Company Name: Morgan Stanley
Public Availability Date: January 14, 2004
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 4, 2003
By Hand
Office of Chief Counsel
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Morgan Stanley Stockholder ProposalGordon P. Knuth
Dear Ladies and Gentlemen:
Morgan Stanley (the "Company") received a letter dated October 15, 2003 from Mr.
Gordon P. Knuth ("Mr. Knuth" or the "Proponent") transmitting a stockholder
Proposal (the "Proposal") and supporting statement for inclusion in the
Company's proxy materials for its 2004 annual stockholders meeting (the "2004
Annual Meeting"). See Exhibit A. The Company intends to omit the Proposal and
supporting statement from its proxy materials based on Rules 14a-8(i)(3) and
14a-8(i)(4) promulgated under the Securities Exchange Act of 1934, as amended.
We request confirmation that the Staff of the Division of Corporation Finance
(the "Staff") will not recommend any enforcement action to the Securities and
Exchange Commission (the "Commission") if the Company omits the Proposal from
its proxy materials.
In accordance with Rule 14a-8(j), we enclose for filing with the Commission six
copies of this letter. The Company is concurrently transmitting a copy of this
letter to Mr. Knuth to notify him of the Company's intent to omit the Proposal
from its proxy materials.
Background
Mr. Knuth is a former employee of Morgan Stanley DW Inc. (then known as Dean
Witter Reynolds Inc.) ("Morgan Stanley DW"), a wholly-owned subsidiary of the
Company. Mr. Knuth was terminated in 1991 for various violations of company
policy. Since his termination, Mr. Knuth has engaged in a retaliatory course of
conduct in which he has persisted for more than a decade. Initially, Mr. Knuth
brought frivolous litigation in Wisconsin state court and before an NASD
arbitration panel charging Morgan Stanley DW with various breaches of contract
and other employment-related claims. In 1995, the arbitration panel vindicated
Morgan Stanley DW by denying all of Mr. Knuth's claims and finding him liable
for $40,000 on a counterclaim asserted by the Company arising from his outside
insurance activities and $10,000 in attorneys fees. Mr. Knuth did not appeal the
award. Instead, Mr. Knuth entered into a settlement agreement with Morgan
Stanley DW under which he agreed to pay Morgan Stanley DW the full amount of the
award.
Three years later, after the Company instituted NASD proceedings because Mr.
Knuth failed to pay the amounts still owed under the award and settlement
agreement, Mr. Knuth finally completed his payments. However, even before he
paid the total amount due, Mr. Knuth extended his campaign against the Company.
He wrote a letter to his U.S. Representative, F. James Sensenbrenner,
complaining of his alleged unjust treatment by Morgan Stanley DW and the
unfairness of the arbitration. Congressman Sensenbrenner's staff forwarded the
letter to the Commission. The Company expended significant time, and incurred
significant costs, demonstrating to the Commission the frivolous nature of Mr.
Knuth's claims. After reviewing the Company's submission, the Commission took no
action on behalf of Mr. Knuth.
Mr. Knuth has continued his campaign against the Company over the last several
years. He appeared at the Company's annual shareholders meetings in 2000 and
addressed the meeting regarding his claims against the Company. Mr. Knuth has
written letters to officers and directors of the Company asserting variations of
his claims and calling on the Company to return its "ill-gotten gains." See,
e.g., Exhibit B. In December 2001, he expressed his intent to introduce a
proposal, again stemming from his claims against the Company, at the Company's
2002 annual shareholders meeting. See Exhibit C. The Company advised Mr. Knuth
that his proposal, which was not submitted for inclusion in the Company's proxy
statement, would be ruled out of order if he attempted to introduce the proposal
at the meeting. See Exhibit D. Mr. Knuth did not attend the Company's 2002
annual shareholders meeting.
