Company Name: Boeing Co.
Public Availability Date: February 10, 2004Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
APPENDIX 3
APPENDIX 4
STAFF REPLY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
December 23, 2003 VIA OVERNIGHT COURIER
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Shareholder Proposal Concerning Independent Board Chairman Submitted by John
Chevedden for Inclusion in The Boeing Company 2004 Proxy Statement
Dear Sir or Madam: We are counsel to The Boeing Company, a Delaware corporation ("Boeing" or the
"Company"). On November 4, 2003, Boeing received a proposed shareholder
resolution and supporting statement (together, the "Proposal") from John
Chevedden (the "Proponent" or "Mr. Chevedden"), for inclusion in the proxy
statement (the "2004 Proxy Statement") to be distributed to the Company's
shareholders in connection with its 2004 Annual Meeting. We hereby request that the staff of the Division of Corporation Finance (the
"Staff") confirm that it will not recommend any enforcement action to the
Securities and Exchange Commission (the "Commission") if, in reliance on certain
provisions of Commission Rule ("Rule") 14a-8 under the Securities Exchange Act
of 1934, as amended, Boeing excludes the portions of the Proposal identified
below from its proxy materials. Further, in accordance with Rule 14a-8(j), on behalf of Boeing, the undersigned
hereby files six copies of this letter and the Proposal, which is attached to
this letter as Exhibit A. One copy of this letter, with copies of all
enclosures, is being simultaneously sent to the Proponent.
The Proposal The Proposal relates to an independent board chairman and states:
RESOLVED: Shareholders request that our Board of Directors amend the By-Laws to
require that an independent director, according to the 2003 Council of
Institutional Investors definition, shall serve as Chairman of the Board of
Directors. Summary of Bases for Exclusion
We have advised Boeing that it properly may exclude the Proposal, or portions
thereof, from its 2004 Proxy Statement and form of proxy for the following
reasons: 1. The entire Proposal may be excluded pursuant to Rule 14a-8(i)(10) because the
Company has already substantially implemented the Proposal.
2. The entire Proposal may be excluded pursuant to Rule 14a-8(i)(3) because it
is impermissibly vague and indefinite. 3. Portions of the Proposal are excludable under Rules 14a-8(i)(3)/14a-9 because
they contain statements or assertions that are materially false or misleading.
The reasons for our conclusions in this regard are more particularly described
below. At the outset, we direct the Staff's attention to the fact that this Proposal is
one of five submitted to the Company this year by John Chevedden. Mr. Chevedden,
in his own right as a shareholder, has submitted this Proposal. In addition, he
has submitted four other proposals in his capacity as "proxy" for certain
shareholders. These include: 1. A proposal requesting a shareholder vote on golden parachutes, "submitted by"
Thomas Finnegan, with Mr. Chevedden as proxy; 2. A proposal recommending that the Company's Board declassify itself,
"submitted by" Ray T. Chevedden, with Mr. Chevedden as proxy;
3. A proposal requesting shareholder approval of a Company poison pill,
"submitted by" James Janopaul, with Mr. Chevedden as proxy; and
4. A proposal requesting a Board policy that directors and executive officers
commit to hold a certain level of Company stock obtained through exercise of
stock options, "submitted by" David Watt, with Mr. Chevedden as proxy.
A copy of each of these proposals is attached to this letter as Exhibits B
through E. We submit that Mr. Chevedden's attempts to submit multiple shareholder
proposals, clearly authored and pursued through the shareholder proposal process
by himself, under the aegis of "proxy" for other shareholders, constitute a
clear abuse of the plain wording and intent of the Rule 14a-8. Given the nature
and magnitude of the abuse of process considered here, we are asking the Staff
to permit the Company to omit from its 2004 Proxy Statement the proposals
submitted to the Company by Mr. Chevedden (other than the instant Proposal). Our
arguments in this regard are discussed in detail in our prior no-action letter
requests submitted to the Commission during the 2003, 2002 and 2001 proxy
seasons and are incorporated by reference into this letter. See The Boeing Co.
(Feb. 26, 2003) (proposal regarding annual election of directors); The Boeing
Co. (Feb. 26, 2003) (proposal regarding shareholder rights plans); The Boeing
Co. (Feb. 18, 2003) (proposal regarding an independent board chairman); The
Boeing Co. (Feb. 18, 2003) (proposal regarding shareholder approval for golden
parachutes); The Boeing Co. (Feb. 18, 2003) (proposal regarding
performance-based stock options); The Boeing Co. (Mar. 2, 2002); The Boeing Co.
(Feb. 13, 2002); The Boeing Co. (Feb. 7, 2002); The Boeing Co. (Feb. 6, 2002);
The Boeing Co. (Feb. 20, 2001); The Boeing Co. (Feb. 13, 2001); The Boeing Co.
