Company Name: E.I. du Pont de Nemours and Co.
Public Availability Date: February 11, 2004Document Sections:INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
December 30, 2003 VIA MESSENGER United States Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Office of the Chief Counsel
Division of Corporation Finance
Mail Stop 0402, Room 4012
Re: E. I. du Pont de Nemours and Company Proxy Statement - 2004 Annual Meeting
Ladies and Gentlemen: On behalf of E. I. du Pont de Nemours and Company ("DuPont"), pursuant to the
provisions of Rule 14a-8 of the Securities Exchange Act of 1934, I enclose six
copies of a legal opinion in support of DuPont's request for no action regarding
the exclusion from its 2004 Annual Meeting Proxy Statement of a shareholder
proposal ("Proposal") submitted by the Paper, Allied-Industrial, Chemical and
Energy Workers International Union (PACE). In my opinion, the Proposal properly
may be omitted from DuPont's proxy statement for the reasons set forth in the
enclosed legal opinion. The Proposal is attached as Exhibit A to each of the six
copies of the opinion. We request that the Staff not recommend any enforcement
action if the Proposal is so omitted. By copy of this letter and the attached opinion, the proponent is being notified
of DuPont's intention to omit the Proposal and supporting statement from its
2004 Annual Meeting Proxy Statement. If you have any questions or require additional information, please contact me
at 302-774-9564 or my colleague, Mary Bowler at 302-774-5303. Thank you for your
consideration. Very truly yours, /s/
Corporate Counsel DPM:dmn
Enclosures cc: James H. Dunn, PACE (with enclosures) [INQUIRY LETTER]
December 30, 2003 VIA MESSENGER United States Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Office of the Chief Counsel
Division of Corporation Finance
Mail Stop 0402, Room 4012
Re: E. I. du Pont de Nemours and Company Proxy Statement 2004 Annual Meeting
Proposal by Paper, Allied-Industrial, Chemical, and Energy Workers International
Union Ladies and Gentlemen: I am writing on behalf of E. I. du Pont de Nemours and Company, a Delaware
corporation ("DuPont" or the "Company"), pursuant to Rule 14a-8(j) under the
Securities Exchange Act of 1934, as amended, to respectfully request that the
Staff of the Division of Corporation Finance (the "Staff") of the Securities
Exchange Commission (the "Commission") concur with the Company's view that, for
the reasons stated below, the shareholder proposal and supporting statement
(collectively the "Proposal") submitted by the Paper, Allied-Industrial,
Chemical, and Energy Workers International Union (the "Proponent" or "PACE") may
properly be omitted from the proxy statement and form of proxy (the "Proxy
Materials") to be distributed by the Company in connection with its 2004 annual
meeting of shareholders. Pursuant to Rule 14a-8(j)(2), I am enclosing six copies of this letter and the
Proponent's letter transmitting the Proposal. A copy of this letter is also
being sent to the Proponent as notice of the Company's intent to omit the
Proposal from the Proxy Materials. I. The Proposal
The Proposal urges the Board of Directors of DuPont to adopt and implement an
enforceable company-wide human rights policy based on a specific set of
standards on global workplace practices. The text of the resolution of the
Proposal is set forth below, and a copy of the Proposal together with its
Supporting Statement is included with this letter as Exhibit A:
Resolved: The shareholders of E. I. du Pont de Nemours and Company ("DuPont")
urge the Board of Directors to adopt and implement an enforceable company-wide
human rights policy based on the International Labor Organization's Declaration
on Fundamental Principles and Rights at Work ("ILO Declaration"), including the
following:
All workers have the right to form and join trade unions and to bargain
collectively (Conventions 87 and 98);
There shall be no discrimination or intimidation in employment. DuPont shall
provide equality of opportunity and treatment regardless of race, color, sex,
religion, political opinion, age, nationality, social origin or other
distinguishing characteristics (Conventions 100 and 111);
Employment shall be freely chosen. There shall be no use of forced labor,
including bonded or voluntary prison labor (Conventions 29 and 105);
There shall be no use of child labor (Conventions 138 and 182);
and to prepare a report at reasonable cost to shareholders concerning
implementation of this policy. II. The Proposal May be Omitted Pursuant To Rule 14a-8(i)(3) Because it is
Vague, Indefinite and Misleading and Therefore in Violation of Rule 14a-9.
A. The Proposal is False and Misleading in its Implication that DuPont Engages
in or Tolerates Human Rights Violations Among Its Employees.
The Proposal and the Supporting Statement may properly be omitted from the
Company's 2004 Proxy Materials pursuant to Rule 14a-8(i)(3), which allows the
exclusion of a shareholder proposal where the proposal or supporting statement
is contrary to any of the Commission's proxy rules and regulations, including
Rule 14a-9, which prohibits materially false or misleading statements in proxy
solicitation materials. The note to Rule 14a-9 states that "misleading"
materials include "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." Unfounded assertions and inflammatory statements representing the
unsubstantiated personal opinion of a shareholder have long been viewed as
excludable under this provision. See Philip Morris Companies Inc. (February 7,
1991). Copies of all no action letters cited herein are attached at Exhibit B.
