Company Name: Bank of New York Co., Inc.
Public Availability Date: September 24, 2004Document Sections:
INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER [INQUIRY LETTER]
August 19, 2004 Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Securities Exchange Act of 1934 - Rule 14a-8 Shareholder Proposal submitted
by Vladimir G. Lukin Ladies and Gentlemen:
In accordance with Rule 14a-8(j) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), The Bank of New York Company, Inc. (the "Company")
hereby requests your concurrence that the Company may exclude from its proxy
statement (the "Proxy Statement") for its 2005 annual meeting of shareholders
the shareholder proposal (the "Proposal") and the statement supporting the
proposal (the "Supporting Statement") submitted to the Company by Vladimir G.
Lukin (the "Proponent"). The Proposal seeks to "limit the maximum salary of the
Bank of New York employees by (sic) $400,000, including all bonuses." A copy of
the Proposal and Supporting Statement is attached as Annex A hereto.
Five additional copies of this letter, including the Proposal and Supporting
Statement, are enclosed herewith in accordance with Rule 14a-8(j).
Grounds for Excluding the Proposal Pursuant to Rule 14a-8(i)(1)
Rule 14a-8(i)(1) states that a registrant may omit a shareholder proposal from
its proxy materials "[i]f the proposal is not a proper subject for action by
shareholders under the laws of the jurisdiction of the company's organization."
Thus, a proposal may be omitted if it seeks to mandate action on matters that,
under state law, fall within the powers of a company's board of directors.
The Company is a New York corporation. Section 701 of the New York Business
Corporation Law provides that in the absence of a specific provision in a
company's certificate of incorporation giving the power directly to the
shareholders, a New York corporation's business and affairs are to be managed
under the direction of its board of directors. Neither the Company's Certificate
of Incorporation nor By-Laws contains such a provision. The note to paragraph (i)(1) under Rule 14a-8(i)(1) states, in pertinent part,
that, "[d]epending upon the subject matter, some proposals are not considered
proper under state law if they would be binding on the company if approved by
shareholders. In our experience, most proposals that are cast as recommendations
or requests that the board of directors take specified action are proper under
state law." The Proposal is not only binding but would usurp the Board's power
to set company-wide compensation. Under New York law shareholders do not have
the power to set company-wide compensation. The Staff of the Division of Corporation Finance (the "Staff") has consistently
found that binding proposals are excludable unless amended by the proponent to
make them precatory. See, e.g., Phillips Petroleum Company (March 13, 2002)
(proposal requiring a formula limiting increases in the salaries of the
company's chairman and other officers); PPL Corporation (February 19, 2002)
(proposal requiring decrease in the retainer for non-employee directors); PSB
Holdings, Inc. (January 23, 2002) (proposal requiring a limitation on
compensation of non-employee directors); and Columbia Gas System (January 16,
1996) (proposal requiring a limitation on salary increases and option grants).
The Proposal is not stated as a recommendation or request; rather it directs
that the Company "limit the maximum salary of the Bank of New York employees by
$400,000, including all bonuses." The Proposal therefore is not precatory.
Rather it would require that the Company perform specific actions, leaving no
discretion in the matter to the Company's board of directors. The Proposal is
not a proper subject for action by shareholders under New York law and seeks to
usurp the discretion of the Company's Board. As such, it is excludable pursuant
to Rule 14a-8(i)(1). Grounds for Excluding the Proposal Pursuant to Rule 14a-8(i)(2)
Rule 14a-8(i)(2) states that a company may omit a shareholder proposal if
implementation of the proposal would cause the company to violate any state,
federal, or foreign law to which it is subject. The Proposal relates not only to
future compensation arrangements entered into by the Company, but also to all of
the Company's outstanding compensation arrangements if, under the arrangement,
the officer or director were to receive salary and bonus aggregating more than
$400,000. The Company currently has outstanding contractual obligations to pay officers
compensation in excess of $400,000. Since these outstanding compensatory
arrangements do not comply with the Proposal such arrangements would have to be
terminated or amended. If such outstanding arrangements were unilaterally
terminated or amended, it is my opinion that, under state law, the Company would
be in breach of its existing contractual obligations to the officers who are
parties to those arrangements. Accordingly, the Proposal would require the
Company to breach outstanding contractual obligations with its officers and thus
violate state law. For example, the Company has granted awards under various Long-Term Incentive
Plans to numerous individuals that may each have a value in excess of $400,000.