(Feb. 8, 2001); The Boeing Co. (Feb. 7, 2001). Among other issues, Mr. Chevedden's purported submission of multiple proposals
as "proxy" for other shareholders puts the Company in a difficult position in
the matter of disclosing to its shareholders the identity of the true proposal
proponents. Mr. Chevedden would have us name as the proposal proponents the
shareholders for whom he acts as proxy. However, in view of his exclusive
control over the drafting, negotiation, revision and no-action letter process
incident to these proposals, we believe it would be false and misleading for the
Company to name anyone but Mr. Chevedden as the proponent for each of the
proposals. Were the Company to do otherwise, its proxy statement would
misleadingly suggest that each of the proposals at issue here was submitted by a
different individual, when in fact they were all submitted and written under Mr.
Chevedden's direction and control. We know of at least one instance where the Staff has granted relief in the
manner the Company is requesting. See TRW Inc. (Jan. 24, 2001) ("TRW") (proposal
excluded based on Proponent's solicitation of nominal proponent and fact that
Proponent had drafted proposal). The relief granted in TRW was short-lived,
however, because Mr. Chevedden now does not include the shareholder's telephone
number, and often omits the shareholder's address, in any correspondence
regarding the proposals in order to preclude the target company from contacting
the shareholder so that it may develop a TRW-type no-action letter.
Nevertheless, we believe that Mr. Chevedden's consistent and repeated abuse of
the one proposal per proponent rule, Rule 14a-8(c), merits and provides a
sufficient basis for the relief the Company is requesting. Accordingly, we ask
that the Staff concur that the Company may omit the shareholder proposals that
Mr. Chevedden has submitted to the Company as "proxy" for other shareholders.
Explanation of Bases for Exclusion 1. The entire Proposal may be excluded pursuant to Rule 14a-8(i)(10) because the
Company has already substantially implemented the Proposal.
The Company has already reorganized the structure of its Board of Directors (the
"Board") so that an independent director now serves as chairman of the Board.
On December 1, 2003, the Company issued a broadly disseminated press release and
filed a Form 8-K announcing the resignation of Phil Condit, its Chairman and
Chief Executive Officer, and the appointment of Lewis E. Platt as nonexecutive
Chairman of the Board and Harry C. Stonecipher as President and Chief Executive
Officer. A copy of the Form 8-K and the accompanying press release is attached
to this letter as Exhibit F. By this action, the Company's Board determined that
it is appropriate at this time to split the functions of Board Chairman and
Company Chief Executive Officer. The Company's bylaws were also amended to
clarify that a nonexecutive could hold the position of Board Chairman.
Importantly, the Company's new nonexecutive Chairman of the Board, Mr. Platt, is
an independent director consistent with the standards imposed by the New York
Stock Exchange. The Proponent advocates that the Chairman be independent
"according to the 2003 Council of Institutional Investors [("CII")] definition,"
but fails to state what that definition is in the resolution or the supporting
statement. We believe, however, that Mr. Platt meets the definition of
independence currently posted on CII's website,
http://www.cii.org/dcwascii/web.nsf/doc/council_indepdirectdef.cm, which states
that "[a]n independent director is someone whose only nontrivial professional,
familial or financial connection to the corporation, its chairman, CEO or any
other executive officer is his or her directorship." A copy of CII's definition
and implementing guidelines is attached to this letter as Exhibit G.
Under Rule 14a-8(i)(10), a company may exclude a proposal if the Company is
already doingor substantially doingwhat the proposal seeks to achieve. The
purpose of the exclusion is to "avoid the possibility of shareholders having to
consider matters, which have been favorably acted upon by the management" or the
board of directors and thereby avoid confusing shareholders or wasting corporate
resources on a matter that is moot. SEC Release No. 34-12598 (July 7, 1976). To
be moot, the proposal need not be implemented in full or precisely as presented.
Rule 14a-8(i)(10) does not require exact correspondence between the actions
sought by a shareholder proponent and the issuer's actions in order for the
shareholder's proposal to be excluded. Exchange Act Release No. 20091 (Aug. 16,
1983). Rather, the standard is whether a company's particular policies,
practices and procedures compare favorably with the guidelines of the proposal.
See SEC Release No. 34-20091 (Aug. 16, 1983), at II.E.6. As noted, shareholder proposals are considered substantially implemented within
the meaning of Rule 14a-8(i)(10) when the company already has policies,
practices and procedures in place relating to the subject matter of the proposal
or has implemented the essential objective of the proposal. Moreover, the fact
that a proposal is not implemented through a bylaw amendment is not necessarily
dispositive, since even a bylaw provision would be subject to a future
revocation by the board in the exercise of its fiduciary duties. See, for
example, AutoNation, Inc. (Mar. 5, 2003) ("AutoNation"), where the Staff did not
object to the omission of a proposal requesting that the board "not adopt or
extend any poison pill unless such adoption or extension has been submitted to a
shareholder vote" because the board had adopted a policy implementing the
proposal. AutoNation noted that the proponent did not provide any precedent or support for Proponent's implication that the Division
is precluded from finding "substantial implementation" of the Proposal as a
result of the Policy being subject to future revocation by the Board.... The
revocability of the Policy is consistent with other Company policies and the
well-settled principle of corporate governance that current directors may not
irreversibly bind future directors from discharging their fiduciary duties....