The Proposal is misleading because the third paragraph of the Supporting
Statement makes the assertion that "DuPont faces potentially high risk that it
could be associated with workplace human rights violations (emphasis added)
because of its operations in countries where ... labor and human rights are not
adequately protected in law and/or practice." In the next paragraph the
Proponent continues to develop this theme with the statement that DuPont could
benefit from the implementation of this human rights policy because "... an
association with workplace human rights violations (emphasis added) could expose
DuPont to costly and time-consuming litigation." The Proponent then offers an
example of the apparent high-cost litigation involving human rights violations
that DuPont is experiencing, by citing an article that appeared in the February
23, 2000 issue of Chemical Week. This example is false and highly inflammatory.
The settlement referred to in the Chemical Week article did not involve either
human rights violations or litigation. It was a voluntary agreement, without any
admission of liability, between DuPont and the Office of Federal Contract
Compliance Programs (OFCCP). During a routine audit of DuPont's compliance with
its affirmative action and nondiscrimination obligations as a federal government
contractor, the OFCCP found that a written pre-entry test had an unintended
adverse impact on the hiring of women for certain entry level jobs at DuPont's
Waynesboro facility. DuPont worked with the OFCCP to revise its testing
procedure and to provide remedies to women whose employment opportunities were
adversely affected by the test. In a January 2000 press release, the OFCCP noted
that "DuPont, a long-time federal contractor, quickly agreed to resolve the
problem" and that "responsible federal contractors such as DuPont are to be
commended for working with us to ensure that there is a true and equal
employment opportunity for all workers." DuPont operates in over 70 countries and has a workforce of over 75,000 people.
There are few companies with a more diverse workforce than DuPont. Respect for
people is a DuPont core value and the Company has worked diligently to provide
such an environment to its employees, customers, suppliers and others. The
Proposal's attempt to link DuPont with human rights violations is an affront to
a company that is recognized worldwide for its respectful workplace environment
and the manner in which it treats its employees and other constituencies. The
Proposal impugns DuPont's reputation with a direct implication that DuPont not
only tolerates, but actually engages in, human rights violations. This is
absolutely wrong. Additionally, DuPont operates in a very competitive environment. Publication of
this misleading statement is likely to cause DuPont competitive harm, in that
its ability to attract highly qualified potential employees in the future could
be detrimentally affected if false statements such as this are permitted to be
published in the Company's proxy materials. Attached to this letter at Exhibit C is a representative listing of the
worldwide awards DuPont has received in recent years in recognition of
establishing equitable opportunities in the workplace, and a respectful
environment for its employees. Similar recognition has been awarded to DuPont in
previous years. Also attached at Exhibit C are the following:
a listing of the educational courses offered to employees which are designed
to support DuPont's core values, particularly as they relate to a respectful
work environment;
summary pages about each of the Company's operating regions showing the
progress that has been made in the area of People Diversity;
DuPont's Business Conduct Guide which is available on the Company's website in
18 languages;
Statement of DuPont's Mission and Principles; and
DuPont's Principles on Child and Forced Labor which are available on the
Company's website. B. The Proposal is False and Misleading in that Certain of its Provisions are in
Conflict with Each Other and the Key Component of the Resolution is Vague and
Indefinite. DuPont believes that the Proposal, inclusive of the Supporting Statement, is
vague, indefinite and misleading in several respects. The Staff consistently has taken the position that a company may exclude a
proposal pursuant to Rule 14a-8(i)(3) if the proposal is vague and indefinite
and, therefore, potentially misleading. A proposal is sufficiently vague,
indefinite and potentially misleading to justify exclusion where "neither the
stockholders voting on the proposal, nor the company implementing the proposal
(if adopted), would be able to determine with reasonable certainty exactly what
measures or action the proposal requires." See Bristol-Myers Squibb Co.
(February 1, 1999), wherein the Staff concurred in the omission of a shareholder
proposal under Rule 14a-8(i)(3) because the proposal's vagueness, in requesting
that shareholders refer certain plans to the board, precluded the shareholders
from determining with reasonable certainty either the meaning of the resolution
or the consequences of its implementation. The Proposal is vague, indefinite and misleading for several reasons, the first
of which is that shareholders will not know the full extent of what the Proposal
requires. The Proposal identifies four broad principles, based on eight cited
ILO Conventions that are to be incorporated in the adopted policy. What is not
clear is whether the Proponent's resolution is limited to these four principles,
or whether the intent is that the Company adopt additional policies derived from
all 180 ILO Conventions. However, based on the last paragraph of the Supporting
Statement, there is an indication that the Proponent seeks to have the Company
include most, if not all, of the 180 ILO Conventions in the human rights policy.
The last paragraph contains the following statement: In our view, the adoption, implementation and enforcement of a comprehensive
(emphasis added) policy based on the ILO Declaration would help bolster DuPont's
integrity and increase its reputation in the capital markets.