Such awards are still outstanding, and in some cases are in the early years of a
multi-year award cycle. It appears that the Proposal, if implemented, would have
a retroactive effect on the Company's outstanding compensatory arrangements, and
the Company could not unilaterally terminate or amend such arrangements to bring
them into compliance with the Proposal without violating those contracts.
The Staff has consistently allowed omission of shareholder proposals under Rule
14a-8(i)(2) that may require the breach of outstanding compensation-related
agreements. For example, in Sensar Corporation (May 14, 2001), the Staff
permitted omission of a shareholder proposal requiring that "[a]ll options
reserved for officers and directors at the last shareholders meeting be
rescinded and re-authorized," because the proposal may cause the company "to
breach existing contractual obligations." Additionally, in International Business Machines Corporation (February 27,
2000), the Staff permitted omission of a shareholder proposal that requested
"termination and renegotiation of the grossly excessive retirement package" of
the company's chief executive officer. In numerous other letters, the Staff has also permitted registrants to exclude
shareholder proposals under Rule 14a-8(i)(2) if the implementation of such
proposals might require the registrant to breach other types of outstanding
agreements. See, e.g., NetCurrents, Inc. (June 1, 2001) (permitting omission of
a shareholder proposal because it may cause the company "to breach existing
employment agreements or other contractual obligations"); and Whitman
Corporation (February 15, 2000) (permitting omission of a shareholder proposal
because it may cause the company "to breach an existing contract").
For all of the above reasons, the Company believes that the Proposal is
excludable pursuant to Rule 14a-8(i)(2). Grounds for Excluding the Proposal Pursuant to Rule 14a-8(i)(3)
Rule 14a-8(i)(3) states that a proposal may be omitted if the proposal or its
supporting statement is contrary to the proxy rules, including Rule 14a-9, which
prohibits materially false or misleading statements in proxy soliciting
materials. The Staff has consistently taken the position that shareholder
proposals that are vague and indefinite are excludable under Rule 14a-8(i)(3) as
inherently misleading because neither the shareholders nor the company's board
of directors would be able to determine, with any reasonable amount of
certainty, what action or measures to take if the proposal were implemented.
See, e.g., General Electric Company (January 23, 2003) (permitting omission of a
shareholder proposal to cap "salaries and benefits" of company officers and
directors at $1,000,000 as vague and indefinite where there was no specified
time frame or definition of what constituted "benefits"); and NYNEX Corporation
(January 12, 1990) (permitting omission of a proposal relating to
non-interference with the government policies of certain foreign nations because
it is "so inherently vague and indefinite" that any company action "could be
significantly different from the action envisioned by the shareholders voting on
the proposal"). The Proposal is vague and indefinite because it fails to define critical terms
or otherwise provide guidance on how it should be implemented. For example, the
Proposal does not define the term "bonus." Does the term apply only to cash
bonuses or does it include performance shares which are considered bonus
payments because the performance period is less than one year?
The Proposal's demand for an individual limit of $400,000 in salary and bonus
does not express any timeframe over which to measure such compensation. It is
not clear or readily discernable whether the Proponent intended the $400,000 cap
to apply to any given year, as opposed to over the entire career of officers. If
the Proposal is intended to apply to each year, how does the Proposal treat
deferred compensation for purposes of the annual $400,000 cap? Similarly, if
performance shares are included in the term "bonus" because the value of such
shares is reported in the bonus column on the summary compensation table in the
Company's annual Proxy Statement, it is not clear when the value of such awards
is to be determined for purposes of the proposed maximum, viz: Should the value
of performance shares be counted on the date of grant, the date of vesting, the
date a performance goal is met, the date the amount of earn-out is determined or
upon the occurrence of some other undefined event, such as resale of the
underlying shares? This timing dilemma is especially troublesome when one recognizes that the
Company, like many other companies, emphasizes incentive awards covering periods
of more than one year; that various Company long-term awards are currently
outstanding, in various stages of their life cycles; and that the Proposal may
be read to apply retroactively to those outstanding awards regardless of their
stage of development. Accordingly, the Proposal is vague and indefinite and is excludable under Rule
14a-8(i)(3) as inherently misleading. Grounds for Excluding the Proposal Pursuant to Rule 14a-8(i)(7)
Rule 14a-8(i)(7) under the Exchange Act permits the exclusion of a shareholder