In October 2002, Mr. Knuth submitted a proposal substantially identical to the
one he has submitted this year for inclusion in the Company's proxy materials
for its 2003 annual stockholders meeting (the "2003 Annual Meeting"). The
Company objected to its inclusion pursuant to Rule 14a-8 on both procedural and
substantive grounds. The Staff of the Commission, by a no-action letter dated
December 24, 2002, stated that it would not object to the omission of the
proposal based on the Company's procedural arguments. See Exhibit E. The Staff
did not address the merits of the Company's substantive arguments. Mr. Knuth
nevertheless continued his campaign against the Company and, by letter dated
November 21, 2002, advised the Company of his intent to introduce the proposal
at the 2003 Annual Meeting. See Exhibit F. Mr. Knuth appeared at the 2003 Annual
Meeting and introduced his proposal, where it was overwhelmingly defeated (with
only 50 shares voting in favor of the proposal). At the 2003 Annual Meeting, Mr.
Knuth stated, "[T]hey won on a non-compete clause and I had to ultimately return
funds that they were not entitled to."
By letter dated October 15, 2003, Mr. Knuth announced that he wishes to present
a proposal substantially identical to the one properly excluded from the
Company's proxy statement last year in the Company's proxy statement for the
2004 Annual Meeting, The Proposal echoes the same meritless themes that Mr.
Knuth has sounded for a decade and is the latest in his campaign against the
Company.
The Proposal
The Proposal reads:
Proposal
"Be it resolved: That the stockholders of Morgan Stanley request that the Board
of Directors adopt a written policy statement with a commitment to undue [sic]
financial injustice(s) to any client(s), employees (current or former), and
investors, which can be demonstrated to have occurred as a result of illegal,
unethical, or immoral actions or inaction's [sic], on the part of any employees
(past or present) of the firm, including actions resulting from dishonesty,
untruthfulness, and perjury. The policy is to clearly include the voluntarily
[sic] setting aside and returning of those financial awards, even if awarded via
court or arbitration rulings."
Reason
Being in an industry which is dependent on honesty and integrity, firms in the
financial services business need to gain even further confidence with the public
and further demonstrate a zero tolerance toward unethical, immoral, and illegal
behavior. All too often legal teams working for their companies, [sic] are more
concerned with simply "winning the legal battle", especially if it involves a
financial award, versus taking the morally correct approach and acknowledgement
[sic] that an injustice may have occurred. I would like to believe that
stockholders and the Board of Directors at Morgan Stanley would take a
leadership role and set an example that it will take the morally correct resolve
[sic], despite "winning" a legal decision, to NOT hide behind the shield of a
legal victory, but rather require the firm to return such financially
"ill-gotten gains". This would include returning those awards gained during
legal proceedings and arbitrations.
Material Interest
As a current common stockholder and former employee, I had been involved in an
arbitration versus Morgan Stanley. I experienced first hand results of
untruthfulness on the part of current and former employees of Morgan Stanley,
while under oath, during an arbitration that I lost. While I was an employee, I
witnessed first hand several examples of immoral activity in and about the
offices, including exotic strippers entertaining the employees. I also have
evidence of untruthfulness by employees of the firm.
The Company believes it can omit the Proposal submitted by Mr. Knuth from its
proxy materials because the Proposal (i) relates to the redress of personal
claim or grievance (Rule 14a-8(i)(4)) and (ii) is vague and misleading (Rule
14a-8(i)(3)).
I. The Proposal May Be Omitted Pursuant to Rule 14a-8(i)(4) Because the Proposal
Is Related to Mr. Knuth's Personal Grievance Against the Company and Is Designed
to Further a Personal Interest of the Proponent Which is Not Shared by
Stockholders at Large.