A comprehensive policy based on the ILO Declaration certainly would involve more
than the four broad principles and eight ILO Conventions identified by the
Proponent. Shareholders should not have to guess as to PACE's intent with
respect to the Proposal, and should not have to make individual judgments about
vague, conflicting language in the Proposal itself. Furthermore, the Conventions are designed and drafted to be adopted by
governments, not by manufacturing companies. Because the Proposal seeks the
adoption of a comprehensive policy based on the ILO Declaration, the Company
will be forced to make numerous subjective interpretations of all the ILO
Conventions in its attempt to apply them to an industrial company. Due to this
fact alone, it is not likely that any two shareholders, when voting on the
Proposal, would have the same understanding as to the scope and breadth of the
human rights policy that might finally be adopted and implemented.
The second reason the Proposal is misleading is that the resolution includes a
requirement that the Company "prepare a report ... concerning implementation
(emphasis added) of this policy." Although this appears to be the primary
purpose of the Proposal, the phrase "concerning implementation (emphasis added)
of this policy" is vague and indefinite. It forces the reader, at best, to
interpret other provisions of the Proposal to clarify its meaning, or in the
worst case, to guess at its true intent. The Proposal provides several clues
which indicate that the Proponent really seeks adoption of a report concerning
enforcement of the policy. The opening lines of the Proposal "... urge the Board
of Directors to adopt and implement an enforceable (emphasis added) company-wide
human rights policy..." Also, additional insight can be gleaned from the fifth
paragraph of the Supporting Statement. That paragraph in part reads as follows:
"DuPont has taken the first step by signing on to the United Nations' Global
Compact, an initiative to encourage global corporations to support basic human
rights and environment principles. However, the Global Compact has no
enforcement mechanism. We believe an effective enforcement mechanism (emphasis
added) is the ultimate measure of DuPont's commitment to the Global Compact
principles..." It appears that what the Proponent really seeks is an enforcement mechanism for
the principles annunciated in the Global Compact, four of which are virtually
identical to the four broad principles contained in the Proposal. Therefore,
"implementation" of this policy and "effective enforcement" of the policy
apparently must have the same meaning. However, shareholders should not have to
go through a series of "mental gymnastics" to try to resolve these conflicts.
On this crucially important aspect of the Proposal, the language is so vague and
indefinite as to be meaningless. It calls for a report concerning implementation
and enforcement of a human rights policy, but makes no attempt to define, or
even outline, the scope of a report that would chronicle effective enforcement,
and be acceptable to shareholders. Furthermore, it gives no guidance to the
Company as to what the shareholders might be willing to accept. Numerous factors
and questions would have to be considered by the Company in attempting to
provide a report of the Company's record of implementation and enforcement of
the policy that is the subject of the Proposal. The following is an illustrative
list of the factors and questions that would have to be addressed and answered
to prepare such a report: Should the report include all official court proceedings filed against the
Company, or only court proceedings determined adversely against it?
Should all settlements be included?
Would it be proper to include settlements in which there is no admission of
liability on the part of the Company? Should the report contain all written complaints made by employees over a stated
period of time? Should the report include complaints that are made, investigated and found to be
groundless? Should these situations be reported initially, and then a subsequent
report issued indicating they were found to be without merit?
Should the report contain all verbal complaints made to supervisors or to an
employee hot-line number? What about incidents that occur but are not reported by the employee? Would the
Company be required to sample the global workforce using statistically valid
sampling methods to determine if employees believe they have encountered
discrimination, but have chosen not to report it? The language of the Proposal "concerning implementation of this policy" presents
two alternatives. First, the words "implementation" in the resolution and
"enforcement" in the Supporting Statement have the same intent and meaning. In
this situation, the Proposal fails to provide both the shareholders and the
Company with sufficient information to allow them to know what measures or
actions the Proposal requires with respect to the requirement of the Company to
prepare a report concerning implementation and enforcement of the human rights
policy. Bristol-Myers Squibb (February 1, 1999). If, on the other hand, the
Proponent does not intend the words "implementation" and "enforcement" to have
the same meaning, then the shareholders are entitled to know exactly what
meaning is attributed to each of these words since they form a vital component
of the requested action. In either case the language of the Proposal is
confusing to the point of being vague and indefinite. Based on the foregoing, the Proposal may be omitted Pursuant to Rule 14a-8(i)(3)
because it is vague, indefinite and misleading and therefore in violation of
Rule 14a-9. III. The Proposal May be Omitted Pursuant to Rule 14a-8(i)(7) Because it is
Related to the Company's Ordinary Business Operations. A proposal may be excluded from a company's proxy statement pursuant to Rule
14a-8(i)(7) if it "deals with a matter relating to the company's ordinary
business operations." In Release No. 34-40018 (May 21, 1998) (the "1998
Release"), accompanying the Commission's 1998 Amendments to Rule 14a-8, the
Staff acknowledged that the general underlying policy of the ordinary business
operations exclusion is "to confine the resolution of ordinary business problems
to management and the board of directors, since it is impracticable for
stockholders to decide how to solve such problems at an annual meeting."
