Company Name: Entergy Corp.
Public Availability Date: February 11, 2004Document Sections:INQUIRY LETTER
APPENDIX 1
APPENDIX 2
APPENDIX 3
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
January 5, 2004 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Stockholder Proposal Submitted by Emil Rossi for Inclusion in the 2004 Proxy
Materials of Entergy Corporation Ladies and Gentlemen:
Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), Entergy Corporation, a Delaware corporation (the
"Company"), requests confirmation that the Division of Corporation Finance (the
"Division") of the Securities and Exchange Commission (the "Commission") will
not recommend enforcement action if the Company excludes the stockholder
proposal and supporting statement (collectively, the "Proposal") submitted by
Mr. Emil Rossi (the "Proponent") (through Mr. Rossi's representative John
Chevedden) from its proxy statement and form of proxy for its 2004 annual
meeting of stockholders (collectively, the "Proxy Materials").
The Company expects to file definitive copies of its Proxy Materials with the
Commission on or about March 27, 2004, more than 80 days after the date of this
letter. Enclosed are six (6) copies each of: 1) The Proposal, dated October 7, 2003, attached hereto as Exhibit A;
2) Copy of a certificate from the Assistant Secretary of Entergy Corporation
dated December 31, 2003, attached hereto as Exhibit B; and
3) This letter. Pursuant to Rule 14a-8(j)(i), the Company, by copy of this letter and all
Exhibits hereto, is notifying the Proponent of its intention to omit the
Proposal from the Proxy Materials. Facts:
The Proposal states: RESOLVED: Shareholders request that our Directors increase shareholder voting
rights and submit the adoption, maintenance or extension of any poison pill to a
shareholder vote as a separate ballot item as soon as may be practical. Also
once this proposal is adopted, any dilution or removal of this proposal is
requested to be submitted to a shareholder vote as a separate ballot item at the
earliest possible shareholder election. Directors have the flexibility of
discretion accordingly in scheduling the earliest shareholder vote and in
responding to shareholder votes. The Company does not have and has not ever had a poison pill (i.e., shareholder
rights plan). At the Company's 2002 Annual Meeting, the following proposal of
the Proponent was approved by the shareholders: "Shareholders request that our Board of Directors seek shareholder approval
prior to adapting any poison pill and also redeem or terminate any pill now in
effect unless it has been approved by a shareholder vote at the next shareholder
meeting." The Board of Directors of the Company (the "Board"), following consideration of
the proposal from the Proponent approved by the shareholders in 2002 and
following discussions with Institutional Shareholder Services, adopted on May 8,
2003 a policy on poison pills (the "Policy"). The Policy reads as follows:
RESOLVED, that the Board hereby adopts a policy that it will not adopt any
shareholder rights plan for the purpose of preventing or hindering a change of
corporate control (a "Poison Pill") unless that adoption is either preceded by
an approval of the Poison Pill by a vote of the shareholders of the Company at a
duly called meeting thereof or is approved by the shareholders no later than at
the next annual meeting of the Company. (See Exhibit B) Reason for Exclusion: The Proposal Has been Substantially Implemented by the
Company and May be Omitted under Rule 14a-8(i)(10). The Company believes that the Proposal may be properly omitted from the proxy
materials for the 2004 Annual Meeting pursuant to Rule 14a-8(i)(10), which
permits the omission of a stockholder proposal if "the company has already
substantially implemented the proposal." The "substantially implemented"
standard replaced the predecessor rule, which allowed the omission of a proposal
that was "moot." The current rule also clarifies the Commission's interpretation
of the predecessor rule that the proposal need not be "fully effected" by the
company to meet the mootness test, so long as it was substantially implemented.