The Company may omit the proposal because it is motivated by, and primarily
relates to, Mr. Knuth's long-term personal grievance with the Company arising
from his termination from employment in 1991, loss in arbitration and the
damages award against him. Rule 14a-8(i)(4) permits the exclusion of a proposal
that relates to the redress of a personal claim or grievance or is designed to
result in a benefit to the proponent or to further a personal interest, which
benefit or interest is not shared with the other stockholders at large. The
Commission has stated that the intention of the Rule is to prevent abuse of the
Rule 14a-8 stockholder proposal process to achieve personal ends that are not
necessarily in the common interest of the other stockholders. See SEC Release
No. 34-20091 (August 16, 1983). The Commission has noted that the costs and time
associated with dealing with such proposals do a disservice to the interests of
stockholders as a whole. See SEC Release No. 34-19135 (October 14, 1982). A
proposal may be excluded, despite being drafted in such a way that it might
relate to matters which may be of general interest to all security holders, if
it is clear from the facts that the proponent is using the proposal as a tactic
to further a personal interest. Id.
The Proposal is the latest in a series of actions taken by Mr. Knuth in an
effort to receive compensation for alleged damages suffered by Mr. Knuth as a
result of his termination of employment by the Company and to recover back from
the Company the amount he was required to pay pursuant to the arbitration which
he himself instituted.
Mr. Knuth was an employee of Morgan Stanley DW from 1984 until 1991, when his
employment was terminated for various violations of company policy. In September
1993, Mr. Knuth instituted both a state court action (later voluntarily
dismissed) and an arbitration action before the NASD, alleging, among other
things, breaches of his employment contract and other employment-related claims.
In addition to answering Mr. Knuth's claims, Morgan Stanley DW pursued a
counterclaim against Mr. Knuth for wrongful solicitation of its customers in
violation of his employment agreement and for engaging in an unauthorized
insurance business on behalf of another company.
On September 21, 1995, after a full hearing, the NASD arbitration panel rejected
all of Mr. Knuth's claims. Instead, the arbitrators awarded Morgan Stanley DW
$40,000 on its counterclaim relating to Mr. Knuth's outside insurance activities
and $10,000 in attorneys' fees. Mr. Knuth did not appeal the arbitrators' award,
reached under the SEC-sanctioned NASD arbitration process. Instead, Mr. Knuth
entered into a settlement agreement with Morgan Stanley DW, under which he
agreed to pay Morgan Stanley DW the full amount of the award.
In 1998, after the Company instituted NASD proceedings to recover amounts Mr.
Knuth owed under the settlement agreement, Mr. Knuth finally paid the amounts he
owed to the Company. However, even before he paid the total amount due, Mr.
Knuth wrote a misleading letter to his Congressman, F. James Sensenbrenner,
which Mr. Sensenbrenner's staff forwarded to the Commission. The Company was
forced to present a responsive submission explaining the circumstances
surrounding Mr. Knuth's termination and the parties' arbitration. The Commission
took no action on behalf of Mr. Knuth.
Mr. Knuth nonetheless continued his campaign against the Company even after the
Commission declined to act. The Proposal is the most recentand now
recurringelement of Mr. Knuth's campaign. Indeed, in the section of his
Proposal entitled "Material Interest," Mr. Knuth admits his real reason for
submitting the Proposal is that he "experienced first hand results" of alleged
injustice on the part of the Company. When discussing his proposal at the 2003
Annual Meeting, Mr. Knuth further indicated his personal interest in the
proposal (e.g., "[T]hey won on a non-compete clause and I had to ultimately
return funds that they were not entitled to.") If the Proposal were to be
adopted by the Company, Mr. Knuth would no doubt consider himself to be entitled
to the benefits of the Proposal and would seek, at a minimum, to have the
Company return the amount rewarded to it in the arbitration hearing. Thus, the
Proposal is merely another blatant attempt by Mr. Knuth to achieve what he has
been unable to obtain through the appropriate legal forums.
In analogous situations, the Staff has consistently permitted exclusion of a
proposal pursuant to Rule 14a-8(i)(4) where the proposal is used as an
alternative forum to press claims that a proponent has asserted in litigation.