Under the 1998 Amendments to Rule 14a-8, the Staff acknowledged that "there is
no brightline test to determine when employment-related shareholder proposals
raising social policy issues fall within the scope of the `ordinary business
exclusion'", but noted that the Staff will make reasoned distinctions relying on
a case-by-case analysis and taking into account such factors as the nature of
the proposal and the circumstances of the company to which it is directed.
The Proposal seeks the Company's commitment to implement and enforce a human
rights policy, which is a set of human rights principles incorporating at least
eight ILO Conventions. While several of the principles listed in the Proposal,
and the corresponding ILO Conventions, address social policy issues, most of the
principles are related directly to the Company's ordinary business operations.
For example, the first principle in the resolution states that "[A]ll workers
have the right to form and join trade unions and to bargain collectively
(Conventions 87 and 98)." This activity falls clearly within the Company's
responsibilities related to its management and labor relations. Additionally,
and more specifically, the ILO Convention that addresses working hours (that the
working hours of employees should not exceed 48 hours per week) also clearly
relates to the Company's ordinary business operations. The Staff has indicated
previously that an employer's policy with respect to employee hours relates to a
company's ordinary business operations, and that shareholder proposals relating
to such issues may be excluded pursuant to Rule 14a-8(i)(7). See Intel
Corporation (March 18, 1999). The fact that the principles deal with numerous
ordinary business activities cannot be masked by the Proponents intermingling
several social policy concerns. See Wal-Mart Stores, Inc. (March 15, 1999), in
which the Staff concurred in omitting a shareholder proposal which requested
Wal-Mart to report on actions taken to ensure that its suppliers do not, among
other things, use child or slave labor, because a single element of the
proposal, regarding sustainable living wages, related to ordinary business
operations. In addition to mandating the maximum number of hours an employee may work each
week, the ILO Conventions seek to establish the minimum age of employees, the
type of benefits to be provided to employees (including health insurance), and
outline safety provisions to which the Company must adhere. These mandates would
apply to the Company's global operations worldwide without regard to employees'
desires, local laws or local customs, and clearly impinge on the Company's
day-to-day business decisions. As an example of going too far to micromanage the Company's daily business
operations, adoption of the ILO Conventions would place the Company at odds with
the laws and customs in the Peoples Republic of China. The Proposal calls for
implementation and enforcement of a policy that allows "workers ... the right to
form and join trade unions and to bargain collectively (Conventions 87 and 98)."
This broad, unqualified principle is incompatible with the organized labor
structure of China. According to the "1999 Country Report on Economic Policy and
Trade Practices - China," published in March, 2000 by the Bureau of Economic and
Business Affairs of the U.S. Department of State, China severely restricts the
activities of organized labor. China's Trade Union Law states that workers who
wish to form a union at any level must receive approval from a government
sponsored trade organization. This is in direct conflict with the Proposal's
unfettered right to join a union. Thus, the Proposal would be unworkable and
counterproductive in China where the Company has a substantial investment.
Based on the foregoing, the Proposal relates to the Company's ordinary business
operations and is excludable under Rule 14a-8(i)(7). IV. The Proposal May be Omitted Pursuant to Rule 14a-8(i)(10) Because it has
been Substantially Implemented and is Moot. Under Rule 14a-8(i)(10), a proposal may be omitted if the company has already
substantially implemented the proposal. To the extent that the Proposal is not
excludable pursuant to the rules discussed above, it may be omitted because it
has been substantially implemented by the Company. The Company has had in place for many years a Statement of its Mission and
Principles, and a Business Conduct Guide addressing many of the issues covered
in the ILO Conventions proposed for adoption. These corporate policies and
procedures are applicable to all employees in all DuPont businesses around the
globe. Copies of the Mission Statement and Principles, and Business Conduct
Guide are attached at Exhibit C. The Company's Business Conduct Guide, for
example, emphasizes the responsibility of each employee to comply with all
applicable laws and stresses the Company's zero tolerance policy on
discrimination and harassment, a key element of the ILO Conventions. The Mission
Statement and Principles set forth the "guiding principles and commonly shared
values" under which the Company operates around the world. They articulate in a
thorough manner the Company's commitment to safety, ethics and respect for the
rights of individuals. During 2001, the Company took the significant step of endorsing the Global
Compact, an initiative of the United Nations. The Global Compact seeks to have
companies and business associations embrace, support, and enact a set of core
values in the areas of human rights, labor standards, and environmental
practices. It contains nine principles, including, among other things,
elimination of all forms of forced and compulsory labor, abolition of child
labor, elimination of discrimination in respect of employment and occupation,
and support of the freedom of association. The principles of the Global Compact
address essentially all of the human rights tenets highlighted in the Proposal.
A copy of the United Nations' brochure describing the Global Compact and its
nine principles is included at Exhibit D. In May, 2003 DuPont adopted Principles on Child and Forced Labor which are
attached at Exhibit C and available for public review on the Company's website.