The goal of the Proposal is clear on its facethe Proponent wants the Company to
remove any existing poison pill or have any new poison pill submitted for
stockholder approval. As previously noted, the Company does not have a poison
pill. Additionally, the Corporation has adopted a policy that no poison pill
shall become effective without the affirmative vote of a majority of
stockholders (Exhibit B). Accordingly, since the Company has adopted a policy
prohibiting the adoption of a poison pill in the absence of stockholder
approval, the goal of the Proposal has been substantially implemented and should
be excluded pursuant to Rule 14a-8(i)(10). The Policy, which effectively implements the Proposal, is well within the
boundaries defined by prior Division rulings wherein issuers were deemed to have
substantially implemented stockholder proposals for purposes of Rule
14a-8(i)(10). In 2003, the Division issued three No Action Letters permitting
exclusion of poison pill stockholder proposals involving facts substantially
similar to those involved in this request: AutoNation (March 5, 2003),
Citigroup, Inc. (February 25, 2003) and Bank of America (February 18, 2003). In
fact, the proponents in all three of these 2003 letters were members of the
Rossi or Chevedden families. In AutoNation, Citigroup and Bank of America, the
respective companies did not have a shareholder rights plannor does Entergy
have a shareholder rights plan. In AutoNation, Citigroup and Bank of America,
the Board of Directors adopted a policy that no poison pill will become
effective without the affirmative vote of a majority of stockholders. Entergy's
Board adopted such a policy. Entergy respectfully requests the same no action
relief previouly granted to these three companies. Further, the Commission has not required exact correspondence between the
actions sought in the Proposal and the actions of the issuer. In Masco
Corporation (March 29, 1999) ("Masco"), the Division allowed Masco to exclude
from its proxy materials pursuant to Rule 14a-8(i)(10) a stockholder proposal
requesting that Masco's "Outside Directors" satisfy specific criteria. Masco's
board of directors subsequently adopted a resolution which included the criteria
requested by the proponent but also allowed the Board discretion to disallow one
of the criteria if certain circumstances were met. Also, in Erie Indemnity
Company (March 15, 1999) ("Erie"), the issuer was permitted to exclude a
stockholder proposal requesting that Erie amend its bylaws to indicate that
gifts among Erie's directors are improper "benefits" within the meaning of
Erie's conflict of interests policy. The stockholder proposal expressly exempted
gifts by family members of Erie's management and employees. Erie's board of
directors subsequently adopted a bylaw amendment prohibiting not only its
directors but also members of their immediate families and Company officers from
accepting gifts of greater than nominal value from other directors and officers.
No mention was made in the bylaw amendment of the conflict of interest policy.
Erie was allowed to exclude the proposal despite these differences.
The Policy, then, in light of AutoNation, Citigroup, Bank of America, Masco and
Erie meets the "substantially implemented" standard imposed by Rule
14a-8(i)(10). Conclusion The Company has substantially implemented the Proposal by adopting the Policy in
2003 following approval by the Company's shareholders of the Proponent's poison
pill proposal in 2002. As discussed above, the Division has three times in 2003
granted no action relief under Rule 14a-8(i)(10) to issuers whose circumstances
were substantially similar to Entergy's. Based on the foregoing analysis, we respectfully request that the Division issue
a letter indicating that it will not recommend enforcement action to the
Commission if the Company omits the Proposal in accordance with Rule
14a-8(i)(10). Thank you for your consideration of our request. If you have any questions,
please do not hesitate to contact me at (504) 576-4212 or Jack Adams at (504)
576-2095. Sincerely, /s/
CTS/slr attachments
cc: Mr. John Chevedden [APPENDIX 1]
EXHIBIT A Emil Ross;
P.O. Box 249
Boonville, CA 95415
Mr. Robert Luft
Chairman
Entergy Corporation (ETR)
639 Loyola Avenue
New Orleans, LA 70113
Phone: (504) 576-4000
Fax: (504) 569-4063, 569-2977
Dear Mr. Luft, 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 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 shareholder 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
PH: 310/371-7872 Your consideration and the consideration of the Board of Directors is
appreciated. Sincerely, /s/
Oct 7-03 cc: Christopher T. Screen
Assistant Secretary FX: 504/576-4150
The attached proposal is submitted consistent with the above letter.
Sincerely, [Text illegible] November 14, 2003 [APPENDIX 2]
3Shareholder Input on Poison Pills RESOLVED: Shareholders request that our Directors increase shareholder voting
rights and submit the adoption, maintenance or extension of any poison pill to a
shareholder vote as a separate ballot item as soon as may be practical. Also
once this proposal is adopted, any dilution or removal of this proposal is
requested to be submitted to a shareholder vote as a separate ballot item at the
earliest possible shareholder election. Directors have the flexibility of
discretion accordingly in scheduling the earliest shareholder vote and in
responding to shareholder votes. We as shareholders voted in support of this topic:
Year.............Rate of Support
2002...............79% 2003...............47%
This percentage is based on yes and no votes cast. I believe this level of
shareholder support is impressive because this support followed our Directors'
objection to the proposalplus insiders own 10% of our stock. Our Directors also
had shareholders contacted for their vote-no pitch. I believe that shareholders
are more likely to vote in favor of this proposal topic if shareholders have the
staff and/or resources to closely follow our company's governance practices.