See, e.g., The Dow Chemical Company (March 5, 2003); Schlumberger Limited
(August 27, 1999). For instance, in The Dow Chemical Company, the proponent
engaged in litigation and took other actions in an effort to obtain payment from
the registrant for alleged injuries that the proponent asserted were caused by
exposure to grain treated with fumigants produced by the registrant. Having lost
in litigation and otherwise been frustrated in his attempt to receive payment,
the proponent presented a proposal that the board of directors "establish a
Review Committee to investigate the use and possible abuse of its carbon
tetrachloride and carbon disulfide products as grain fumigants by grain workers
who were exposed to and handled the products daily," and report to shareholders
its findings and recommendations "as to how the Company can compensate those who
evidence bodily damage as a result of exposure." In that case, the Staff
concurred in the exclusion of the proposal under Rule 14a-8(i)(4) because it
related to the redress of a personal claim or grievance or was designed to
result in a benefit to the proponent or further a personal interest that was not
shared with other securityholders.
Schlumberger Limited presented another closely analogous case. In Schlumberger,
the proponent sought to recover a finder's fee that he alleged was due from the
company in connection with a corporate merger. The company won litigation on the
matter. The proponent then submitted a proposal requesting the company to form
"an impartial fact-finding committee" on the merger and to establish a
"Statement of Fair Business Principles." The proponent's supporting statement
cited the results of his lawsuit seeking payment from the company as an example
of "ethical fault" at the company that could be remedied through the proposed
"Statement of Fair Business Principles." The Staff concurred in the registrant's
decision to exclude the proposal because it related to the redress of a personal
claim or grievance or was designed to result in a benefit to the proponent or
further a personal interest, which was not shared with the company's other
security holders. See also International Business Machines Corporation (December
18, 2002) (proposal with respect to the registrant's review of claims of bias
and discrimination excludable as a personal grievance when brought by a
terminated employee who engaged in litigation against the company alleging,
among other things, age and sex discrimination in connection with his
termination of employment); Sara Lee Corporation (August 10, 2001) (proposal
regarding a policy for pre-approval by non-employee board members of certain
types of payments excludable as a personal grievance when the proponent
participated in litigation directly adverse to the registrant); KeyCorp
(February 22, 2001) (proposal that the board of directors fully disclose the
performance of certain mutual funds and provide that the directors of a
subsidiary of the registrant should be elected, all or in-part, "by the involved
parties, be they the establishing parties or the final beneficiaries" excludable
as a personal grievance where the proponent was involved in litigation with the
registrant).
The Staff has also repeatedly concurred in the exclusion of a proposal as based
on a personal grievance when, as in the present case, a terminated employee
attempted to use the shareholder proposal process to further his own objectives.
See, e.g., International Business Machines Corporation (December 18, 2002);
Phillips Petroleum Company (March 12, 2001); CBS Corporation (March 4, 1998);
CSX Corporation (February 5, 1998).
In Release No. 34-19135, the Commission stated that a proposal is also
excludable under Rule 14a-8(i)(4) if it is used to give the proponent some
particular benefit or to accomplish objectives particular to the proponent. Mr.
Knuth has claimed that he has suffered financial injury as a result of alleged
illegal, unethical or immoral actions on the part of Company employees. The
Proposal seeks to provide a means for persons who have such financial injury to
present their claims and for the Company to voluntarily set aside judgments or
return money awarded to the Company through the judicial process or in
arbitration proceedings. Based on his past actions against the Company, Mr.
Knuth clearly would attempt to receive compensation under the procedures that
the Proposal would have the Company establish. Although an exclusion under Rule
14a-8(i)(4) may sometimes involve a subjective determination as to the
proponent's intent, in this case the intended benefit to the Proponent is clear
on the face of the Proposal. In addition, Mr. Knuth's statements at the 2003
Annual Meeting also evidence his personal interest in the Proposal. Because the
Proposal therefore is designed to produce a financial benefit for Mr. Knuth that
would not be shared by the Company's shareholders at large, it is excludable
under Rule 14a-8(i)(4).