These principles make it clear that DuPont will not tolerate the exploitation of
children or the physical punishment, abuse or involuntary servitude of any
worker. DuPont expects its suppliers and contractors to uphold the same
standards, and will discontinue its business relationship with companies who
violate these standards. Finally, DuPont supports the Global Reporting Initiative (GRI) which is an
official collaborating center for the United Nations Environment Program and
works in cooperation with UN Secretary General Kofi Annan's Global Compact. The
GRI provides a comprehensive format for reporting data on economic,
environmental and social performance. The Company publishes annually on its
website a broad range of data in the GRI format. Through its endorsement of the Global Compact, adoption and publication of its
Principles on Child and Forced Labor, and its active participation in the Global
Reporting Initiative, DuPont has substantially implemented the objectives of the
Proposal. The Proposal therefore is excludable pursuant to Rule 14a-8(i)(10).
For all of the foregoing reasons, it is my opinion that DuPont may properly
exclude the Proposal from its 2004 Annual Meeting Proxy Materials.
If you have any questions or require additional information, please contact me
at (302)-774-9564 or my colleague, Mary Bowler, at (302)-774-5303.
Very truly yours, /s/
Corporate Counsel cc: PACE (with attachments) [APPENDIX]
EXHIBIT A Resolved: The shareholders of E.I. du Pont de Nemours and Company ("DuPont")
urge the Board of Directors to adopt and implement an enforceable company-wide
human rights policy based on the International Labor Organization's Declaration
on Fundamental Principles and Rights at Work ("ILO Declaration"), including the
following:
All workers have the right to form and join trade unions and to bargain
collectively (Conventions 87 and 98);
There shall be no discrimination or intimidation in employment. DuPont shall
provide equality of opportunity and treatment regardless of race, color, sex,
religion, political opinion. age, nationality, social origin or other
distinguishing characteristics (Conventions 100 and 111);
Employment shall be freely chosen. There shall be no use of forced labor,
including bonded or voluntary prison labor (Conventions 29 and 105);
There shall be no use of child labor (Conventions 138 and 182);
and to prepare a report at reasonable cost to shareholders concerning
implementation of this policy. SUPPORTING STATEMENT
As a global corporation, DuPont faces many regulatory regimes and public
pressures exposing it to various risks. Managing operations effectively and
increasing shareholder value depend on public and governmental goodwill. DuPont
would benefit from protecting its reputation of being a good corporate citizen
by adopting and enforcing a company-wide human rights policy based on the ILO
Declaration. Such a policy would ensure that DuPont is not associated with human rights
violations in the workplace, and in turn, would protect DuPont's brand names and
its relationships with its customers and the numerous governments with which it
may do business and on whose goodwill DuPont's business success depends.
DuPont faces potentially high risk that it could be associated with workplace
human rights violations because of its operations in countries where, according
to the U.S. Department of State's 2002 Human Rights Reports and Amnesty
International, labor and human rights are not adequately protected in law and/or
practice. These high-risk countries include China and Zimbabwe, which are
locations of some of DuPont's major sites. In addition, an association with workplace human rights violations could expose
DuPont to costly and time-consuming litigation. For example, Chemical Week
reported on February 23, 2000 that DuPont settled a Department of Labor claim
regarding discrimination against women and "will pay $14,731 each to 31 women,
the largest per capita settlement of its kind." DuPont has taken a first step by signing on to the United Nations' Global
Compact, an initiative to encourage global corporations to support basic human
rights and environment principles. However, the Global Compact has no
enforcement mechanism. We believe an effective enforcement mechanism is the
ultimate measure of DuPont's commitment to the Global Compact principles.
Furthermore, DuPont has not incorporated all of the Global Compact principles in
its Mission Statement and Business Conduct Guide. In our view, the adoption, implementation and enforcement of a comprehensive
policy based on the ILO Declaration would help bolster DuPont's integrity and
increase its reputation in the capital markets. We urge you to vote FOR this resolution. [INQUIRY LETTER]
January 27, 2004 Securities and Exchange Commission
Division of Corporate Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Request by E. I. du Pont de Nemours and Company to omit a shareholder
proposal submitted by Paper, Allied-Industrial, Chemical, and Energy Workers
International Union Dear Sir/Madam: We are writing in response to the December 30, 2003 letter (the "Letter") from
E. I. du Pont de Nemours and Company (the "Company"). That letter states the
Company's intention to omit from its proxy materials the non-binding shareholder
proposal (the "Proposal") submitted by the Paper, Allied-Industrial, Chemical,
and Energy Workers International Union (the "Proponent"), which urges the Board
of Directors to adopt and implement an enforceable company-wide human rights
policy based on the International Labor Organization's Declaration on
Fundamental Principles and Rights at Work ("ILO Declaration"). For the reasons
set forth below, the Proponent respectfully asks the Division to deny the relief
the Company seeks. As grounds for exclusion the Company relies on Rule 14a-8(i)(3) and Rule 14a-9,
dealing with false and misleading statements; Rule 14a-8(i)(7), which applies to
matters pertaining to the "ordinary business" of a company; and Rule
14a-8(i)(10), which applies to proposals that have been substantially
implemented by the Company. We address each objection in turn below. Although
the Proponent believes that the Company's arguments are in the main without
merit, the Proponent does not object to making any necessary clarifications or
amplifications to the Proposal to address Rule 14a-9 concerns.
