Company Name: Burlington Northern Santa Fe Corp.
Public Availability Date: January 23, 2002
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 12, 2001
By Messenger
Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Burlington Northern Santa Fe Corporation - Stockholder Proposal Submitted by
Bartlett Naylor
Dear Sir or Madam:
On behalf of Burlington Northern Santa Fe Corporation, and pursuant to Rule
14a-8(j) under the Securities Exchange Act of 1934, I hereby request
confirmation that the Staff of the Securities and Exchange Commission will not
recommend enforcement action if, in reliance on certain provisions of Rule
14a-8, we exclude a proposal submitted by Bartlett Naylor from our proxy
materials for our 2002 annual meeting of shareholders, which we expect to file
in definitive form on or about March 11, 2002.
We received a letter from Mr. Naylor on November 5, 2001, submitting a proposal
for consideration at our 2002 annual meeting of shareholders. The proposal
(which, together with the accompanying statement in support, is attached as
Exhibit A) reads as follows:
Resolved: That shareholders urge that the board of directors will solicit
shareholder approval for any "shareholder rights" plan that might be adopted,
and that if this approval is not granted in the form of a majority of shares
voted, then any rights plan be redeemed.
Pursuant to Rule 14a-8(j), I have enclosed six copies of the proposal and this
letter, which sets forth the grounds upon which we deem omission of the proposal
to be proper. For your convenience, I have also enclosed a copy of the no-action
letters referred to herein. Pursuant to Rule 14a-8(j), a copy of this letter is
being sent to the proponent to notify him of our intention to omit the proposal
from our 2002 annual meeting proxy materials.
We believe that the proposal may be properly omitted from our proxy materials
pursuant to Rule 14a-8 for the reasons set forth below.
I. The Proposal may be Properly Omitted Under Rule 14a-8(i)(3) and 14a-9 as it
is Materially False or Misleading
Rule 14a-8(i)(3) under the Exchange Act permits the exclusion of a shareholder
proposal if it 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." This proposal, coupled with its unrelated supporting
statement, is materially false and misleading.
In the first paragraph of his supporting statement, Mr. Naylor writes that "[i]n
the space of a year, our company might both redeem a pill and adopt a new one,
two actions which, in fact, our management did execute recently." This statement
is materially false and misleading in that (a) it suggests that our company
adopted a pill, redeemed it, and adopted a new one, and (b) it implies a
shareholder rights plan is still in place The only rights plan ever enacted by
our company was adopted in December 1999 in connection with our agreement to
combine with Canadian National Railway Company. The adoption of the rights plan
was a condition of the combination agreement between our company and Canadian
National because of the ownership provisions of Canadian law, which prohibited
any person from acquiring 15% or more of voting rights in Canadian National's
securities. In May 2000, the Surface Transportation Board imposed a 15 month
moratorium on major rail mergers while it developed new merger regulations. In
July 2000, following a federal appellate court ruling upholding the moratorium,
our company and Canadian National announced the termination of the proposed
combination. Subsequently, in December 2000, our Board voted to redeem the
shareholder rights plan. As a result, company shareholders of record on March
12, 2001 received a redemption payment of $0.01 per share on April 2, 2001. The
supporting statement of Mr. Naylor's proposal states that our company redeemed a
pill and adopted a new one, when in fact we adopted a shareholder rights plan
and later redeemed it, and have not adopted a new rights plan. Mr. Naylor's
formulation suggests that we have had multiple rights plans and that a rights
plan is currently in place; in fact, we have had only one rights plan and that
plan has been redeemed.
In the third paragraph of his supporting statement, Mr. Naylor writes that
"federal preemption insulates [a railroad] company from certain requirements
which apply to non-rail corporations, most notably, environmental law." The
suggestion that railroads are exempted from environmental law requirements is
patently false. The railroad is certainly required by law and regulation to
protect the environment and is subject to both civil and criminal liability for
failure to comply with those requirements, as is any non-rail corporation.
Shareholders only need review our annual report to shareholders, our Form 10-K
and other periodic filings to get a grasp of the wide array of environmental
laws applicable to our company and the costs we incur to comply with those laws.