Proponent's argument is disingenuous in implying that "substantial
implementation" of the Proposal, which would not be binding on the Company even
if approved by the Company's stockholders, requires irrevocable action by the
Board. See also Citigroup, Inc. (Feb. 25, 2003) (proposal requesting shareholder
approval of shareholder rights plan was excludable because Company's board of
directors had adopted a similar policy); The Talbots Inc. (Apr. 5, 2002)
(proposal requesting that the company commit to the implementation of a code of
conduct based on ILO human rights standards was excludable because the company
had formerly established and implemented similar standards); The Gap, Inc. (Mar.
16, 2001) (proposal requesting that the company's board provide a report on
child labor practices of the company's suppliers was excludable because the
company had established and implemented a code of vendor conduct, monitored
compliance with the code and discussed child labor issues with share owners).
We believe General Electric Co. (Jan. 28, 2003) ("General Electric"), in which
the Staff did not grant no-action relief under Rule 14a-8(i)(10) on a similar
proposal, is distinguishable. In General Electric, the company unsuccessfully
argued that a proposal requesting that the board amend the bylaws to require
that an independent director serve as chairman of the board was moot. GE argued
that the proposal had been substantially implemented because the company had
recently announced several structural changes to its board, intended to achieve
what GE characterized as the "essential objective of the proposalto address the
perceived pitfalls of having unitary leadership of the Company by making changes
in the leadership structure of the Board of Directors." However, although GE's
structural changes included establishment of the position of an independent lead
director, they did not include a separation of the role of chairman and chief
executive officer. The Staff denied GE's request for relief under Rule
14a-8(i)(10). In our view, the Company has substantially implemented the Proposal by splitting
the functions of Board Chairman and Company Chief Executive Officer at this
time. The Company's action is distinguishable from General Electric. Unlike GE,
the Company is not arguing that it has adopted other policies that are intended
to indirectly accomplish the intent of the proposal. Rather, the Company has
instituted a Board structure that is directly responsive to the Proposal. The
fact that the Board structure was not implemented through an amendment to the
bylaws should not be dispositive, since even a bylaw provision would be subject
to future revocation by the Board in the exercise of its fiduciary duties. See
AutoNation. Accordingly, we believe that asking the Company's shareholders to
consider a matter that has been favorably acted upon by the Board would only
confuse shareholders and waste corporate resources on a matter that is now moot.
SEC Release No. 34-12598 (July 7, 1976). We also believe that no-action letters where the Staff has denied no-action
relief under Rule 14a-8(i)(10) for board committee "independence" proposals are
also distinguishable because the companies' policies did not fully meet the
"independence" standard called for by the proposals. See The Boeing Co. (Feb. 7,
2002) (Staff did not permit the company to omit a shareholder proposal
recommending a bylaw provision that the board "nominate independent directors to
key board committees to the fullest extent possible" notwithstanding the
Company's representation that its audit, compensation, and governance and
nominating committee charters already stated that each should consist of "three
or more directors who are not members of management"); AMR Corp. (Apr. 3, 2002)
(no relief under Rule 14a-8(i)(10) even though company's bylaws and board
policies required that the audit, compensation and nominating committees consist
solely of nonemployee directors who meet NYSE requirements (for the audit
committee) and Commission and IRS requirements (for the compensation committee)
although the current committee members were independent under the definition
proposed by the proponent). 2. The entire Proposal may be excluded pursuant to Rule 14a-8(i)(3) because it
is impermissibly vague and indefinite. Because the Proposal fails to give any description of the "2003 Council of
Institutional Investors definition" included in the Proposal, the Proposal is
impermissibly vague and indefinite such that the Company's shareholders would
not know what they are voting on, and in particular, they would not know how the
Proposal definition differs from the new New York Stock Exchange definition of
independent directors. Under Rule 14a-8(i)(3), a company may exclude all or portions of a proposal if
the proposal or supporting statement is contrary to any of the Commission's
proxy rules. By extension, this includes proposals that are impermissibly vague
and indefinite. In this regard, the Staff has indicated that proposals may be
excluded if the proposal is so vague and indefinite that it would be difficult
for shareholders to know what they are voting on. See, e.g., Woodward Governor
Co. (Nov. 26, 2003) (proposal requesting "compensation" for the "executives in
the upper management (that being plant managers to board members)" based on
stock growth); General Electric Co. (Feb. 5, 2003) (proposal requesting board to
seek shareholder approval "for all compensation for Senior Executives and Board
members not to exceed more than 25 times the average wage of hourly working
employees"); Proctor & Gamble Co. (Oct. 25, 2002) (proposal requesting that
board create a fund that would provide lawyers, clerical help, witness
protection and records protection for victims of retaliation, intimidation and
troubles because they are stockholders of publicly owned companies).