I do not see how our Directors object to this proposal because it gives our
Directors the flexibly to ignore our shareholder vote if our Directors seriously
believe they have a good reason. I believe our vote is a strong signal of
shareholder concern. This topic also won an overall 60% yes-vote at 79 companies
in 2003. Emil Rossi, P.O. Box 249, Boonville, Calif. 95415 submitted this proposal.
Polson Pill Negative The key negative of poison pills is that pills can preserve management deadwood
instead of protecting investors. Source: Moringstar.com
The Potential of a Tender Offer Can Motivate Our Directors
Hectoring directors to act more independently is a poor substitute for the
bracing possibility that shareholders could turn on a dime and sell the company
out from under its present management. Source: Wall Street Journal, Feb. 24, 2003
Diluted Stock An anti-democratic management scheme to flood the market with diluted stock is
not a reason that a tender offer for our stock should fail.
Source: The Motley Fool Akin to a Dictator
Poison pills are akin to a dictator who says, "Give up more of your freedom and
I'll take care of you. Source: T.J. Dermot Dunphy, CEO of Sealed Air (NYSE) for more than 25 years
I believe our Directors could make a token response to this proposalhoping to
gain points in the new corporate govemance rating systems. A reversible
response, which could still allow our directors to give us a poison pill on
short notice with no subsequent vote, would not substitute for this proposal.
Council of Institutional Investors Recommendation
The Council of Institutional Investors www.cii.org, an organization of 130
pension funds investing $2 trillion, called for shareholder approval of poison
pills. Based on the 60% overall yes-vote in 2003 many shareholders believe
companies should allow their shareholders a vote. Shareholder Input on Poison Pills 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. References: The Motley Fool, June 13, 1997
Moringstar.com, Aug. 15, 2003 Mr. Dunphy's statements are from The Wall Street Journal, April 28, 1999.
IRRC Corporate Governance Bulletin, JuneSept. 2003
Council of Institutional Investors, Corporate Governance Policies, March 25,
2002 Please advise within 14 days if the company requests help to locate these or
other references. [APPENDIX 3]
CERTIFIED RESOLUTION Adoption of Stockholder Rights Policy
RESOLVED, upon the recommendation of the Committee on Directors and Governance
that the Board of Directors adopt the following Stockholder Rights Policy for
the Company: The Board of Directors shall obtain stockholder approval prior to adopting any
stockholder rights plan; provided, however, that the Board may act on its own to
adopt a stockholder rights plan if, under the then current circumstances, the
Board in the exercise of its fiduciary responsibilities, deems it to be in the
best interest of Dow's stockholders to adopt a stockholder rights plan without
the delay in adoption that would come from the time reasonably anticipated for
stockholder approval. Any stockholder rights plan so adopted by the Board
without prior stockholder approval will be submitted to a non-binding vote of
stockholders as a separate ballot item at the next subsequent meeting of Dow
stockholders. The Board shall not repeal this Policy without first submitting it
to a non-binding vote of Dow stockholders. Certification
I, Thomas E. Moran, Assistant Secretary of The Dow Chemical Company (the
"Company"), do hereby certify that the foregoing is a full, true and correct
copy of a resolution adopted at a meeting of the Board of Directors of the
Company, held at the offices of the Company in Midland, Michigan, on the 13th
day of February, 2003, at which meeting a quorum of the Board of Directors was
present, and that, as of the date below, such resolution has not been revoked,
annulled or modified in any manner whatsoever, and is in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal
of the Company this 13th day of February, 2003. /s/
Thomas E. Moran, Assistant Secretary [INQUIRY LETTER]
January 31, 2004 6 Copies
7th copy for date-stamp return
Via Airbill Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 0402
450 Fifth Street, NW
Washington, DC 20549 Poison Pill Proposals and Not Substantially (Extensively) Implemented
Ladies and Gentlemen: Hewlett Packard (December 24, 2003) essentially said that half the baby was as
good as the whole baby on poison pills and shareholder votes. One possible
interpretation of Hewlett Packard is that it gives a company the power to repeal
a poison pill policy as soon as it receives a no action letter based on adopting
that very policy. The company has not claimed that the company would lack the power in this
instance to take the Office of Chief Council Response letter, issued on the
substantially implemented issue, on dayone and on day-two repeal the policy
which was the linchpin to obtaining the day-one Response letter.