In an attempt to evade this result, Mr. Knuth has attempted to couch his
personal grievance in broader terms of alleged "financial injustice(s)"
perpetrated by employees of the Company and of the need of financial service
firms to regain the confidence of the public. The Commission, however, has
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." See SEC Release No. 34-19135 (October
14, 1982). The Staff has often utilized the personal grievance exclusion to omit
proposals submitted to redress personal grievances against companies even though
the proposals were drafted in such a manner that they could be read to relate to
matters of general interest to all shareholders. See, e.g., International
Business Machines Corporation (December 18, 2002); Philips Petroleum Company
(March 12, 2001); The Southern Company (February 12, 1999); U.S. West, Inc.
(December 2, 1998); Pyramid Technology Corporation (November 4, 1994).
Based on the foregoing, the Company intends to omit the Proposal pursuant to
Rule 14a-8(i)(4).
II. The Proposal May Be Omitted Pursuant to Rule 14a-8(i)(3) Because the
Proposal is Vague and Indefinite and Contains False and Misleading Statements in
Violation of Rule 14a-9.
The Proposal is subject to differing interpretations and would require highly
subjective determinations without providing guidance.
Rule 14a-8(i)(3) permits the Company to exclude a proposal if it is contrary to
any of the Commission's proxy rules and regulations, including Rule 14a-9, which
prohibits false and misleading statements in proxy soliciting materials. In
numerous no-action letters, the Staff has permitted a registrant to omit a
proposal under Rule 14a-8(i)(3) and Rule 14a-9 when the action specified by the
proposal was so vague and indefinite that neither the stockholders voting on the
proposal nor the Company would be able to determine with any reasonable
certainty what actions or measures would be required in the event the proposal
was implemented. See, e.g., Puget Energy, Inc. (March 7, 2002) (proposal that
requested registrant's board of directors implement a policy of "improved
corporate governance" excludable under Rule 14a-8(i)(3) as vague and
indefinite); Abbott Laboratories (February 18, 2000) (proposal that the
registrant endorse the "Pro Vita Principles" as a public commitment to ethical
business practices excludable as vague and indefinite); Gannett Co. Inc.
(February 24, 1998) (proposal excluded because it was "unclear what action the
Company would take if the proposal were adopted"); A.H. Belo Corp. (January 29,
1998) (proposal excluded because "neither the shareholders voting on the
proposal, nor the Company, would be able to determine with reasonable certainty
what measures the Company would take if the proposal was approved"). The Staff
has also stated that a proposal may be excluded if it would require a company
"to make highly subjective determinations ... without guidance from the proposal
and would be subject to differing interpretations by both shareholders voting on
the proposal and the [company] if the proposal was implemented." U.S. West, Inc.
(February 9, 1990).
In the present case, neither the Company nor the stockholders voting on the
Proposal would know to a reasonable certainty what actions or means would be
taken to implement the Proposal.
The Proposal would require the Company to adopt a formal policy "to undue
[sic] financial injustice(s) to any client(s), employees (current or former),
and investors which can be demonstrated to have occurred as a result of illegal,
unethical, or immoral actions or inaction's [sic] ...." The Proposal fails to
indicate what criteria would be used to determine whether such a demonstration
has been made in each instance. In addition, the Proposal does not specify which
person or organization would determine whether the actions or inactions causing
financial injustices were illegal, unethical or immoral.