We note in particular that the Staff has permitted companies to exclude
proposals requesting that the company adopt a particular definition or set of
guidelines when the proposal or supporting statement failed to include any
description of the substantive provisions of the definition or set of guidelines
being recommended. For example, in Smithfield Foods, Inc. (July 18, 2003)
("Smithfield"), the company received a proposal requesting that management
"prepare a report based upon the Global Reporting Initiative." The proposal was
devoid of any definition or description of the Global Reporting Initiative. The
company argued that, on its face, the proposal and supporting statement did not
adequately inform shareholders of what they would be voting on or what the
company would be required to do if the proposal were approved, and therefore the
proposal was excludable under Rule 14a-8(i)(3). The Staff concurred. Similar
decisions have been reached in Johnson & Johnson (Feb. 7, 2003) ("J&J")
(proposal requesting adoption of Glass Ceiling Commission's business
recommendations) and Kohl's Corp. (Mar. 13, 2001) (proposal requesting
implementation of the "SA8000 Social Accountability Standards").
We believe that General Electric is distinguishable on these grounds. In General
Electric, the Staff declined to permit GE to omit a proposal from Mr. Chevedden
recommending that GE's Board "amend the bylaws to require that an independent
director, who has not served as CEO of the [c]ompany, shall serve as Chairman of
the Board of Directors." GE unsuccessfully argued that the proposal was
impermissibly vague and indefinite because it did not include or reference any
definition of independence, unlike "numerous [other] share owner proposals
involving Mr. Chevedden." Moreover, notwithstanding the fact that GE had
recently adopted a definition of independence "that goes beyond the requirements
of the proposed listing standards of the New York Stock Exchange," GE argued
that neither its shareholders nor its Board would "know whether that definition
is appropriate for implementing the [p]roposal, or whether the [p]roposal
intended to use one of the other definitions that Mr. Chevedden has used in past
proposalsor yet a different definition." In our view, the Proposal and request for relief under Rule 14a-8(i)(3) are
distinguishable from the Staff's decisions in General Electric. In that letter
the company argued that the proposal was vague and indefinite because it simply
did not include or reference any definition of independence at all. Here, the
Proposal does include a reference to a definition, but does not adequately
describe or delineate that definition. Just as the proposals in Smithfield, J&J and Kohl's Corp. did, the Proposal
recommends the adoption of a particular definition and set of guidelines but
fails to even describe or enumerate the substance of the definition and
guidelines. At its most basic level, the Proposal is asking the Company's
shareholders to vote on a definitionwithout even giving shareholders that
definition. In our view, the Company's shareholders cannot be expected to make
an informed decision on the merits of the Proposal without at least knowing what
they are voting on. Accordingly, we believe the Proposal is impermissibly vague
and indefinite and may be excluded pursuant to Rule 14a-8(i)(3).
3. Portions of the Proposal are excludable under Rules 14a-8(i)(3)/14a-9 because
they contain statements that are materially false or misleading.
Portions of the Proposal are properly excludable under Rules 14a-8(i)(3)/14a-9
because they contain false or misleading statements, inappropriately cast the
Proponent's opinions as statements of fact or otherwise fail to appropriately
document assertions of fact. Proxy Rule 14a-8(i)(3) permits a company to exclude portions of a shareholder
proposal or supporting statement from its proxy statement if such portions are
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 includes false or misleading statements, opinions stated as fact
and undocumented assertions of fact. See, e.g., Farmer Bros. Co. (Nov. 28, 2003)
(opinions stated as fact and undocumented assertions of fact); Monsanto Co.
(Nov. 26, 2003) (false or misleading statements, opinions stated as fact and
undocumented assertions of fact); Sysco Corp. (Aug. 12, 2003) (false or
misleading statements and undocumented assertions of fact); Kroger Co. (Feb. 18,
2003) (false or misleading statements). Mr. Chevedden is well aware of the
requirements of Rule 14a-8(i)(3). The Staff repeatedly has directed Mr.
Chevedden to delete or revise such statements in his shareholder proposals. See,
e.g., AMR Corp. (Apr. 4, 2003); Sabre Holdings Corp. (Mar. 20, 2003); The Boeing
Co. (Feb. 26, 2003); Weyerhaeuser Co. (Jan. 16, 2003); Southwest Airlines Co.