Mr. Naylor goes on to say that, with respect to the refueling facility our
railroad is constructing in Hauser, Idaho, "government authorities ruled that it
need not oblige any standing environmental protection requirement" resulting in
our "insulation from common social requirements." These assertions are false and
misleading, and are not substantiated by any facts. No governmental authority
ruled that our railroad did not have to satisfy environmental protection
requirements. Our railroad was issued construction permits by Kootenai County,
Idaho, after demonstrating that the proposed refueling facility was
environmentally safe and complied with the environmental regulations of the
County, the local health district and the State of Idaho. Indeed, the
environmental design of the railroad's facility was so extraordinary that it
became the basis for tank construction regulations proposed by Spokane County,
Washington. Opponents of the facility, one of which was the Railroad & Clearcuts
Campaign with which Mr. Naylor is associated, later asked the U.S. Surface
Transportation Board ("STB") to assert jurisdiction over the facility and
require an environmental assessment under the National Environmental Policy Act.
The STB ruled that though it has jurisdiction over certain types of railroad
construction, it did not have jurisdiction to require an assessment for this
type of facility. In its ruling, the STB noted the railroad's efforts to work
for resolution of local concerns (including environmental concerns) and to
revise its plans accordingly as it went through the permit process with the
County.
The bulk of the remainder of the supporting statement is misleading in that it
does not address the pill proposal at all, but rather speaks to Mr. Naylor's
concern that railroad corporations are not socially or environmentally
responsible. In the past, Mr. Naylor has attempted to use our proxy materials
and annual meeting as a forum for his social and environmental platform by
tacking these arguments to the statement supporting a proposal on an entirely
different subjecta proposal nearly identical to the proposal he submitted this
year. For the last two years, the proposal has been included in our proxy
materials. As submitted, a substantial portion of the supporting statement of
each of Mr. Naylor's proposals, including the proposal submitted this year, has
been devoted to social and environmental concerns unrelated to the subject of
the proposal.
Two years ago, Mr. Naylor devoted the supporting statement of his proposal to an
irrelevant harangue on our railroad's proposed construction of the train
refueling facility in Hauser, Idaho. Mr. Naylor argued that the refueling
facility could pose an environmental threat to the area. In response to our
request for a no-action letter, the Staff wrote that if Mr. Naylor did not
submit a revised proposal, the Staff would not recommend enforcement action if
we omitted his statements regarding the refueling facility. See Burlington
Northern and Santa Fe Corporation (February 14, 2000). Mr. Naylor submitted a
revised proposal, but did not attend the 2000 annual meeting of stockholders.
His representative, a politician running for office in Idaho, presented his
proposal. Not surprisingly, she wanted to talk about the proposed refueling
facility in Hauser, Idaho, not the rights plan proposal. An article in The Wall
Street Journal (See Exhibit B) after the meeting explained that a coalition of
groups affiliated with the Railroads & Clearcuts Campaign, an environmental
organization based in Spokane, Washington, had introduced "so-called management
accountability resolutions" annual election of directors and poison pill
resolutionsat four companies, including ours. Mr. Naylor was identified as
having assisted the environmentalists.
Last year, Mr. Naylor used the supporting statement of his rights plan proposal
to discuss our railroad's handling of hazardous waste. In his supporting
statement last year, Mr. Naylor wrote:
Like Texaco, which suffered a major controversy involving racial discrimination,
BNSF has exposed its shareholders to a complex net of problems. For example,
BNSF is a major transporter of hazardous waste. Even as it guards against
expenses, BNSF's hazardous waste movements require our company to protect
diligently the environment. Shareholders are growing increasingly concerned
about their interests in profiting from ownership while at the same time
promoting environmental standards.
In response to our request for a no-action letter, the Staff wrote that it would
not recommend enforcement action if we omitted the above language from the
supporting statement from our 2001 Proxy. See Burlington Northern and Santa Fe
Corporation (January 31, 2001). Mr. Naylor's representative at our 2001 meeting
was a representative of the Sierra Club. As reported in the Spokesman Review
newspaper (See Exhibit C):
Green investors will show up at Burlington Northern and Santa Fe Railway's
annual meeting in Texas today, attempting to influence corporate policy through
a shareholder resolution.