proposal from a company's proxy materials if it "deals with a matter relating to
the company's ordinary business operations." The Securities and Exchange
Commission (the "Commission") has stated, in pertinent part, in Staff Legal
Bulletin No. 14A (July 12, 2002) that: "Since 1992, we have applied a
bright-line analysis to proposals concerning equity or cash compensation:
We agree with the view of companies that they may exclude proposals that
relate to general employee compensation matters in reliance on rule 14a-8(i)(7)"
In line with the Commission's statement quoted above, the Staff has consistently
granted no-action relief pursuant to Rule 14a-8(i)(7) in connection with
shareholder proposals seeking to require a company to limit general employee
compensation. See, e.g., Caterpillar, Inc. (February 13, 1992) (allowing
exclusion of a proposal to require that every employee be granted stock options
for a minimum of 100 shares of company stock); E.I. DuPont de Nemours and
Company (March 15, 2001) (allowing exclusion of a proposal that "no one" at a
DuPont site receive a bonus unless all employees at that site receive a bonus);
Lucent Technologies Inc. (November 6, 2001) (allowing exclusion of a proposal to
immediately reduce the salaries of "all" officers and directors of the company
by 50%); and Minnesota Mining and Manufacturing Company (March 4, 1999)
(allowing exclusion of a proposal to limit the compensation of the "top 40"
executives of the company). The Proposal clearly applies to all "Bank of New York employees." As such it
falls squarely within the bright-line analysis articulated by the Commission in
Staff Legal Bulletin No. 14A (July 12, 2002) and so is excludable under Rule
14a-8(i)(7) as dealing with the Company's ordinary business operations.
If the Staff disagrees with my conclusion regarding the exclusion of the
Proposal and Supporting Statement, or if additional information is desired in
support of the Company's position, I would appreciate an opportunity to speak
with you by telephone prior to the issuance of a written response. If you have
any questions regarding this request, or need any additional information, please
telephone me at (212) 635-1075. Very truly yours,
/s/ Paul A. Immerman
Senior Counsel
The Bank of New York cc: Vladimir G. Lukin, Ph.D. [APPENDIX]
ANNEX A Vladimir G. Lukin
2538 East 63\rd/ St
Brooklyn, NY 11234 To: Mr. Thomas Renyi
Chairman and CEO
Of The Bank of New York
One Wall Street
New York, NY 10286 August, 02, 2004
Dear Mr. Renyi: As a co-owner (shareholder) of the Bank of New York I am very concern about some
aspects of the Bank humane resource politic. From your letters to me I know you
as a great patriot of our country and The Bank of New York. I always tried
together with you to make our job more efficient and our position in the world
economy more strongly. Now I am having a feeling this is my duty to share my
concern with you. As an employee of the Bank I could see how many IT jobs gone from the department
outsource and how many American citizens lost they jobs. Is it good for our
country, dear Mr. Renyi? Can you do something to prevent it?
I have a proposal for annual meeting of shareholders. I propose to limit the
maximum salary of the Bank of New York employees by $400,000, including all
bonuses. I think this is a descent money (this is a salary of USA President, by
the way) and I am sure the majority of shareholders, including you, dear Mr.
Renyi, will approve it. We can save a lot of expenses for our bank, dear Mr.
Renyi by doing this. I used to be an employee of the Bank of New York from September 1994 until March
2004 and as you can see, dear Mr. Renyi, I continuously had in my Retirement
Account and Employee Stock Purchase Plan account much more then value of $2,000
shares of The Bank of New York. On April 2004 I transferred these money to my
Citibank brokerage account and I am still holding it See, please, my last
statement from the Citibank I am going to hold shares for market value of at
least $2,000 until the next shareholders meeting and I am going to give another
proposals after that. I believe my proposal is in compliance with all rules of Securities Exchange
Commission Could you inform me, please, can you accept it or not?
With my very best wishes to you, dear Mr. Renyi,
/s/ Ph.D. Vladimir G. Lukin,
USA Citizen,
USA Taxpayer,
The Bank of New York Co-owner. [STAFF REPLY LETTER]
September 24, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: The Bank of New York Company, Inc. Incoming letter dated August 19, 2004
The proposal relates to limiting the maximum salary of The Bank of New York
"employees" by $400,000, including all bonuses. There appears to be some basis for your view that The Bank of New York may
exclude the proposal under rule 14a-8(i)(7), as relating to The Bank of New
York's ordinary business operations (i.e., general compensation matters).
Accordingly, we will not recommend enforcement action to the Commission if The
Bank of New York omits the proposal from its proxy materials in reliance on rule
14a-8(i)(7). In reaching this position, we have not found it necessary to
address the alternative bases for omission upon which The Bank of New York
relies. Sincerely, /s/
Robyn Manos
Special Counsel
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