(Mar. 25, 2002); Alaska Air Group (Mar. 8, 2002); The Boeing Co. (Mar. 2, 2002);
General Motors (Mar. 27, 2001); Northrop Grumman Corp. (Feb. 16, 2001); UAL
Corp. (Feb. 9, 2001); Electronic Data Systems (Mar. 24, 2000). In our view, the
Proposal contains several such statements. We believe that the portions of the
Proposal identified below are properly excludable unless modified by the
Proponent. First, the following statement is properly excludable unless modified because it
is the Proponent's own opinion cast as a statement of fact:
[paragraph 3, last sentence] "An independent Chairman can enhance investor
confidence in our Company and strengthen the integrity of the Board of
Directors."
[paragraph 5, first sentence] "How can one person, serving as both Chairman
and CEO, effectively monitor and evaluate his or her own performance?"
The first statement and the second rhetorical question, which is really a
statement, inappropriately cast the Proponent's opinion as a statement of fact.
The Proponent should qualify the foregoing statement by adding "The Proponent
believes," "In the opinion of the Proponent," or some other acceptable
variation. See Farmer Bros. Co. (Nov. 28, 2003); Monsanto Co. (Nov. 26, 2003).
Without such qualification, the statement misleadingly suggests facts that have
not otherwise been documented. Second, paragraph 5 includes a quote attributed to a "blue-ribbon commission of
the National Association of Corporate Directors."
[paragraph 5] "it is difficult for us to see how an active CEO, already
responsible for the operations of the corporation, can give the time necessary
to accept primary responsibility for the operations of the board."
No citation is included in the text of the Proposal to assist shareholders or
the Company in verifying the accuracy of this quote. We note that the Staff has
repeatedly directed the Proponent to include accurate citations to the source of
quotes included in his proposals. See Monsanto Co. (Nov. 26, 2003); AMR Corp.
(Apr. 4, 2003); The Home Depot, Inc. (Mar. 31, 2003); The Boeing Co. (Feb. 26,
2003). We note that the Proponent provided a reference to the Council of
Institutional Investors Corporate Governance Policies in the correspondence
accompanying his Proposal, but it is unclear whether this reference was intended
to support the statement in paragraph 5. In our view, the Proponent should
specifically identify or provide factual support in the form of a citation to a
specific source for the foregoing statement in the text of the Proposal. The
Proponent should provide full and accurate citations, including the title and
author of the article quoted, so that shareholders can more easily access the
information. Otherwise, the statements should be deleted altogether. This
request is consistent with the Staff's response to similar statements in
proposals submitted to the Company and other companies. See FirstEnergy Corp.
(Mar. 10, 2003) (directing the proponent to provide a citation to a specific
publication date for a reference to "BUSINESS WEEK's inaugural ranking of the
best and worst boards in 1996"); The Boeing Co. (Feb. 18, 2003) (directing the
proponent to provide factual support in the form of a citation when the proposal
merely cited to "McKinsey & Co. corporate governance survey"); Weyerhaeuser Co.
(Jan. 21, 2003) (instructing the proponent to provide a citation to a specific
publication date for the proposal's reference to a "major series by the Seattle
Times"). * * * * * For the foregoing reasons, we believe that the Proposal or portions thereof may
be omitted from the Company's 2004 Proxy Statement and respectfully request that
the Staff confirm that it will not recommend any enforcement action if the
Proposal or portions thereof are excluded. Boeing anticipates that its definitive 2004 Proxy Statement and form of proxy
will be finalized for filing and printing on or about March 22, 2004.
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 (206) 359-8447.
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, /s/
J. Sue Morgan JSM:reh
Enclosures cc: John Chevedden
Mark R. Pacioni, Assistant Corporate Secretary and Counsel, The Boeing Company
[APPENDIX 1]
Exhibit A 3Independent Board Chairman
RESOLVED: Shareholders request that our Board of Directors amend the By-Laws to
require that an independent director, according to the 2003 Council of
Institutional Investors definition, shall serve as chairman of the Board of
Directors. This proposal was submitted by John Chevedden, 2215 Nelson Ave., No. 205,
Redondo Beach, Calif. 90278. The primary purpose of the Board of Directors is to protect shareholders'
interests by providing independent oversight of management, including the CEO. I
believe that separating the roles of Chairman and CEO will promote greater
management accountability to shareholders and lead to a more objective
ovaluation of the CEO. An independent Chairman can enhance investor confidence
in our Company and strengthen the integrity of the Board of Directors.
Recent corporate scandals have focused attention on the issue of board
independence and the need for an independent board chairman. According to The
Wall Street Journal, "in a post-Enron world of tougher corporate-governance
standards, the notion of a separate outside chairman is gaining boardroom
support as a way to improve monitoring of management and relieve overworked
CEOs" ("Splitting Posts of Chairman, CEO Catches on With Boards," November 11,
2002). How can one person, serving as both Chairman and CEO, effectively monitor and
evaluate his or her own performance? A blue-ribbon commission of the National
Association of Corporate Directors recently observed "it is difficult for us to
see how an active CEO, already responsible for the operations of the
corporation, can give the time necessary to accept primary responsibility for
the operations of the board." In January 2003 the Conference Board said, "Typically, the CEO is a member of
the board, but he or she is also part of the management team that the board
oversees. This dual role can provide a potential for conflict, particularly in
those cases in which the CEO attempts to dominate both the management of the
company and the exercise of the responsibilities of the board."
