading statements,
the overall tone and effect of which is to impugn the character, integrity and
personal reputation of the Company's Directors and management, does nothing to
further the Commission's mission. Instead, inclusion of the Proposal in the
Company's Proxy Materials would put investors at risk of making a voting
decision on the basis of false and misleading statements put forth by the
Proponent and Mr. Chevedden.
The following are examples of statements in the Proposal that are false and
misleading within the meaning of Rule 14a-9.
(1) The following statements are materially misleading to shareholders and, in
some cases, are blatant misrepresentations of fact.
(a) The first sentence of the fourth paragraph of the supporting statement
asserts that a substantially similar proposal presented by Mr. Chevedden at the
Company's 1999 Annual Meeting of Shareholders "could have won more than 50%
approval if the company did not influence the vote of employee-owned stock."
This statement is false and impugns the character, integrity and personal
reputation of the Company's Directors, in violation of Rule 14a-9. It implies,
without any factual foundation, that Directors directly or indirectly took
improper steps to influence the vote of the Company's employees. The Company and
its Directors and officers did not hold meetings with employees, send e-mails or
other communications to employees, or take any other action designed to
"influence" the vote of employees. No targeted action whatsoever was directed
towards the Company's employees.
(b) Under the heading "What issues highlight challenges for TRW directors?" the
Proponent and Mr. Chevedden cite the November 12, 1999 edition of The Wall
Street Journal for the proposition that "[u]nder Mr. Cote GE appliances was a
rare GE laggard. Profits dropped in recent quarters." In fact, the referenced
article simply states as follows:
"TRW Inc. hires away General Electric Co. senior vice [president] David M. Cote
as its president and chief operating officer, adding to uncertainty at GE about
who will succeed [chairman] John F. Welch Jr. when he retires in April 2001."
Nowhere in the referenced article does it state that GE appliances was a rare GE
laggard under Mr. Cote, or that profits had dropped in recent quarters. With
this statement, the Proponent and Mr. Chevedden have unfairly and without
factual basis impugned the character, integrity and personal reputation of Mr.
Cote in violation of Rule 14a-9. This statement is not only false and misleading
but, in fact, a blatant misrepresentation. The Wall Street Journal article cited
in the supporting statement is attached as Exhibit I.
(c) The resolution proposed by the Proponent and Mr. Chevedden reads, in
relevant part, as follows:
"RESOLVED: ELECT EACH DIRECTOR ANNUALLY ADOPT PROPOSAL TOPIC THAT WON 46%
SHAREHOLDER APPROVAL IN 1999"
The preceding statement is misleading in that it does not clearly indicate that
the 1999 proposal referenced was approved by 46% of the shareholders represented
and voting at the meeting, not 46% of the shares outstanding as the language
implies. The third paragraph of the supporting statement contains a similarly
misleading statement by referring to management's response to the "46%
shareholder approval." The Staff has previously required Mr. Chevedden to revise
his references to the percentage of shareholders approving his proposals "to
reflect the actual nature of the majority of those who voted on the
resolutions." See Honeywell International Inc. (March 2, 2000) and AlliedSignal
Inc. (January 29, 1999). Therefore, the resolution and supporting statement
ought to be revised to reflect that the 46 percent shareholder approval reflects
only 38 percent of the then outstanding shares. If the Staff does not agree with
this position, at a minimum, the Proposal ought to be revised to reflect that
the 46 percent shareholder approval reflects only 46 percent of the shareholders
represented and voting at the meeting.
(d) The third paragraph of the supporting statement reads as follows:
"Paradoxically the management response to the 46% shareholder approval was to
deny shareholders the opportunity to vote on this topic at the 2000 annual
meeting."
The Proponent and Mr. Chevedden are purposefully trying to mislead shareholders
into believing that TRW acted improperly by excluding Mr. Chevedden's proposal
from the 2000 proxy statement Mr. Chevedden in fact said as much at the 2000
Annual Meeting of Shareholders when he accused TRW of acting unethically to
prevent him from resubmitting his 1999 proposal in 2000. In reality, TRW
excluded Mr. Chevedden's proposal from the 2000 proxy statement with the
concurrence of the Commission because Mr. Chevedden's proposal, if enacted,
would have resulted in a violation of Ohio law. The Proponent's and Mr.
