Company Name: Microsoft Corp.
Public Availability Date: August 26, 2002
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
June 24, 2002
Securities and Exchange Commission
Office of Chief Counsel
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Microsoft Corporation Shareholder Proposal Submitted by Robert C. Marrs
Ladies and Gentlemen:
In accordance with Rule 14a-8(j) under the Securities Exchange Act of 1934, as
amended (the "Act"), enclosed are six copies of (1) this letter and (2) the
proposal and statement in support thereof (the "Proposal") received by Microsoft
Corporation (the "Company") on May 30, 2002 from Robert C. Marrs (the
"Proponent") for inclusion in the proxy statement and form of proxy
(collectively, the "Proxy Materials") relating to the Company's 2002 annual
meeting of shareholders. This letter is intended to notify the Commission of the
Company's belief that the Proposal may be properly omitted from its Proxy
Materials and to set forth the Company's reasons for the intended omission.
Microsoft requests the concurrence of the Staff of the Division of Corporation
Finance (the "Division") that no enforcement action will be recommended if
Microsoft omits the Proposal from its Proxy Materials. The Company would
appreciate the Division's response to its request prior to August 22, 2002,
which is the date of the meeting of the Company's Board of Directors at which
the Proxy Materials will be approved. The Company expects to file definitive
copies of its Proxy Materials with the Commission on approximately September 16,
2002.
The Proposal reads as follows: "In view of the foregoing, I propose:
1. The board should declare regular quarterly dividends for shareholders.
2. The amount of dividends paid should generally be increasing yearly.
3. The amount of dividends should provide, on average, a 3% annual yield on
share value."
Microsoft has concluded that the Proposal may be properly omitted from its Proxy
Materials pursuant to Rule 14a-8(i)(13) of the Act. The specific reason why the
Company deems omission to be proper and the legal support for such conclusion
are discussed below.
THE PROPOSAL MAY PROPERLY BE OMITTED UNDER RULE 14a-8(i)(13) AS IT RELATES TO
SPECIFIC AMOUNTS OF CASH OR STOCK DIVIDENDS.
Rule 14a-8(i)(13) provides that a shareholder proposal is excludable if it
relates to specific amounts of cash or stock dividends. The Commission has
interpreted this Rule broadly such that the phrase "specific amounts of cash or
stock dividends" does not simply mean dividends in specific dollar amounts. See
Exelon Corporation (March 2, 2002); Duke Energy Corporation (January 9, 2002).
It is well established that a shareholder proposal that purports to establish a
formula or percentage for the payment of dividends may be excluded. See
International Business Machines Corporation (January 2, 2001); Lydall, Inc.
(March 28, 2000); H.J. Heinz Company (May 6, 1987); ITT Corporation (January 23,
1986). Because the Proposal directs the Company to declare "regular quarterly
dividends" in amounts "increasing yearly" and, "on average, a 3% annual yield on
share value," it is clearly excludable under Rule 14a-8(i)(13).
The Proponent's request relates to a specific amount of dividends. Not only does
the Proponent propose the specified amounts to be both increasing yearly and on
average equal to 3% of annual yield on share value, but he also sets forth the
schedule on which such specific dividends should be declared, that is, on a
regular quarterly basis. Based on the foregoing, the Company respectfully
requests the Division's concurrence that the Proposal may be omitted and that it
will not recommend any enforcement action if the Proposal is in fact excluded
from the Company's 2002 Proxy Materials under Rule 14a-8(i)(13).
Pursuant to Rule 14a-8(j)(1), the Company by copy of this letter is notifying
the Proponent of its intention to omit the Proposal from the Proxy Materials.
Should you have any questions or comments regarding the foregoing, please
contact James Andrus of Preston Gates & Ellis LLP at (206) 224-7329. Please
acknowledge receipt of this letter and enclosures by stamping the enclosed
additional copy of this letter and returning it in the enclosed, self-addressed
stamped envelope.
We appreciate your attention to this request.
Sincerely,
MICROSOFT CORPORATION
By /s/
John A. Seethoff
Assistant Secretary
Enclosures
cc: Robert C. Marrs
[INQUIRY LETTER]
April 12, 2002
Board of Directors, c/o Investors Relations Department
Microsoft Corporation
One Microsoft Way
Redmond, Washington 98052-6399
RE: Dividend payment proposal
Dear Board of Directors:
I am a beneficial shareholder of 850 shares of stock which is held in personal
accounts, IRA, 401K and two trusts which I manage. Many of these shares I have
held since 1995. I am also a long-term customer of Microsoft products.
I've invested in many stocks over the past 25 years and have enjoyed some return
in Microsoft stock in years past. However, in recent years, the stock has not
performed well and my return has been negative. It appears that Microsoft may
have reached a size and market saturation point where the appreciation seen
previously is not possible in the foreseeable future. Thus, I am hesitant to
invest further in Microsoft at this time.
In past years the company has re-invested nearly all its earnings in new
products and growth. However, there is not an apparent or return in re-investing
all earnings at this point.
In view of the foregoing, I propose:
1. The board should declare regular quarterly dividends for shareholders.
2. The amount of dividends paid should generally be increasing yearly.
3. The amount of dividends should provide, on average, a 3% annual yield on
share value.
Such changes will put Microsoft in a more competitive position for long-term
shareholder investment dollars.
I recognize that many investment fund managers encourage companies to have
volatility in stocks. This volatility creates wealth for investment fund
managers, but nothing for the company or shareholders. It seems to me that
Microsoft is the kind of company that can make prudent financial decisions that
balance the interests of shareholders, customers, and employees. Paying regular
dividends to shareholders as outlined above would put such a balance back.
Thank you for your consideration.
Sincerely,
/s/
Robert C. Marrs
13943 E. Lupine Ave.
Scottsdale, AZ 85259
480-614-5868
[STAFF REPLY LETTER]
August 26, 2002
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Microsoft Corporation
Incoming letter dated June 24, 2002
The proposal requests that the board of directors declare a regular quarterly
dividend, increase the dividend amount yearly and provide an average 3% annual
yield on share value.
There appears to be some basis for your view that Microsoft may exclude the
proposal under rule 14a-8(i)(13). Accordingly, we will not recommend enforcement
action to the Commission if Microsoft omits the proposal from its proxy
materials in reliance on rule 14a-8(i)(13).
Sincerely,
/s/
Keir D. Gumbs
Special Counsel
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