The Proposal would require the Company to make vague characterizations of
actions or inactions as "unethical" or "immoral." The terms "unethical" and
"immoral" are highly subjective and are susceptible to different
interpretations. In an analogous situation, the Staff granted no action relief
when a proposal asked a registrant's advertising committee to determine what
constituted "criminal" or "immoral" behavior, See U.S. West, Inc. (February 9,
1990). The Staff, in granting the no action request in U.S. West, stated that
"such determinations would have to be made without guidance from the proposal
and would be subject to differing interpretations by both shareholders voting on
the proposal and the Committee if the proposal was implemented. Accordingly, we
believe that the proposal is so inherently vague and indefinite that
shareholders voting on the proposal would not be able to determine with
reasonable certainty what actions the Committee would take under the proposal.
The Staff, therefore, believes that the proposal may be misleading because any
action ultimately taken by the Company upon implementation of the proposal could
be significantly different from the actions envisioned by shareholders voting on
the proposal." In our case, due to the subjectivity of the terms "unethical" and
"immoral," there is the same danger that any action ultimately taken by the
Company upon implementing the proposal could be much different than that
envisioned by the shareholders when voting on the Proposal.
The Proposal would direct the Company to make an independent determination
that certain actions or inactions by it or its employees were "illegal," despite
a court's or arbitrator's determination that the Company deserves a "financial
award." Courts and arbitration panels are the appropriate forums to determine
whether actions or inactions are "illegal" and when financial awards are just.
The Proposal is misleading because many stockholders would be unaware that the
Proposal requires the Company to substitute its own determination of what is
"illegal" or unjust for that of an appropriate court or arbitrator.
For the reasons discussed above, the Proposal gives insufficient guidance on how
the Board of Directors and the Company can carry out its terms, and stockholders
cannot determine to a reasonable degree of certainty what actions might be
taken. Any actions to be taken by the Board of Directors to implement the
Proposal therefore could be significantly different than those contemplated by
the stockholders voting on the Proposal.
The Proposal contains misleading implications, unsubstantiated assumptions and
unsupported personal opinion.
Rule 14a-8(i)(3) also allows a registrant to omit a proposal if it violates Rule
14a-9 by containing materially false and misleading statements. The Staff has
recognized that "when a proposal and supporting statement will require detailed
and extensive editing in order to bring them into compliance with the proxy
rules, [the Staff] may find it appropriate for companies to exclude the entire
Proposal, supporting statement, or both, as materially false or misleading."
Securities and Exchange Commission, Division of Corporation Finance, Staff Legal
Bulletin No. 14, E.1 (July 13, 2001). Because the Proposal contains unsupported
assumptions and misleading implications, and thus would require detailed and
extensive editing, the Company may exclude the Proposal from its proxy
materials. If the Staff does not agree that the Company may exclude the Proposal
in its entirety, it should direct Mr. Knuth to revise the Proposal to correct
the deficiencies noted below.
The Proposal incorporates numerous misleading assumptions and implications and
personal opinions for which Mr. Knuth fails to provide any support:
The first sentence of the paragraph entitled "Reason" states that "firms in
the financial services business need to gain even further confidence with the
public and further demonstrate a zero tolerance toward unethical, immoral, and
illegal behavior." The statement is misleading because it falsely implies that
financial services firms like the Company tolerate unethical or illegal
behavior. Mr. Knuth offers no support for this statement other than his
unsubstantiated "first hand" allegation and does not identify the statement as
personal opinion. In fact, Morgan Stanley does not tolerate unethical or illegal
behavior by its employees. Morgan Stanley maintains a robust Code of Ethics and
Business Conduct and a Code of Conduct that clearly set forth the Company's
commitment to ethical behavior by its employees. Illegal or unethical behavior
by any Morgan Stanley employee is unacceptable. Employees who engage in such
activity face termination of employment. Morgan Stanley employees are committed
to observing both the letter and spirit of the law and to acting ethically in
all of their business dealings. Mr. Knuth's implication to the contrary is thus
misleading.