The key point of this poison pill proposal is a shareholder vote. It does not
seem credible that a policy is substantially implemented when the company has
the power to take a December 24, 2003 Response letter and on December 26, 2003
repeal the policy that was the linchpin to the December 24, 2003 Response.
Furthermore there would be no shareholder vote before or after.
The company has not provided a precedent where a Staff Response of substantial
implementation allowed the repeal of the policy critical to the staff Response
the instant that the company received the staff Response. Thus the repeal could be timed to the very minute after the fax arrival of the
Staff Response letter. The company has provided no argument rebutting the
ability of the board to pass a resolution now that repeals the policy once the
Response letter comes through on the company fax machine. Pfizer Inc. (PFE) in 2003 had the transparency to adopt this same half-baby
policy with more detail to reveal the limitations (from a shareholder viewpoint)
of such a policy: "This policy may be revised or repealed without prior public notice and the
Board may thereafter determine to act on its own to adopt a poison pill"
The Dow Chemical company Adoption of Stockholder Rights (Poison Pill) Policy,
adopted February 13, 2003, prior to the company policy, added two key provisions
beyond what one company called its "as far as it can go" company policy:
1) Any stockholder rights plan so adopted by the Board without prior stockholder
approval will be submitted to a non-binding vote of stockholders as a separate
ballot item at the next subsequent meeting of Dow stockholders.
2) The Board shall not repeal this Policy without first submitting it to a
non-binding vote of Dow shareholders. The company has not argued that the Dow Policy is contrary to state law.
The company has not submitted an argument stating that item 1) and 2) above are
inconsistent with a fiduciary out. The company has not made any analogous claim that a Board of Directors, which
permits ratification of auditors, has abdicated its responsibility for the
selection of auditors. ElementAn Essential Component
The following is additional material which applies to a poison pill proposal for
a two-element single-concept policy calling for: 1) A shareholder vote policy regarding a poison pill Plus
2) A shareholder vote if the foundational policy is repealed after adoption.
The ability to have a vote on repealing the foundational policy is critical to
the underlying policy having any meaning. This letter addressees the substantially implemented issue.
The two-element policy calls for a vote at each of two points. There is no
substantial implementation if the company sets up a condition:
1) Where the company has complete control
2) And the company can avoid a vote at both element-one and element -two
In many proposals 6-elements are missing such as:
The following provisions are thus not implemented in the company policy:
1. A vote is not needed to adopt a pill ("unless the Board ...").
2. Since no vote is required to adopt a pill then the first "shareholder vote as
a separate ballot item" is not implemented. 3. No vote whatsoever is needed for a pill with a 364-day term ("within one
year"). a. If the pill "expires" after 364-days a new pill can be adopted.
b. This expire-and-adopt-again cycle can be repeated year after year.
4. No shareholder vote ever applies to repealing the entire policy.
5. Since no vote is required to repeal the entire policy then the second "as a
separate ballot item" is not implemented. 6. Since no vote is required to repeal the entire policy then "earliest election
date" is not implemented. SEC Release No. 34-20091 said "The Commission proposed an interpretative change
to permit the omission of proposals that have been `substantially implemented by
the issuer.'" The key phrase is "substantially implemented by the issuer."
The proposal does not seem to be substantially implemented if the foundational
policy of the proposal can be repealed at will or at whim by the board without a
corresponding non-binding vote. The second element of the proposal is arguably of greater importance because
without it the first element of the proposal could be moot.