The railroad giant angered environmentalists with its project to build a
refueling depot over the Spokane Valley/Rathdrum Prairie aquifer near Hauser,
Idaho.
Environmental groups say they want more accountability from corporate officials
and board members. Their vehicle: a resolution making it harder for BNSF to
enact a `poison pill.'
While the article states that the poison pill issue doesn't have a direct link
to the decision to build the refueling facility, it quotes Mr. Naylor as stating
that the issue does speak to "management credibility."
In this year's proposal, Mr. Naylor again devotes a substantial portion of his
supporting statement to his unrelated social and environmental concerns. Mr.
Naylor writes:
Shareholders may face special concerns about management insulation at a railroad
because federal preemption insulates the company from certain requirements that
apply to non-rail corporations, most notably, environmental law. For example,
when our company proposed building a 500,000 gallon diesel fueling station above
the aquifer serving greater Spokane, Washington, government authorities ruled
that it need not oblige any standing environmental protection requirement.
Such insulation from common social requirements may send our company on a
collision course with the increasing number of shareholders with formal policies
of social responsibility. This includes the Council of Institutional Investors,
with more than $1 trillion in assets. Meanwhile, environmental groups have
joined religious organizations to press such enlightened policies of social
responsibility. For example, the Sierra Club, of which I am a member, recently
launched an [sic] such an effort. Explained Sierra Club board member Larry Fahn,
as shareholders, `we have a chance to push them to be better environmental
stewards. Long term, this will be good for their bottom line.'
These statements establish that Mr. Naylor's motivation in proffering his pill
proposals is to further his social and environmental agenda. The proposal
submitted by Mr. Naylor, like those he has submitted in the past, is simply a
Trojan Horse designed to give Mr. Naylor a forum in our proxy materials and at
our annual meeting to promote his unrelated agenda. If Mr. Naylor has a specific
social or environmental concern that is the proper subject of a shareholder
proposal he should submit a proposal on that topic; he should not be permitted
to use his shareholder rights proposal to publicize these unrelated issues.
For purposes of Rule 14a-8(i)(3), the Staff has previously concurred with the
omission of proposals where "neither shareholders voting upon the proposal nor
the company would be able to determine with any reasonable certainty exactly
what action or measures would be taken in the event that the proposals were
implemented." Southeast Banking Corp. (February 8, 1982). The proposal made by
Naylor is misleading in that it couples a pill proposal with an unrelated
supporting statement on social and environmental issues. Shareholders would be
confused as to the subject matter of the proposal. Any action ultimately taken
upon implementation could be quite different from the type of action envisioned
by the shareholders at the time their votes were cast.
Accordingly, it is my opinion that the proposal may be excluded from our 2002
annual meeting proxy materials pursuant to Rule 14a-8(i)(3) and Rule 14a-9 as it
is materially false or misleading.
II. The Proposal May be Properly Omitted Under Rule 14a-8(i)(4) as it Relates to
a Personal Interest Not Shared by our Other Shareholders
Mr. Naylor is listed as a contact person for the Railroads & Clearcuts Campaign,
an environmental organization committed to opposing corporations associated with
railroad land grants. (See Exhibit D). The internet home page for the Railroads
& Clearcuts Campaign (www.landgrant.org) describes the mission of the
organization:
Railroad corporations were entrusted with millions of acres of land and
instructed to build and operate the nation's transportation and communication
systems. Instead, the railroads sold millions of acres to timber, mining, and
real estate corporations.
The largest of the railroad land grants was to the Northern Pacific Railroad [a
predecessor company of our railroad].... Many community and environmental
problems stem from corporate abuse of the Northern Pacific railroad land grants.
... [M]illions of acres more are still being clearcut and stripmined. Workers
and communities are being poisoned with toxic waste. Corporations are
squandering our taxes, writing our public laws, and controlling our local and
national governments. (See Exhibit E).