The second sentence of the paragraph entitled "Reason" claims that "All too
often legal teams working for their companies, [sic] are more concerned with
simply `winning the legal battle', especially if it involves a financial award,
versus taking the morally correct approach and acknowledgment [sic] that an
injustice may have occurred." Mr. Knuth offers no support for this broad
statement and does not identify the statement as personal opinion. The statement
falsely implies that the Company's legal personnel are unconcerned with morality
and justice in the legal process. The Code of Ethics and Business Conduct and
the Code of Conduct, which bar illegal and unethical behavior, apply to all
Morgan Stanley employees, including its inside counsel. Further, Morgan Stanley
has an additional attorney ethics policy that ensures the Company's inside and
outside counsel play an important role in the Company's efforts to comply with
the law and to maintain the highest ethical standards.
In the third sentence of the paragraph entitled "Reason," Mr. Knuth states
that he "would like to believe that stockholders and the Board of Directors at
Morgan Stanley would take a leadership role and set an example that it will take
the morally correct resolve [sic], despite `winning' a legal decision, to NOT
hide behind the shield of a legal victory, but rather require the firm to return
such financially `ill-gotten gains.'" This sentence falsely implies that the
Company has received "financially ill-gotten gains" from legal decisions in its
favor. Mr. Knuth offers no support for this implication and does not identify
the statement as personal opinion.
Finally, the paragraph entitled "Material Interest" specifically attacks
"current and former employees of Morgan Stanley" and makes claims of
"untruthfulness" and "immoral activity." Mr. Knuth offers no support for these
unsubstantiated accusations. Note (b) to Rule 14a-9 specifically provides that
"material which directly or indirectly impugns character, integrity or personal
reputation, or directly or indirectly makes charges concerning improper, illegal
or immoral conduct or associations, without factual foundation" may be
considered misleading under the Rule. Mr. Knuth's unsubstantiated allegations
against former and current employees thus violate Rule 14a-9 and the Company
should not be compelled to include such statements in its proxy materials.
As discussed above, Mr. Knuth's Proposal and supporting statement are so filled
with unsupportable and misleading statements that the Company believes it may
exclude the entire Proposal under Rule 14a-8(i)(3).
II. Conclusion
Based upon the foregoing, the Company respectfully requests that the Staff
confirm that the Company may omit Mr. Knuth's Proposal from its proxy statement
for its 2004 Annual Meeting. We would be happy to provide any additional
information and answer any questions that you may have regarding this subject.
Should you disagree with the conclusions set forth in this letter, we
respectfully request the opportunity to discuss the matter prior to any final
decision thereon.
Please confirm receipt of this letter by returning a receipt-stamped copy of
this letter. An extra copy of this letter is enclosed.
Very truly yours,
/s/
William J. O'Shaughnessy, Jr.
Executive Director
Enclosures
cc: Mr. Gordon Knuth
[INQUIRY LETTER]
January 4, 2004
Office of Chief Counsel
C/o Securities and Exchange Commission Division of Corporation Finance
Attn: Grace Lee
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Morgan Stanley Stockholder ProposalGordon P. Knuth
Dear Ladies and Gentleman:
My name is Gordon P. Knuth. I am a common stockholder of Morgan Stanley and a
former employee of Dean Witter, n/k/a/ Morgan Stanley. It is my intention to
present a proposal to the shareholders at the 2004 annual meeting, I had
requested that this proposal be available with the Notice of Annual Meeting of
Shareholders and be included in the Proxy Statement. I received a copy of a
letter from Morgan Stanley, addressed to your office dated December 4, 2003, and
would like to use this opportunity to respond to their request to omit my
proposal from the Proxy Statement.
To review, here is the proposal:
Proposal
"Be it resolved: That the stockholders of Morgan Stanley request that the Board
of Directors adopt a written policy statement with a commitment to undue
financial injustice(s) to any client(s), employees (current or former), and
investors, which can be demonstrated to have occurred as a result of illegal,
unethical, or immoral actions or inaction's, on the part of any employees (past
or present) of the firm, including actions resulting from dishonesty,
untruthfulness, and perjury. The policy is to clearly include the voluntarily
setting aside and returning of those financial awards, even if awarded via court
or arbitration rulings."