1. Rule 14a-8(i)(3) and Rule 14a-9: Vague, Indefinite and Misleading
A. The Proposal Does Not Contain Materially False and Misleading Statements or
Implications Regarding Human Rights Violations There is no merit to the Company's argument that the Proposal includes
materially false and misleading statements about human rights violations at the
Company, thereby justifying exclusion under Rule 14a-8(i)(3) and Rule 14a-9. In
particular, the Company erroneously complains that an article referenced in the
Proposal, published in the February 23, 2000 issue of Chemical Week, "did not
involve either human rights violations or litigation." As the Company itself
acknowledges, however, the article referenced settlement with a federal agency
of a legal matter involving compliance with federal
non-discrimination-in-employment requirements. The Company's Letter explains
that an audit by the OFCCP, the federal agency responsible for policing the EEO
obligations of federal contractors such as DuPont, "found that a written
pre-entry test had an unintended adverse impact on the hiring of women for
certain entry level jobs at DuPont's Waynesboro facility."
First, the Proponent submits that the legal matter referenced in the article
does in fact fall within the scope of the "human rights" policy advocated in the
Proposal. It is a well established principle of federal EEO law that use of an
ostensibly "neutral" test or other selection criterion that has an adverse
impact on a protected class of applicants, such as female applicants,
constitutes prohibited sex discrimination. The term "human rights" as used in
the Proposal is commonly understood to encompass freedom from discrimination
based on a person's sex. For example, the most well-known document outlining
human rights, the United Nations' Universal Declaration of Human Rights (the
"Universal Declaration"), explicitly provides in Article 2 that the right to be
free from sex discrimination is a fundamental human right: "Everyone is entitled
to all the rights and freedoms set forth in this Declaration, without
distinction of any kind, such as race, colour, sex, language, religion,
political or other opinion, national or social origin, property, birth or other
status." (See http://www.un.org/Overview/rights.html)
Second, the Proponent submits that it is not at all misleading for the
Supporting Statement to refer to the expensive settlement of this one sex
discrimination claim in connection with the wholly accurate assertion that
"association with workplace human rights violations could expose DuPont to
costly and time-consuming litigation." As the Proponent's Statement truthfully
reports, resolving even this one alleged instance of sex discrimination without
litigation has already cost the Company over $434,000 in payments to 31 victims
(without even mentioning any associated legal expenses). Thus, this reference
logically and persuasively bolsters the Proponent's point that actual litigation
of workplace claims can be costly and time-consuming. Nonetheless, if the Staff
deems further clarification necessary, the Proponent would willingly revise the
disputed first sentence of the fourth paragraph of the Supporting Statement to
read: "... an association with workplace human rights violations could expose
DuPont to costly and time-consuming litigation or administrative proceedings"
[new wording in italics]. The Company further argues that the Proposal "impugns DuPont's reputation with a
direct implication that DuPont not only tolerates, but actually engages in,
human rights violations." As noted above, workplace discrimination such as
referenced in the Supporting Statement does in fact fall within the ambit of
human rights violations. But in any event, the Proposal could not be clearer in
its focus on the potential reputational harm and ensuing potential financial
damage from potential association with workplace human rights violations.
Finally, the Rules provide no legal justification for excluding the Proposal
based on the Company's argument that publication of the Proposal in the
Company's proxy material is likely to cause DuPont competitive harm by adversely
affecting its ability to attract highly qualified potential employees in the
future. That contention, in any event, is contrary to fact. The Proposal clearly
articulates the overall benefits for the Company from adopting and implementing
an enforceable workplace human rights policy based on the ILO Declaration. In
the Proponent's view, and as other enlightened firms have recognized, such a
policy would help bolster DuPont's integrity and increase its reputation in the
capital markets, while enhancing the Company's attractiveness to highly
qualified potential employees in the future. B. The Proposal's Provisions Are Not in Conflict with Each Other, and the Key
Component of the Resolution Is Not Vague and Indefinite The Company erroneously asserts that the Proposal is vague, indefinite and
misleading because shareholders will not know the full extent of what the
Proposal requires. In particular, there is no merit to the Company's argument
that it is not clear whether the Proponent's resolution is limited to four
principles outlined in the proposal, or "whether the intent is that the Company
adopt additional policies derived from all 180 ILO Conventions."