The company is in the inscrutable position of claiming that adopting the first
half of the two-element policy compares favorably with adopting the whole
policy. It is like half the baby is as good as the whole baby. Nordstrom Inc.,
claimed a favorable 12-for-12 match in Nordstrom Inc., 1995 SEC No-Act. LEXIS
226 (Feb. 8, 1995). Yet the company now claims that one-for-two is as favorable
12-for-12 when addressing the poison pill topic. In Nordstrom Inc., the staff allowed a company to exclude a proposal where the
company demonstrated that it already had adopted policies or taken actions to
address each of 12 points of the proposal. In Nordstrom a 12-for-12 match at a detail level of the company was apparently
established in order to obtain concurrence. At the highest level of the company the company claims a one-for-two match
compares favorably. A key principle of rule 14a-8 and corporate governance is
that shareholder voices are intended to be heard more at the macro level of the
company because the managers are responsible for the details. Thus if 12-for-12
is the standard for detailed items in Nordstrom, the standard should at least
approach 100% at a much higher level of a companynot 50%.
For shareholders the greater importance of macro issues is supported by text in
rule 14a-8: i. Question 9: If I have complied with the procedural requirements, on what
other bases may a company rely to exclude my proposal? ...
7. Management functions: If the proposal deals with a matter relating to the
company's ordinary business operations. In Nordstrom Inc., the company argued:
A comparison of the Proponent's "code of conduct" and the Guidelines reveals
that the Guidelines include each form of prohibited supplier conduct listed in
the Proposal and include the means to verify compliance as requested in the
Proposal. The Proponent, for example, requests that under the code of conduct
the Company will not do business with suppliers which: (1) utilize forced or prison labor;
(2) employ children under compulsory school age or legal working age;
(3) fail to follow prevailing practice and local laws regarding wages and hours;
(4) fail to maintain a safe and healthy working environment; or
(5) contribute to local environmental degradation.
In addition, the Proponent requests that the Company verify its suppliers'
compliance through certification, regular inspections and/or other monitoring
processes. Under the Guidelines, the Company's vendors are expected to refrain from:
(1) utilizing prison or forced labor;
(2) utilizing child labor; (3) failing to offer wages, hours and overtime consistent with prevailing local
industry standards; (4) failing to provide safe and healthy work environments for their workers;
(5) failing to demonstrate a commitment to the environment;
(6) failing to comply with all applicable legal requirements; or
(7) discriminating. Cll Alerts, Council Research Service, November 13, 2003 establishes concern
regarding meaningless poison pill policies. It stated: SO FAR, WE'VE TRACKED 62 majority votes on poison pill proposals submitted in
2003. Only seven have adopted policies terminating their pills or amending their
policies. 3M, Hewlett-Packard and JP Morgan Chase, which also don't have poison pills,
responded to the majority votes by approving policies to get shareholder
approval before adopting any poison pills. But their policies include a huge
loophole giving their boards the right to adopt pills without prior shareholder
approval if, as fiduciaries, they decide a pill would be in the best interests
of shareholders. These clauses effectively render the policies meaningless.
The following is a recent precedent where substantially implement was not
concurred with. Continental Airlines, Inc. (January 28, 2004)
"The Proposal requests that the board submit any adoption, maintenance or
extension of a poison pill to a shareholder vote and further requests that once
adopted, any material change or discontinuing of this proposal be submitted to a
shareholder vote at the earliest possible shareholder ballot.
"We are unable to concur in your view that Continental may exclude the proposal
under rule 14a-8(i)(10). Accordingly, we do not believe that Continental may
omit the proposal from its proxy material in reliance on rule 14a-8(i)(10)."
I do not believe that the company has met its burden of proof obligation
according to rule 14a-8 on substantially implement in regard to a half-baby
poison pill policy. For the above reasons this is to respectfully request non-concurrence with the
company no action requests on this issue in particular. Sincerely,
/s/ [INQUIRY LETTER]
January 31, 2004 6 Copies
7th copy for date-stamp return
Via Airbill Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 0402
450 Fifth Street, NW
Washington, DC 20549 Response to No Action Request
Entergy Corporation (ETR)
Poison Pill Proposal
Emil Rossi Ladies and Gentlemen:
This is in further support of the January 23, 2004 letter.