Chevedden's statement creates the impression that the Directors acted improperly
and unethically in excluding Mr. Chevedden's proposal from the Company's 2000
proxy statement. This statement constitutes a violation of Rule 14a-9.
(2) The following statements made by the Proponent and Mr. Chevedden distort and
misrepresent the press articles to which they are attributed.
(a) The supporting statement cites the September 12, 2000 edition of the Los
Angeles Times for the following propositions:
"TRW accused of faked tests for anti-missile program."
"FBI investigates TRW missile fraud allegation."
"53 Congressional representatives sign letter to urge FBI investigation."
These statements are not direct quotes from the referenced article but rather
are paraphrases of select statements in that article. The format in which the
Proponent and Mr. Chevedden present these statements, with the citation
appearing below the statements, suggests, however, that these statements are
quotes excerpted from the cited article. Furthermore, when taken out of the
context of the entire article, as the Proponent and Mr. Chevedden have done in
their supporting statement, the statements do not accurately convey the news
being reported by the referenced article. The statements have been selected and
paraphrased because of their inflammatory effect. If a shareholder were to read
the entire article instead of simply the selected and paraphrased statements
cited by the Proponent and Mr. Chevedden, the shareholder would learn that:
"[f]ederal investigative agencies often look into allegations at the direction
of Congress, and it was not clear from the letter whether the FBI believes this
matter merits a full investigation, which would be the next step after a
review[;]"
the allegations at issue were initially made by Nira Schwarz, a former TRW
employee who was fired by TRW and has a lawsuit pending against the Company
related to her dismissal;
TRW has already been investigated with respect to this issue and has been
found by many government agencies to have acted appropriately; and
"[t]he Defense Criminal Investigative Service, after a review of the
allegations, recommended a further review in 1997. In 1998, a Pentagon advisory
board disagreed and defended TRW's work."
The use of only selected statements from the article, which are then paraphrased
for further inflammatory effect, is a clear departure from the context of the
statements in the article, is misleading and should not be permitted. A copy of
the Los Angeles Times article is attached as Exhibit J.
(b) The supporting statement cites a September 8, 2000 Bloomberg News report and
purports to include select statements from the report. The statements in the
Proposal, however, are not quoted verbatim from the Bloomberg News report;
rather, the statements in the Proposal are paraphrases of certain statements
made in the article. The first statement referenced in the Proposal, which says
"TRW shares tumble 13%," is taken out of context and is misleading. The
statement in the Bloomberg News report that we believe is referenced here
actually says "TRW, based in Cleveland, disclosed the news after the close of
market trading. Its shares fell $5.75, or 13 percent, to $39.50, on electronic
networks and regional exchanges after exchange trading had ended." The
Proponent's and Mr. Chevedden's choice of words like "tumble" is intended to be
inflammatory to shareholders and, as such, does not accurately represent the
Bloomberg News report upon which it relies. The Bloomberg News report is
attached as Exhibit K.
The Staff has previously ruled that portions of a supporting statement that
selectively quote various newspaper and magazine articles in order to falsely
convey a negative impression of a company, while omitting key facts that would
contradict that impression, are properly excludable. See AlliedSignal Inc.
(January 15, 1998). We believe that the statements described in the preceding
paragraphs are of the same nature and, therefore, should be excluded from the
supporting statement.
On the basis of the foregoing discussion, we ask the concurrence of the Staff
that the entire Proposal may be excluded from the Company's Proxy Materials. If
the Staff does not agree that the entire Proposal can be excluded, at the very
least the false and misleading statements outlined above should be excluded from
the Proposal.
C. Format of Proposal
If the Proposal is included in the Proxy Materials, the Company may decide to
omit the proposal number and the heading. The Proposal will bear an appropriate
heading clearly identifying the subject of the Proposal.