The intent of the Railroads & Clearcuts Campaign is "to hold government and
corporations accountable, and to reclaim this land to the public domain." Its
environmental agenda targets several corporations it perceives as having
benefited unfairly from public land grants. The Campaign publishes a list of
such companies; our company and five of our predecessor and former subsidiary
companies are among the twelve on the list. (See Exhibit F).
The submission of shareholder proposals is apparently an integral part of the
mission of the Railroads & Clearcuts Campaign. The Railroads & Clearcuts website
has a page devoted to recent shareholder proposals at corporations with
significant land grant based assets. It lists certain proposals made to
Weyerhaeuser, Boise Cascade, Potlatch, Burlington Resources (a former subsidiary
of our predecessor company) and our company. Included on the list is Mr.
Naylor's 2000 "poison pill" proposal to our company.
The enmity of Mr. Naylor and the Railroads & Clearcuts Campaign toward our
company arises in connection with our predecessor companies having been the
beneficiaries of federal railroad land grants. Because Mr. Naylor and the
Railroads & Clearcuts Campaign view the federal railroad land grants as
"illegal," they have embarked on a mission to harass the recipients of such land
grants. Though the concerns of Mr. Naylor and the Railroads & Clearcuts Campaign
are focused on the national railroad land grants and ancillary environmental
issues, Mr. Naylor continues to submit corporate governance proposals to our
company. The reason for this may be found on the Railroads & Clearcuts website,
which publishes an article by Mr. Naylor containing advice on how to submit
successful shareholder proposals. In the article, Mr. Naylor counsels
environmental activists to propose corporate governance proposals. Mr. Naylor
writes, "Why should an environmental activist propose a resolution regarding
corporate governance? Because federal law guarantees investors the right of
governance of the publicly held corporation." In a section devoted to successful
"poison pill" proposals, Mr. Naylor writes, "Environmental resolutions typically
receive low votes. Wall Street figures many of them won't benefit profits.
Corporate governance resolutions often receive high votes." (See Exhibit G).
Mr. Naylor's agenda is clear from his publication: his proposal has not been
submitted to change our corporate governance policies, it has been submitted
because Mr. Naylor hopes it will "receive high votes" and somehow further his
environmental crusade. Because his cause is not shared by shareholders generally
(he admits that it will "typically receive low votes"), he has adopted the ploy
of tacking his arguments onto an entirely irrelevant pill proposal because he
knows that they are difficult to exclude and more popular with institutional
shareholders. There is no reason for Mr. Naylor to submit a proposal based upon
its propensity to receive high votes rather than a proposal on the subject in
which he is actually interested other than as a tactic to attack our company.
Mr. Naylor again seeks to use our proxy materials to oppose our company for
constructing a train refueling facility and because he objects to our
predecessor railroads having been recipients of federal railroad land grants in
the 1800s.
A majority of shareholders voted in favor of Mr. Naylor's rights plan proposal
at our 2001 annual meeting. The proposal did not call for our Board to take any
action at that time, but only urged that it solicit shareholder approval for any
rights plan that might be adopted. No such rights plan has since been adopted.
Yet Mr. Naylor has again sought to include in our 2002 meeting proxy materials
an almost identical shareholder proposal. His persistence suggests that his
motive is advancement of his environmental agenda using whatever vehicle will
pass muster with the Staff and garner the most votes.
Rule 14a-8(i)(4) under the Exchange Act states that a shareholder proposal may
be excluded from proxy materials if the statement "relates to the redress of a
personal claim or grievance against the company ... or if it is designed to
result in a benefit to [the proponent] or to further a personal interest, which
is not shared with the other shareholders at large ...." According to the
Commission, the purpose of this rule is to ensure "that the security holder
proposal process would not be abused by proponents attempting to achieve
personal ends that are not necessarily in the common interest of the issuer's
shareholders generally." Release No. 34-20091 (August 16, 1983). In this
connection, the Commission has also stated that proposals phrased in broad terms
that "might relate to matters which may be of general interest to all security
holders" may be omitted from a registrant's proxy materials "if it is clear from
the facts ... that the proponent is using the proposal as a tactic designed to
redress a personal grievance or further a personal interest." Release No.