The shareholder proposal states:
RESOLVED: Shareholders request that our Directors increase shareholder voting
rights and submit the adoption, maintenance or extension of any poison pill to a
shareholder vote as a separate ballot item on the next shareholder ballot. Also
once this proposal is adopted, any dilution or removal of this proposal is
requested to be submitted to a shareholder vote as a separate ballot item at the
earliest possible shareholder election. Yet the company policy states:
RESOLVED, that the Board hereby adopts a policy that it will not adopt any
shareholder rights plan for the purpose of preventing or hindering a change of
corporate control (a "Poison Pill") unless that adoption is either preceded by
an approval of the Poison Pill by a vote of the shareholders of the Company at a
duly called meeting thereof or is approved by the shareholders no later than at
the next annual meeting of the Company. The following provisions are not implemented in the company policy:
1. A vote is not needed to adopt a pill.
2. Since no vote is required to adopt a pill then the first "shareholder vote as
a separate ballot item" is not implemented. 3. No vote whatsoever is needed for a pill with up to a 364-day term (vote at
"next annual meeting"). 4. No vote ever is required to repeal the entire policy.
5. Since no vote is required to repeal the entire policy then the second "as a
separate ballot item" is not implemented. 6. Since no vote is required to repeal the entire policy then "earliest election
date" is not implemented. Instead of addressing the proposal submitted the company policy seems addressed
to a proposal which would read: This poison pill shareholder vote proposal would allow the Board to have a
poison pill in force for one-year without a shareholder vote. This poison pill
vote can then be bundled with a number of other more important items as an
all-or-nothing vote. This vote can bypass any special meeting of shareholders.
This entire foundational policy may be repealed or revised without prior public
notice and without any subsequent shareholder vote within any foreseeable
period. 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. Sincerely,
/s/ John Chevedden
cc: Emil Rossi
Robert Luft [INQUIRY LETTER]
February 7, 2004 6 Copies
7th copy for date-stamp return
Via Airbill Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 0402
450 Fifth Street, NW
Washington, DC 20549 Rebuttal to No Action Request
Entergy Corporation (ETR)
Poison Pill Proposal
Emil Rossi Ladies and Gentlemen:
This is in further support of the January 23, 2004 and January 31, 2004 rebuttal
letters. Non-Functional Company Policy due to Lack of Transparency
The company claims that a shareholder proposal which calls for the transparency
of a vote can be substantially implemented by a policy that lacks transparency:
1. No announcement of policy adoption.
2. No announcement if policy repealed.
New company policy not clear Additionally the company policy does not appear to be clear. If the board adopts
a pill one-day after the 2004 annual meeting is the new pill void until
"approved by the shareholders ... at the next annual meeting."
The shareholder proposal states:
RESOLVED: Shareholders request that our Directors increase shareholder voting
rights and submit the adoption, maintenance or extension of any poison pill to a
shareholder vote as a separate ballot item on the next shareholder ballot. Also
once this proposal is adopted, any dilution or removal of this proposal is
requested to be submitted to a shareholder vote as a separate ballot item at the
earliest possible shareholder election. Yet the company policy states:
RESOLVED, that the Board hereby adopts a policy that it will not adopt any
shareholder rights plan for the purpose of preventing or hindering a change of
corporate control (a "Poison Pill") unless that adoption is either preceded by
an approval of the Poison Pill by a vote of the shareholders of the Company at a
duly called meeting thereof or is approved by the shareholders no later than at
the next annual meeting of the Company. The following provisions are not implemented in the company policy:
1. A vote is not needed to adopt a pill.
2. Since no vote is required to adopt a pill then the first "shareholder vote as
a separate ballot item" is not implemented. 3. No vote may or may not be needed for a pill with up to a 364-day term (vote
at "next annual meeting"). 4. No vote ever is required to repeal the entire policy.
5. Since no vote is required to repeal the entire policy then the second "as a
separate ballot item" is not implemented. 6. Since no vote is required to repeal the entire policy then "earliest election
date" is not implemented. Instead of addressing the proposal submitted the company policy seems addressed
to a proposal which would read: This poison pill shareholder vote proposal may or may not allow the Board to
have a poison pill in force for one-year without a shareholder vote. This poison
pill vote can then be bundled with a number of other more important items as an
all-or-nothing vote. This vote can bypass any special meeting of shareholders.