The Conference Board added that it was "profoundly troubled by the corporate
scandals of the recent past. The primary concern in many of these situations is
that strong CEOs appear to have exerted a dominant influence over their boards,
often stifling the efforts of directors to play the central oversight role
needed to ensure a healthy system of corporate governance."
By setting agendas, priorities and procedures, the position of chairman is
critical in shaping the work of the Board of Directors. Accordingly, I believe
that having an independent director serve as Chairman can help ensure the
objective functioning of an effective board. Conversely, I fear that combining
the positions of Chairman and CEO may result in a passive and uninvolved board
that rubber-stamps the CEO's own decisions. Independent Board Chairman Yes on 3
Notes: The above format is the format submitted and intended for publication.
Please advise if there is any typographical question.
The company is requested to assign a proposal number (represented by "3" above)
based on the chronological order in which proposals are submitted. The requested
designation of "3" or higher number allows for ratification of auditors to be
item 2. Reference: Council of Institutional Investors, Corporate Governance Policies, March 25,
2002 Please advise within 14 days if the company fails to locate references and list
the specific items. [APPENDIX 2]
4Retention of Stock Obtained through Options RESOLVED: Shareholder request that our board of directors adopt a policy for
senior executives and directors to commit to hold throughout their tenure at
least 75% of all Boeing shares that they obtain by exercising stock options.
This would include each option plan that our Board has the power to modify
accordingly. David Watt, 23401 N.E. Union Hill Road, Redmond, Washington 98503 submitted this
proposal. Since the accounting scandals at Enron, Worldcom and other companies, the role
of stock options in executive compensation has become more controversial. Stock
options can provide incentives to senior executives which confliet with the
interests of stockholders. Stock option grants promise executives all the gain
of stock price Increases yet none of the risk of stock price declines. For this
reason, stock options can encourage actions to boost short-term performance.
Unlike direct stock holdings, stock options can also discourage executives from
increasing dividends because option holders are not entitled to dividends.
I believe that this proposal is more important to our company than to some other
companies because our company does not require that our directors own any
minimum amount of stock. This resolution proposes to align director and executive interests with those of
shareholders by asking our directors and executives to commit that they will
hold at least 75% of all Boeing stock that they obtain by exercising options for
as long as they remain directors or executives. This policy seeks to decouple
executive and director compensation from short-term price movements. This is
designed to encourage greater emphasis on longer-term gains while giving
directors and executive flexibility by enabling them to sell 25% of their
holdings at will. I believe that adopting this policy would be a good way of assuring shareholders
that our directors and senior executives are committed to long-term growth of
the Company and not merely short-term gains. I urge you to vote FOR this resolution.
Retention of Stock Obtained through Options Yes on 4
Notes: The above format is the format submitted and intended for publication.
Please advise if there is any typographical question. [APPENDIX 3]
5Shareholder Input regarding Golden Parachutes RESOLVED: Shareholders request that our Board of Directors seek shareholder
approval for future golden parachutes for senior executives. This applies to
benefits exceeding 200% of the sum of the executive's base salary plus bonus,
Future golden parachutes include agreements renewing, modifying or extending
existing severance agreements or employment agreements with golden parachute or
severance provisions. This includes that golden parachutes not be given for a change in control or
merger which is approved but not completed. Or for executives who transfer to
the successor company. This proposal would include to the fullest extent each
golden parachute that our Board has or will have the power to grant or modify.
Because it may not always be practical to obtain prior shareholder approval, our
company would have the flexibility under this proposal of seeking approval after
the material terms of a golden parachute were agreed upon.
Thomas Finnegan, 8152 S.E. Ketchum Road, Olalla, Washington 98359 submitted this
proposal. In the view of certain institutional investors ...
Golden parachutes have the potential to:
1) Create the wrong incentives 2) Reward mis-management
A change in control can be more likely if our executives do not maximize
shareholder value. Golden parachutes can allow our executives to walk away with
millions even if shareholder value languishes during their tenure.
54% Shareholder Support The 17 shareholder proposals voted on this topic in 2003 achieved an impressive
54% average supporting vote. The potential magnitude of golden parachutes for executives was highlighted in
the failed merger of Sprint (FON) with MCI WorldCom. Investor and media
attention focused on the estimated $400 million payout to Sprint Chairman
William Esrey. Almost $400 million would have come from the exercise of stock
options that vested when the deal was approved by Sprint's shareholders.