34-19135 (October 14, 1982). This is the case even if the subject matter of the
proposal does not relate specifically to the personal grievance. See AmVestors
Financial Corporation (March 31, 1992).
Because Mr. Naylor's proposal has been submitted to aggravate and embarrass our
company in furtherance of a special interest of Mr. Naylor's not generally held
by our shareholders and unrelated to the subject of the actual proposal, it is
my opinion that his proposal may be properly omitted from our 2002 annual
meeting proxy materials pursuant to Rule 14a-8(i)(4) as it is designed to
further a special interest not shared by our other shareholders at large.
III. In the Event that the Proposal Submitted by Emil Rossi is Included in our
2002 Proxy Materials, the Proposal Submitted by Bartlett Naylor may be Properly
Omitted Under Rule 14a-8(i)(11) as it is Duplicative
On October 25, 2001, eleven days before we received Mr. Naylor's proposal, we
received the following shareholder proposal from Emil Rossi (which, together
with its accompanying statement in support, is attached as Exhibit H):
Shareholders request the Board of Directors redeem any poison pill previously
issued unless such issuance is approved by the affirmative vote of shareholders,
to be held as soon as may be practicable.
In a separate letter to the Commission, we have requested that the Staff provide
us with a no-action letter regarding our intent to omit Mr. Rossi's proposal
from our proxy materials. In the event that the Staff does not concur in our
position and Mr. Rossi's proposal is included in our 2002 annual meeting proxy
materials, we believe that Mr. Naylor's proposal may be omitted as substantially
duplicative under Rule 14a-8(i)(11).
Rule 14a-8(i)(11) allows a shareholder proposal to be omitted if it
substantially duplicates another proposal previously submitted to a company by
another proponent that will be included in such company's proxy materials for
the same meeting. The proposal of Mr. Rossi and the proposal of Mr. Naylor each
request that the Board of Directors obtain shareholder approval of shareholder
rights plans. The proposals differ only in that the proposal submitted by Mr.
Rossi requests shareholder approval for previously issued shareholder rights
plans, while the proposal submitted by Mr. Naylor requests shareholder approval
for any shareholder rights plan that might be adopted.
The Staff has taken the position that proposals do not need to be identical to
be excluded under Rule 14a-8(i)(11). The test is whether the core issues to be
addressed by the proposals are substantially the same, even though the proposals
may differ somewhat in terms or breadth. For example, in EMCOR Group, Inc. (May
16, 2000) the Staff found that the company could omit the second of two
proposals where the first requested that the board of directors redeem the
rights plan currently in place and refrain from adopting a shareholder rights
plan without the prior approval of the stockholders, and the second sought to
amend the by-laws of the company with a provision that would prevent the board
from entering into a rights agreement and redeeming any outstanding rights plan.
In USG Corp. (April 7, 2000) the Staff permitted the second of two proposals to
be omitted under Rule 14a-8(i)(11) where the first proposal requested that the
company redeem or cancel its existing shareholder rights agreement and would
prohibit any new shareholder rights agreement from becoming effective without
shareholder approval and the second proposal requested that the company redeem
its shareholder rights agreement and not implement a new shareholder rights
agreement. See also Tri-Continental Corporation (March 2, 1998), Freeport-McMoran
Copper & Gold Inc. (February 22, 1999) and Polaroid Corporation (March 12,
1990).
Because the proposal submitted by Mr. Naylor is substantially duplicative of the
proposal submitted by Mr. Rossi, I am of the opinion that if Mr. Rossi's
proposal is included in our 2002 annual meeting proxy materials, we may properly
omit Mr. Naylor's proposal pursuant to Rule 14a-8(i)(11) as it is duplicative.
IV. Conclusion
For the foregoing reasons, I request your confirmation that the Staff will not
recommend any enforcement action to the Commission if the proposal is omitted
from our 2002 annual meeting proxy materials. To the extent that the reasons set
forth in this letter are based on matters of law, this letter also constitutes
an opinion of counsel pursuant to Rule 14a-8(j)(2)(iii).