This entire foundational policy may be repealed or revised without prior public
notice and without any subsequent shareholder vote within any foreseeable
period. 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. Sincerely,
/s/ John Chevedden
cc: Emil Rossi
Robert Luft [INQUIRY LETTER]
January 23, 2004 6 Copies
7th copy for date-stamp return
Via Airbill Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 0402
450 Fifth Street, NW
Washington, DC 20549 Response to No Action Request
Entergy Corporation (ETR)
Poison Pill Proposal
Emil Rossi Ladies and Gentlemen:
In response to the company no action request, the numbers preceding the brackets
below correspond approximately to the pages of the company letter. Please also
see the attachments for: Separate Ballot Item
Not Substantially (Extensively) Implemented
2] The shareholder proposal states:
RESOLVED: Shareholders request that our Directors increase shareholder voting
rights and submit the adoption, maintenance or extension of any poison pill to a
shareholder vote as a separate ballot item on the next shareholder ballot. Also
once this proposal is adopted, any dilution or removal of this proposal is
requested to be submitted to a shareholder vote as a separate ballot item at the
earliest possible shareholder election. Yet the company policy states:
RESOLVED, that the Board hereby adopts a policy that it will not adopt any
shareholder rights plan for the purpose of preventing or hindering a change of
corporate control (a "Poison Pill") unless that adoption is either preceded by
an approval of the Poison Pill by a vote of the shareholders of the Company at a
duly called meeting thereof or is approved by the shareholders no later than at
the next annual meeting of the Company. The company policy states that an approval is only needed by the shareholders no
later than at the next annual meeting of the Company. Hence a one year grace-
period. Instead of addressing the proposal submitted the company policy seems addressed
to a proposal which would read: This poison pill shareholder vote proposal would allow the Board to have a
poison pill in force for one-year without a shareholder vote. This poison pill
vote can then be bundled with a number of other items as an all-or-nothing vote.
This vote can bypass any special meeting of shareholders. This entire
foundational policy may be repealed or revised without prior public notice and
without any subsequent shareholder vote within any foreseeable period.
The company argues without support that its policy, which is less comprehensive
than the 2003 AutoNation policy, can be extended to this 2004 proposal. No
support is given to allow a policy less comprehensive than 2003 AutoNation
policy address a more comprehensive 2004 proposal. According to the inscrutable company argument it is moot to replace "earliest
possible shareholder election" with "next annual meeting."
The company fails to note that proposals submitted to AutoNation, Citigroup and
Bank of America did not have the second-sentence foundational element of this
proposal. "Also once this proposal is adopted, any dilution or removal of this
proposal is requested to be submitted to a shareholder vote as a separate ballot
item at the earliest possible shareholder election." 3] This company text is misleading, "The goal of the Proposal is clear on its
facethe Proponent wants the Company to remove any existing poison pill or have
any new poison pill submitted for stockholder approval." This is correct for the
first element of the proposal. The company fails to address the second
foundational element of the proposal. The company is using the fallacy of
substituting a part for the whole. 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
cc: Emil Rossi
Robert Luft [INQUIRY LETTER]
January 23, 2004 6 Copies
7th copy for date-stamp return
Via Airbill Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 0402
450 Fifth Street, NW
Washington, DC 20549 Poison Pill Proposals and Not Substantially (Extensively) Implemented Separate
Ballot Item Issue Ladies and Gentlemen:
Separate Ballot Item The company has made no claim that its policy calls for a vote as a separate
ballot item. The company has cited no precedent where a called-for vote was
determined substantially implemented by a policy allowing a vote as only a small
part of a larger bundle of provisions. The 2003 company policy can also make a vote nearly meaningless by bundling the
vote on the poison pill with 5 other items as an all-or-nothing vote
proposition. And one of the 5 other items could be a big-ticket item.
There is no point-by-point company analysis particularly focused on the separate
ballot item provision. Sincerely, /s/
John Chevedden [INQUIRY LETTER]
January 23, 2004 6 Copies
7th copy for date-stamp return
Via Airbill Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 0402
450 Fifth Street, NW
Washington, DC 20549 Poison Pill Proposals and Not Substantially (Extensively) Implemented
Ladies and Gentlemen: The company has not made any analogous claim that a Board of Directors, which
permits ratification of auditors, has abdicated its responsibility for the
selection of auditors. ElementAn Essential Component
The following is additional material which applies to a poison pill proposal for
a two-element single-concept policy calling for: 1) A shareholder vote policy regarding a poison pill Plus
2) A shareholder vote if the foundational policy is repealed after adoption.