Another example of questionable golden parachutes is the $150 million parachute
payment to Northrop Grumman executives after the merger with Lockheed Martin
fell apart. Independent Support for Shareholder Input on Golden Parachutes
Institutional investors recommend companies seek shareholder approval for golden
parachutes. For instance the California Public Employees Retirement System
(CalPERS) said, "shareholder proposals requesting submission of golden
parachutes to shareholder vote will always be supported." Also, the Council of
Institutional Investors www.cii.org supports shareholder approval if the golden
parachute exceeds 200% of a senior executive's annual base salary.
Shareholder Input regarding Golden Parachutes YES ON 5
Notes: The above format is the format submitted and intended for publication.
Please advise if there is any typographical question.
The company is requested to assign a proposal number (represented by "5" above)
based on the chronological order in which proposals are submitted:
References: CaIPERS Domestic Proxy Voting Guidelines, 4500 Golden Parachutes at
http://www.calpers-governance.org/principles/domestic/voting/page11.asp
Northrop to take $180 million merger charge, Wall Street Journal, March 26, 1998
IRRC Corporate Governance Bulletin, JuneSept. 2003
Council of Institutional Investors, Corporate Governance Policies, March 25,
2002 Please advise within 14 days if there are any references the company is unable
to locate and please list the specific items. [APPENDIX 4]
Exhibit B Dear Mr. Condit, This Rule 14a-8 proposal is respectfully submitted for the next annual
shareholder meeting. This proposal is submitted in support of the long-term
performance of our company. Rule 14a-8 requirements are intended to be met
including the continuous ownership of the required stock value until after the
date of the applicable shareholder meeting. This submitted format, with the
shareholder-supplied emphasis, is intended to be used for definitive proxy
publication. This is the proxy for Mr. John Chevedden and or his designee to act
on my behalf in shareholder matters, including this Rule 14a-8 proposal for the
forthcoming shareholder meeting before, during and after the forthcoming
shareholder meeting. Please direct all future communication to Mr. Chevedden at:
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278 Your consideration and the consideration of the Board of Directors is
appreciated. Sincerely, /s/
10/27/03 cc: James C. Johnson
Corporate Secretary
[STAFF REPLY LETTER]
January 10, 2004 Via Airbill Response to Perkins Coie LLP No Action Request
The Boeing Company (BA)
John Chevedden
Ladies and Gentleman: In response to the company no action request, the numbers preceding the brackets
below correspond to the pages of the company letter. 3] The company makes a sham argument on its purported "difficult position" on
identifying proponents in the company definitive proxy. This is a complete sham
because the company routinely omits the identity of all proponents. The company
has made no corresponding commitment of reversing itself on this long-practiced
company policy starting. A sham argument like this could or should taint the
company credibility in the entire no action process. 4] The company cites a TRW case that is not similar to this case in the key
determining facts. The company fails to provide any scrap of evidence to
hypothesize any similarity in the key TRW determining facts compared to any
proposals to Boeing. SEC Release No. 34-20091 states the standard of substantially implemented "is
whether a company's particular policies, practices and procedures compare
favorably with the guideline of the proposal." Clearly an independent board
chairman "at this time" does not compare favorably with "amend the bylaws to
require an independent director ... shall serve as chairman of the Board of
Directors." "At this time"
No text in the shareholder proposal requests that the proposal apply only "at
this time." These are the limited-effectivity words admitted to in the company
request letter. There is no company provision for any durability of the "at this
time" practice. The company makes no claim that the current temporary
independent board chairman has any similarity in durability that the bylaw
called for in this proposal. To address this explicit bylaw proposal the company fails to provide any company
governance document concerning the topic of the proposal. The company has the
burden of proof yet does not provide any governance document.
5] Rule 14a-8(i)(10) states, "Substantially implemented: If the company has
already substantially implemented the proposal." Rule 14a-8(i)(10) does not
contain the text the company deceptively inserted into its letter "if the
company is already doing-or substantially doing-what the proposal seeks to
achieve." According to the company SEC Release No. 34-20091 stated the standard of
substantially implemented "is whether a company's particular policies, practices
and procedures compare favorably with the guideline of the proposal." Clearly an
independent board chairman "at this time" does not compare favorably to the
proposal text to "amend the bylaws to require an independent director ... shall
serve as chairman of the Board of Directors." "At this time" does not "compare
favorably" with a typical Boeing bylaw, such as the classified board, which has
been in effect since 1986. The company quotes freely from the AutoNation argument such as "may not
irreversibly bind future directors," but the company fails to make the
corresponding claim that a Boeing bylaw would be "irreversible."
6] Again the company repeats the effectivity of "at this time." The company does
not give any examples of its current bylaws which have the status of "at this
time" and are subject to be changed as easily as making a personnel change. The
company does not cite any bylaws which have been changed since 1986.
The company admits that exclusion was not concurred with in General Electric Co.
(Jan. 28, 2003), The Boeing Co. (Feb. 7, 2002) and AMR Corp. (April 3, 2002).