The Company reserves the right to include a customary introduction to each
proposal, and the information on the vote required for approval of each
proposal, pursuant to Item 21 of Schedule 14A. The Proposal and supporting
statement will be clearly identified and distinguished from the response of the
Company's Board of Directors.
I respectfully request the Staff to confirm that it will not recommend any
enforcement action if the Company takes each of the actions described herein.
IV. Concluding Statement
On the basis of the foregoing, the Company intends to omit the Proposal from the
Proxy Materials for TRW's 2001 Annual Meeting of Shareholders. The Company
specifically requests the concurrence of the Staff that the Proposal may be
excluded from the Company's Proxy Materials related to such meeting.
Alternatively, if the Staff is unable to concur that the Proposal may be omitted
in its entirety, TRW Inc. requests the Staff's concurrence that the portions of
the Proposal discussed in this letter may be excluded from the Company's Proxy
Materials.
In accordance with Rule 14a-8(j)(1), a copy of this letter and all of the
exhibits to this letter is being forwarded to the Proponent, and, as requested
by the Proponent, to John Chevedden as formal notice of the Company's intention
to omit the Proposal from the Proxy Materials for its 2001 Annual Meeting.
We anticipate that the Company's 2001 Proxy Materials will be complete on or
about February 20, 2001, when the Company's Directors will meet to approve the
Proxy Materials. We expect the definitive Proxy Materials to be filed on or
about March 10, 2001. Accordingly, your prompt review of this matter would be
greatly appreciated. Should you have any questions regarding any aspect of this
matter or require any additional information, please call the undersigned at
(216) 291-7979.
Please acknowledge receipt of this letter and its enclosures by stamping the
enclosed copy of this letter and returning it to me in the enclosed envelope.
Very truly yours,
Kathleen A. Weigand
Assistant General Counsel and Assistant Secretary
cc: William B. Lawrence
Thomas Wallenberg
901 Leawood Drive
Crestwood, MO 63126
John Chevedden
2215 Nelson Avenue, No. 205
Redondo Beach, CA 90278-2453
Enclosures
[APPENDIX]
October 30, 2000
October 30, 2000 Response to Company Request
ITEM NO. 3
ELECT EACH DIRECTOR ANNUALLY
ADOPT PROPOSAL TOPIC THAT WON 46% APPROVAL
RESOLVED:
ELECT EACH DIRECTOR ANNUALLY
ADOPT PROPOSAL TOPIC THAT WON 46% SHAREHOLDER APPROVAL in 1999
TRW shareholders recommend the Board take all necessary steps to enact this
proposal.
Also, require that any future change on this topic be put to shareholder voteas
a separate proposal. (Unexpired terms of directors not affected.)
SUPPORTING STATEMENT:
Electing each director annually gives shareholders an opportunity to register
their evaluation of each director individually and the board as a group. Many
institutional investors hold that electing each director annually is one of the
best methods to ensure that directors will manage the company in the best
interest of shareholders.
The Plain Dealer reported this topic "won a surprising 46% of the votes" at the
1999 shareholder meeting and was presented by John Chevedden, Redondo Beach,
Calif.
Paradoxically the management response to the 46% shareholder approval was to
deny shareholders the opportunity to vote on this topic at the 2000 annual
meeting.
Arguably this proposal could have won more than 50% approval if the company did
not influence the vote of employee-owned stock. Employees own 16% of TRW stock.
Ironically TRW relies on substantial profits from TRW's employee pension fund.
However, many stock analysts believe that pension profits downgrade the quality
of TRW earnings.
What issues highlight challenges for TRW directors?
TRW shares tumble 13%.
TRW announces 3rd quarter profit will fall and 4th quarter profit could also be
hurt.
Bloomberg News. Sept. 8, 2000
TRW accused of faked tests for anti-missile program.
FBI investigates TRW missile fraud allegation.
53 Congressional representatives sign letter to urge FBI investigation.
Los Angeles Times. Sept. 12, 2000
David Cote, former General Electric executive, will become CEO of TRW by
July 2001 or he will walk away with $10 million.