The Proponent submits that the Proposal is very clear in its focus on the
International Labor Organization's Declaration on Fundamental Principles and
Rights at Work (the "ILO Declaration"), and in particular on those Fundamental
Conventions that speak to the principles listed in the resolution (which relate
to the four principles under which the ILO has grouped its Fundamental
Conventions). Although it is true that the ILO has adopted 180 Conventions, the
ILO Governing Body decided that eight Conventions should be considered
fundamental to the rights of human beings at work, the so-called Fundamental ILO
Conventions. (See
http://www.ilo.org/public/english/standards/norm/whatare/fundam/index.htm) The
ILO has organized those Fundamental Conventions under four principles:
Freedom of association
Freedom of Association and Protection of the Right to Organize Convention,
1948 (No. 87)
Right to Organize and Collective Bargaining Convention, 1949 (No. 98)
The abolition of forced labour
Forced Labour Convention, 1930 (No. 29)
Abolition of Forced Labour Convention, 1957 (No. 105) Equality
Discrimination (Employment and Occupation) Convention, 1958 (No. 111)
Equal Remuneration Convention, 1951 (No. 100) The elimination of child labour
Minimum Age Convention, 1973 (No. 138)
Worst Forms of Child Labour Convention, 1999 (No. 182) In 1998, the government, employer and worker representatives meeting at the
International Labour Conference adopted the ILO Declaration, which covers the
same four areas: freedom of association and the right to collective bargaining;
the elimination of forced and compulsory labor; the abolition of child labor;
and the elimination of discrimination in the workplace. By asking the Company's Board of Directors to adopt and implement an enforceable
company-wide human rights policy based on the ILO Declaration, by structuring
the resolution based on the ILO Declaration's four principles, and by
specifically referencing the numbered Fundamental Conventions, the Proponent
provided adequate guidance to shareholders about the issues to be voted on.
The Company also misreads the last paragraph of the Supporting Statement and
wrongly interprets the word "comprehensive" to encompass more than the eight
Fundamental Conventions of the ILO Declaration. The fifth paragraph of the
Supporting Statement clearly talks about a policy based on the ILO Declaration.
For this reason, in the Proponent's view, a "comprehensive policy based on the
ILO Declaration" can only mean a policy that includes all of the eight
Conventions specified in the ILO Declaration and not a subset of them.
Nonetheless, the Proponent is willing to further clarify the meaning of the word
"comprehensive" in the fifth paragraph of the Supporting Statement, if the Staff
deems it necessary. The Company is equally off base in arguing that the "ILO Conventions are
designed and drafted to be adopted by governments, not by manufacturing
companies;" that it "will be forced to make numerous subjective interpretations
of all the ILO Conventions in its attempt to apply them in an industrial
company;" and that "no two shareholders would have the same understanding as to
the scope and breath of the human rights policy that might finally be adopted
and implemented." Here again, the Company unreasonably misinterprets the
Proposal. The Proposal is very clear in that it does not ask the Company to
adopt the ILO Conventions themselves. While the ILO Conventions were drafted for
adoption by nations, the Proposal urges the Company's Board of Directors to
adopt and implement a Companywide policy "based on" the ILO Declaration's four
clearly outlined principles. By asking the Board of Directors to adopt and
implement a policy based on the ILO Declaration, the Proposal intentionally and
reasonably allows the Board and the Company the flexibility they may need in
developing such a policy suited to the Company's own circumstances. The
Proponent believes, therefore, that the Proposal's "based on" formulation,
followed by the enumeration of four specific areas, accompanied by citation to
specific ILO Convention numbers, and then rounded out with a supporting
statement identifying the areas of concern, provide adequate information to the
Proponent's fellow shareholders about the scope and the breath of such a policy.
The Company further takes issue with the phrase "prepare a report ... concerning
the implementation of this policy," arguing that this phrase is vague and
indefinite. The Company then misinterprets other parts of the Proposal and the
Supporting Statement that it believes "indicate that the Proponent really seeks
adoption of a report concerning enforcement of the policy." The Proponent
submits that the Proposal is sufficiently clear in that it begins by urging the
Board of Directors "to adopt and implement an enforceable company-wide human
rights policy based on [the ILO Declaration]," and ends with a provision urging
the Board "to prepare a report at reasonable cost to shareholders concerning
implementation of this policy." The phrase "concerning implementation of this
policy" at the end of the Proposals clearly refers to the adoption and
implementation of "an enforceable company-wide human rights policy" at the
beginning of the proposal. A shareholder would, therefore, have no difficulty in
understanding the Proposal. Nonetheless, the Company argues that the Proposal is vague and indefinite in
calling for a report because it "makes no attempt to define, or even outline,
the scope of a report." The Company further complains that the proposal "gives
no guidance to the Company as to what the shareholders might be willing to
accept." The answer to these assertions is that the Proposal is worded in this
way because the Proponent does not intend to constrict the Company's Board of
Directors or the Company itself in how they may choose to fashion a report
concerning implementation of the enforceable human rights policy. Instead, the
Proposal provides the Company the flexibility to deal with all the questions it
raised in its objection and to report in a manner tailored to the Company's
circumstances. 2. Rule 14a-8(i)(7): Ordinary Business Operations
The Company argues that the Proposal should be omitted because it deals with a
matter relating to the company's ordinary business operations. The Company's
arguments track the objections made in 2002 when the Company sought to exclude a
proposal concerned with the adoption of a workplace code of conduct based upon
ILO Conventions (E. I. du Pont de Nemours and Company, available March 11,
2002). In that prior case, the Staff was unable to concur in the Company's view
that the Company may exclude the proposal under Rule 14a-8(i)(7).