The "at this time" independent board chairman was only enacted as a result of a
management and ethics crises at Boeing. Thus it is more susceptible to being
reversed once the crises subsides. The following is relevant to the "at this time" independent board chairman. It
is sourced largely from Air Transport World, January 2004:
On December 1, 2003 Phil Condit, Boeing chairman and CEO since 1997, resigned in
wake of allegations of corporate misbehavior in Boeing's pursuit of a contract
to lease 100 Boeing 767 tanker aircraft to the U.S. Air Force. Condit, 62, said
he was leaving the company where he worked for more than 38 years, "as a way to
put the distractions and controversies of the past year behind us."
Only a week before his fall, the company sacked Executive VP and CFO Mike Sears
for his role in hiring a former U.S. government official who was a key official
in the government evaluation of the tanker proposal. That former official was
also fired. The tanker controversy came in the same year that Boeing was sanctioned by the
U.S. Air Force for improprieties in bidding on satellite launch vehicles. This
sanction cost an estimated $1 billion in contracts. Ironically Condit's successor as CEO, Harry Stonecipher, 67, was instrumental in
bringing the sacked Mr. Sears to Boeing. Mr. Stonecipher was also a strong
advocate of Mr. Condit's strategy of expanding the company beyond its core civil
aircraft business into areas such as satellites which have become costly
disappointments. Today with Boeing trailing Airbus in civil aircraft for the
first time in history, the new Boeing CEO is Mr. Stonecipher. Ironically Mr.
Stonecipher was the former McDonnell Douglas CEO who presided over the demise of
the McDonnell Douglas civil aircraft business in the mid-1990s. (Source: Air
Transport World, January 2004) Under these emergency circumstances it would arguably be difficult for the
Boeing board to appoint the controversial Mr. Stonecipher to both Chairman and
CEO positions. 7] The company claims that a proposal is vague since a cited and
widely-available Council of Institutional definition is not described. The
company does not make a corresponding claim that the Board of Directors could
not locate this definition. The company does not make the corresponding claim
that directors and shareholders would not be able to readily locate the
definition through the use of a search engine such as "Google."
The inscrutable company position is that the Board has implemented a purported
vague proposal which is incomprehensible to the board. This would seem to be a
violation of the Board's fiduciary duty. Since the author of this letter is
writing on behalf of the Board the Board appears to be involved in an admission
to adopting an incomprehensible proposal. Additionally the board cannot brush
this off by claiming that it was forced to do an incomprehensible act by an
outside authority. It seems that if one substantially implements a proposal then one substantially
understands the proposal. It also seems that if one does not substantially
implement a proposal that one could claim that the proposal is incomprehensible.
To argue both claims at the same time is to destroy credibility on both
pointssubstantially implemented and a purported vague proposal.
Hence the company appears to have no credibility on either point.
8] Hog ProductionPurported Precedent
The company claim cites a hog production case as a purported analogy for vague,
Smithfield Foods, Inc. (July 18, 2003). The company does not cite any reason
that purported precedent involving hog production should be stretched beyond the
narrow application of that specialized business to have an extended application
to a core corporate governance issueboard independence which has application to
all companies. The company does not claim that hog production even has one other
important precedent for the conduct of the company's business.
10] The company has no factual dispute with a statement restricted by "can:" "An
independent chairman can enhance investor confidence in our Company and
strengthen the integrity of the Board of Directors." It is well-accepted since
1776 that a division of power can improve integrity. Improved integrity can
logically enhance investor confidence. The company seems to base its argument on
substituting "will always" in place of "can."
This proposal question addressed the inherent conflict in one person having two
jobs, "How can one person, serving as both Chairman and CEO, effectively monitor
and evaluate his or her own performance?" This question is consistent with the
quote from Business Week, November 11, 2002, page 28, "How can the CEO be his
own boss?" I do not believe the company has met its burden of proof obligation according to
rule 14a-8. For the above reasons this is to respectfully request non-concurrence with the
company no action request on each point. Sincerely,
/s/ John Chevedden
Boeing Company shareholder cc:
Harry Stonecipher
[STAFF REPLY LETTER]
February 10, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: The Boeing Corporation
Incoming letter dated December 23, 2003 The proposal requests that Boeing amend its bylaws to require that an
independent director, as defined by the Council of Intuitional Investors, shall
serve as chairman of the board of directors. There appears to be some basis for your view that Boeing may exclude the
proposal under rule 14a-8(i)(3) as vague and indefinite because it fails to
disclose to shareholders the definition of "independent director" that it seeks
to have included in the bylaws. Accordingly, we will not recommend enforcement
action to the Commission if Boeing omits the proposal from its proxy materials
in reliance on rule 14a-8(i)(3). In reaching this position, we have not found it
necessary to address the alternative basis for omission upon which Boeing
relies. Sincerely, /s/
Michael R. McCoy |
Attorney Adviser
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