Wall Street Journal. Nov. 16, 1999
Under Mr. Cote GE appliances was a rare GE laggard.
Profits dropped in recent quarters.
Wall Street Journal. Nov. 12, 1999
Mr. Gorman, TRW Chairman, added Imperial Chemical Industries to his list of
outside directorships.
CBS MarketWatch.com, Sept. 21, 2000
4 outside directorships make Mr. Gorman over-extended by the standards of many
institutional investors.
In 1999 Mr. Gorman:
Collected $7 million from TRW.
Has $16 million in unexercised stock options from previous years.
www.paywatch.org
10 directors failed to attend the 8:30 am 2000 shareholder meeting.
Yet most directors were then in town for another meeting.
The Council of Institutional Investors (www.cii.org) recommends each director be
elected annually. TRW is 61%-owned by institutional investors.
In its response to this resolution. TRW is asked to name the steps taken since
April 2000 to improve corporate governance. The best boards continue to raise
the bar, convinced that a stronger board can only help improve competitiveness,
said a Business Week cover story.
ADOPT PROPOSAL TOPIC THAT WON 46% APPROVAL
ELECT EACH DIRECTOR ANNUALLY
YES ON 3
The Company is respectfully requested to insert the correct proposal number in
the proxy statement.
Exhibit A
October 9, 2000
Via facsimile
Mr. Joseph T. Gorman
Chairman and Chief Executive Officer
TRW Inc.
1900 Richmond Road
Cleveland, OH 44124-3760
Dear Mr. Gorman and Directors of TRW Inc.,
The attached proposal is submitted for vote by TRW Inc. shareholders at the next
and/or 2001 shareholder meeting. It is submitted for inclusion in the TRW Inc.
proxy statement on behalf my TRW, Inc. stock in accordance with Rule 14-a-8 of
the General Rules and Regulations of the Securities and Exchange Act of 1934.
The stock is listed in my name in the company list of shareholders and has
exceeded 82000 for more than one year. The required stock will continue to be
held through the applicable shareholder meeting.
This is my legal proxy for Mr. John Chevedden to represent me and my shareholder
proposal at the applicable shareholder meeting before, during and after the
shareholder meeting. Please direct all future communication to John Chevedden.
Mr. John Chevedden can be contacted at:
PH: 310/371-7872
FX: 310/371-7872
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278
This proposal is believed to be in the best interest of TRW Inc. and its
shareholders. A commitment from the company to enact this resolution,
particularly before November 1, 2000, would allow the resolution to be
withdrawn.
Sincerely,
Thomas Wallenberg
cc:
John Chevedden
William B. Lawrence
Corporate Secretary
FX: 216/291-7563
FX: 216/291-7255
[STAFF REPLY LETTER]
January 24, 2001
Response of the Office of Chief Counsel
Division of Corporation Finance
Re: TRW Inc.
Incoming letter dated December 14, 2000
The proposal relates to the annual election of directors.
Based on the facts presented, there appears to be some basis for your view that
TRW may exclude the proposal under rule 14a-8(b) because Thomas Wallenberg is a
nominal proponent for John Chevedden, who is not eligible to submit a proposal
to TRW. In this regard, we note, among other things, that:
Mr. Wallenberg became acquainted with Mr. Chevedden, and subsequently
sponsored the proposal, after responding to Mr. Chevedden's inquiry on the
internet for TRW stockholders willing to sponsor a shareholder resolution;
Mr. Wallenberg indicated that Mr. Chevedden drafted the proposal;
Mr. Wallenberg indicated that he is acting to support Mr. Chevedden and the
efforts of Mr. Chevedden.
Accordingly, we will not recommend enforcement action to the Commission if TRW
omits the proposal from its proxy materials in reliance on rule 14a-8(b). In
reaching this position, we have not found it necessary to address the
alternative basis for omission upon which TRW relies.
Sincerely,
Lillian K. Cummins
Attorney-Advisor
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