Background
Ideas toward improvement and creativity are often drawn from real life
experiences. I am a current employee in the securities industry and happen to be
a former employee of Morgan Stanley DW, Inc. (then known as Dean Witter
Reynolds, Inc.) Being in an industry, which is dependent on honesty and
integrity, firms in the financial services business need to further gain
confidence with investors and the public, and further demonstrate a zero
tolerance toward unethical, immoral, and illegal behavior. This is especially
true in light of recent industry events and marketing tactics.
The proposal speaks for itself and is based on the truth. This proposal could be
proposed by anyone with exposure to any securities firm. This proposal does not
single out any one company and could very well be embraced by any financial
institution. I would like to believe that stockholders and the Board of
Directors at Morgan Stanley would embrace this proposal, take a leadership role,
and set an example for the industry. It is from these experiences that motivates
the above referenced proposal.
I did attempt to previously submit this proposal; however at that time Morgan
Stanley disallowed it on a technical point ... being that my shares were held in
"street name" Vs. "book entry." (I still do not understand why that would make a
difference, and am concerned that that tactic was fair. See letter from Mr.
Donald G. Kempf, dated February 19, 2002.) I have since moved my shares into
"book entry" shares and am now attempting the process again.
I believe this proposal has merit. As a result of this belief, I traveled to the
2003 Morgan Stanley Annual Meeting to at least present the proposal verbally.
Morgan Stanley attempted to deny me the right and privilege to even make this
proposal to the shareholders. I was very fortunate to be able to finally have
the floor after writing to Mr. Martin P. Dunn, SEC. (See my letter dated March
31, 2003.) It was only then that the senior management at Morgan Stanley allowed
my right to present the verbal proposal to the shareholders. There was NO
argument against its merits!
Nothing in that proposal has changed, but without the benefit of having been
able to present the proposal in the Proxy and in advance of the meeting, my
proposal was defeated. Being defeated does NOT mean that one should be denied
the opportunity to present the proposal again.
Material Interest
I am a Morgan Stanley common stockholder of 51 shares. In addition, I have
fractional shares which are a result of dividend reinvestment. I do intend to
continue to hold these shares of common stock through the date of the 2004
Annual Shareholders Meeting.
Please allow for this proposal to be included in the company's proxy statement
for the 2004 Annual Meeting.
Very truly,
/s/
Gordon P. Knuth
1475 Cedarton Parkway
Grafton, WI 53024
H- 262-376-4989
W- 414-226-3056
Enclosures
[STAFF REPLY LETTER]
January 14, 2004
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Morgan Stanley
Incoming letter dated December 4, 2003
The proposal requests that that the board "adopt a written policy statement with
a commitment to undue financial injustice(s) to any client(s), employees
(current or former), and investors, which can be demonstrated to have occurred
as a result of illegal, unethical, or immoral actions or inaction's [sic], on
the part of any employees (past or present) of the firm, including actions
resulting from dishonesty, untruthfulness, and perjury" and further clarifies
that the policy include "the voluntary setting aside and returning of those
financial awards, even if awarded via court or arbitration rulings."
There appears to be some basis for your view that Morgan Stanley may exclude the
proposal under rule 14a-8(i)(4) as relating to the redress of a personal claim
or grievance, or designed to result in a benefit to the proponent or further a
personal interest, which benefit or interest is not shared with other security
holders at large. Accordingly, we will not recommend enforcement action to the
Commission if Morgan Stanley omits the proposal from its proxy materials in
reliance on rule 14a-8(i)(4). In reaching this position, we have not found it
necessary to address the alternative basis for omission upon which Morgan
Stanley relies.
Sincerely,
/s/
Grace K. Lee
Special Counsel
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