If the Staff has any questions or has formulated a response to my request,
please contact Jeffrey T. Williams at (817) 352-3466 or by facsimile at (817)
352-2397.
Please acknowledge receipt of this letter and the enclosures by date-stamping
the enclosed copy of this letter and returning it to the waiting messenger.
Very truly yours,
/s/
Jeffrey R. Moreland
Executive Vice President Law and Chief of Staff
Enclosures
cc: Bartlett Naylor
[INQUIRY LETTER]
Exhibit A
October 31, 2001
Marsha Morgan, Corporate Secretary
BNSF
2650 Lou Menk Drive
Fort Worth, Tx 76131-2830
Dear Secretary,
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 (from a record holder); intend to continue ownership of the
requisite value through the forthcoming annual meeting; 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.
Sincerely,
/s/
Bartlett Naylor
Resolved: That shareholders urge that the board of directors will solicit
shareholder approval for any "shareholder rights" plan that might be adopted,
and that if this approval is not granted in the form of a majority of the shares
voted, then any rights plan be redeemed.
Supporting Statement
Shareholder rights plans, sometimes called "poison pills," may be adopted by
boards at any time. In the space of a year, our company might both redeem a pill
and adopt a new one, two actions which, in fact, our management did execute
recently. Such board action presumes a knowledge of what is best for
shareholders. Yet I believe shareholders frequently oppose "pills" when they are
asked in a vote.
This resolution merely urges the board to secure shareholder approval if and
when a pill is put in place by the board. Companies such as Texaco and Compaq
have instituted the policy imbedded in this resolution and understandably
highlight it as a sign of shareholder accountability. Last year, management
argued that "The Board believes it is important that it retain the flexibility
to adopt a rights plan without having to conduct a shareholder vote in order to
maintain the plan." A majority of shareholders rejected this argument when they
voted to support the above resolution.
Broadly, the poison pill and a board's actions to establish them without
shareholder vote have come to signify management insulation. Shareholders may
face special concerns about management insulation at a railroad because federal
preemption insulates the company from certain requirements that apply to
non-rail corporations, most notably, environmental law. For example, when our
company proposed building a 500,000 gallon diesel fueling station above the
aquifer serving greater Spokane, Washington, government authorities ruled that
it need not oblige any standing environmental protection requirement.
Such insulation from common social requirements may send our company on a
collision course with the increasing number of shareholders with formal policies
of social responsibility. This includes the Council of Institutional Investors,
with more than $1 trillion in assets. Meanwhile, environmental groups have
joined religious organizations to press such enlightened policies of social
responsibility. For example, the Sierra Club, of which I am a member, recently
launched an such an effort. Explained Sierra Club board member Larry Fahn, as
shareholders, "we have a chance to push them to be better environmental
stewards. Long term, this will be good for their bottom line."
By supporting this resolution, shareholders can signal that it will hold the
board to the highest standards of accountability.
[STAFF REPLY LETTER]
January 23, 2002
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Burlington Northern Santa Fe Corporation
Incoming letter dated December 12, 2001
The proposal urges the board to solicit shareholder approval for rights plans.
We are unable to concur in your view that BNSF 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 materially false or misleading
under rule 14a-9. In our view, the supporting statement must be revised to:
- delete the statement in the second sentence of the first paragraph beginning,
"In the space ..." and ending "... did execute recently;"
- delete the second and third sentences of the third paragraph beginning,
"Shareholders may face ..." and ending "... environmental protection
requirement"; and
- delete the fourth paragraph beginning, "Such insulation from ..." and ending
"... their bottom line."
Accordingly, we will not recommend any enforcement action to the Commission if
the BNSF 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 BNSF may exclude the proposal under
rule 14a-8(i)(4). Accordingly, we do not believe that BNSF may omit the proposal
from its proxy materials in reliance on rule 14a-8(i)(4).
We are unable to concur in your view that BNSF may exclude the proposal under
rule 14a-8(i)(11). Accordingly, we do not believe that BNSF may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(11).
Sincerely,
/s/
Maryse Mills-Apenteng
Attorney-Advisor
|