In addition to its recycled 2002 objections, the Company complains that
"adoption of the ILO Conventions would place the Company at odds with the laws
and customs of the Peoples Republic of China." Regarding objections based on
alleged conflict with foreign laws, SEC Staff Legal Bulletin 14 notes that
companies "should provide a supporting opinion of counsel when the reasons for
exclusion are based on matters of state or foreign law. In determining how much
weight to afford these opinions, one factor we consider is whether counsel is
licensed to practice law in the jurisdiction where the law is at issue." To our
knowledge, the Company has not provided any legal opinion from counsel licensed
to practice in the Peoples Republic of China. In addition, in Marriott International, Inc. (available March 19, 2002), exactly
the same argument was advanced regarding a shareholder proposal similar to the
PACE Proposal at issue here. The Staff rejected Marriott's arguments in that
case and should follow the same course here. 3. Rule 14a-8(i)(10): Substantially Implemented
The Company argues that it may omit the proposal because it has already
substantially implemented the proposal, citing its Mission and Principles and a
Business Conduct Guide, as well as the endorsement of the Global Company. Here,
again, the Company reiterates unsuccessful arguments made in 2002 when it tried
to exclude a proposal concerned with the adoption of a workplace code of conduct
based upon ILO Conventions (E. I. du Pont de Nemours and Company, available
March 11, 2002). In that prior case, the Staff was unable to concur in the
Company's view that the Company may exclude the proposal under Rule
14a-8(i)(10). In addition to the baseless arguments made in 2002, the Company contends that it
has substantially implemented the objectives of the Proposal through its
adoption and publication of Principles on Child and Forced Labor and its
participation in the Global Reporting Initiative (GRI). Although the documents
provided by the Company do endorse and adopt certain worthy principles, those
documents fail to establish that the Company has "substantially implemented" the
Proposal. While the Principles on Child and Forced Labor address some of the
principles in the Proposal, other principles encompassed by the Proposal are not
addressed at all. For example, there is no reference to the first point in the
Proposal, involving the right to form and join trade unions and to bargain
collectively. The Company also says that it supports the Global Reporting Initiative (GRI).
While the Company publishes very specific data on a range of issues in DuPont
Economic, Environmental and Social Performance Data In the Global Reporting
Initiative Format, December 2003 (the "GRI Report"), the Company is unspecific
in many areas addressed by the Proposal. For example, under the topic "Policies
related to human rights related to facilities," the Company's GRI Report says:
"There is not a specific policy on human rights; however, the Business Conduct
Guide says: `In the conduct of Company Business, employees should respect the
rights and cultural differences of individuals.'" Under the heading "Policies on
how human rights performance is monitored," the GRI Report says "information not
consolidated for the corporation." See
www1.dupont.com/dupontglobal/corp/documents/US/en
US/news/publications/dupprogress/gri.pdf, page 41 More generally, the Company's response misses the heart of the Proposal, which
is to generate a single policy document that explicitly and in one place commits
the Company to the enumerated principles, and to provide a report concerning
implementation of this policy. The resolution is thus similar to other proposals
that the Staff has viewed as appropriate for shareholder action, such as the
Sullivan Principles, CERES Principles and McBride Principles, which the Staff
deemed appropriate for inclusion regardless of whether a company has an existing
policy or code of conduct in place. We note that the Staff denied relief under Rule 14a-8(i)(10) in Oracle Corp.
(available August 15, 2000), where Oracle argued against a proposal to adopt a
similar set of human rights principles. Oracle unsuccessfully argued that it
already had in place its own code and a separate employee handbook, which (along
with laws to which Oracle was subject) "sufficiently address the concerns of the
Principles." (Inquiry Letter 1, par. 2). PPG Industries (available January 22,
2001) is a similar example. There, as here, the Proponent cited specific
elements of the resolution that were not addressed in the company's
documentation, and the Staff denied no-action relief. The Proponent asks the
Staff to follow the same approach here. Conclusion
In conclusion, the Company should not be permitted to exclude the Proposal under
Rule 14a-8(i)(3), Rule 14a-8(i)(7), or Rule 14a-8(i)(10). Should you have any
questions, please do not hesitate to call Shawn Gilchrist at 615.831.6723.
Sincerely, /s/
James H. Dunn c: E. I. DuPont de Nemours and Company
[STAFF REPLY LETTER]
February 11, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: E.I. du Pont de Nemours and Company Incoming letter dated December 30, 2003
The proposal urges the board of directors to adopt and implement an enforceable
company-wide human rights policy based upon the International Labor
Organization's conventions, including the four principles set forth in the
proposal, and prepare a report concerning implementation of the policy.
We are unable to concur in your view that DuPont may exclude the proposal under
rule 14a-8(i)(3). Accordingly, we do not believe that DuPont may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(3).
We are unable to concur in your view that DuPont may exclude the proposal under
rule 14a-8(i)(7). Accordingly, we do not believe that DuPont may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(7).
We are unable to concur in your view that DuPont may exclude the proposal under
rule 14a-8(i)(10). Accordingly, we do not believe that DuPont may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(10).
Sincerely, /s/
John J. Mahon
Attorney-Advisor
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