This letter addressees the substantially implemented issue.
The two-element policy calls for a vote at each of two points. There is no
substantial implementation if the company sets up a condition:
1) Where the company has complete control
2) And the company can avoid a vote at both element-one and element -two
SEC Release No. 34-20091 (attached) said "The Commission proposed an
interpretative change to permit the omission of proposals that have been
`substantially implemented by the issuer.'" The key phrase is "substantially
implemented by the issuer." The proposal does not seem to be substantially implemented if the foundational
policy of the proposal can be repealed at will or at whim by the board without a
corresponding non-binding vote. The second element of the proposal is arguably of greater importance because
without it the first element of the proposal could be moot.
The company is in the inscrutable position of claiming that adopting the first
half of the two-element policy compares favorably with adopting the whole
policy. It is like half the baby is as good as the whole baby. Nordstrom Inc.,
claimed a favorable 12-for-12 match in Nordstrom Inc., 1995 SEC No-Act. LEXIS
226 (Feb. 8, 1995). Yet the company now claims that one-for-two is as favorable
12-for-12 when addressing the poison pill topic. In Nordstrom Inc., the staff allowed a company to exclude a proposal where the
company demonstrated that it already had adopted policies or taken actions to
address each of 12 points of the proposal. In Nordstrom a 12-for-12 match at a detail level of the company was apparently
established in order to obtain concurrence. At the highest level of the company the company claims a one-for-two match
compares favorably. A key principle of rule 14a-8 and corporate governance is
that shareholder voices are intended to be heard more at the macro level of the
company because the managers are responsible for the details. Thus if 12-for-12
is the standard for detailed items in Nordstrom, the standard should at least
approach 100% at a much higher level of a companynot 50%.
For shareholders the greater importance of macro issues is supported by text in
rule 14a-8: i. Question 9: If I have complied with the procedural requirements, on what
other bases may a company rely to exclude my proposal? ...
7. Management functions: If the proposal deals with a matter relating to the
company's ordinary business operations. In Nordstrom Inc., the company argued:
A comparison of the Proponent's "code of conduct" and the Guidelines reveals
that the Guidelines include each form of prohibited supplier conduct listed in
the Proposal and include the means to verify compliance as requested in the
Proposal. The Proponent, for example, requests that under the code of conduct
the Company will not do business with suppliers which: (1) utilize forced or prison labor;
(2) employ children under compulsory school age or legal working age;
(3) fail to follow prevailing practice and local laws regarding wages and hours;
(4) fail to maintain a safe and healthy working environment; or
(5) contribute to local environmental degradation.
In addition, the Proponent requests that the Company verify its suppliers'
compliance through certification, regular inspections and/or other monitoring
processes. Under the Guidelines, the Company's vendors are expected to refrain from:
(1) utilizing prison or forced labor;
(2) utilizing child labor; (3) failing to offer wages, hours and overtime consistent with prevailing local
industry standards; (4) failing to provide safe and healthy work environments for their workers;
(5) failing to demonstrate a commitment to the environment;
(6) failing to comply with all applicable legal requirements; or
(7) discriminating. In Texaco Inc., 2001 SEC No-Act. LEXIS 136 (Jan. 30, 2001) a shareholder
proposal, which urged this company's board of directors to adopt, implement and
enforce a workplace code of conduct based upon the International Labor
Organization's conventions on workplace human rights, including the five
principles set forth in the proposal, may not be omitted from the company's
proxy material under rule 14a-8(i)(10). The company argued that the proposal had been substantially implemented because
the company already had endorsed the Sullivan Principles. The proponent noted
that the Sullivan Principles did not cover all of the subjects addressed by the
International Labor Organization's Principles nor were the Sullivan Principles
co-extensive with them. In PPG Industries, Inc., 2001 SEC No-Act. LEXIS 124 (Jan. 22, 2001) the company
was required to include a proposal asking the board to adopt the International
Labor Organization's conventions on workplace human rights, including the five
principles set forth in the proposal. The company argued that it had
substantially implemented the proposal because it had adopted various policies,
such as its EEO and Global Code of Ethics policies, or was subject to certain
laws, including the National Labor Relations Act and the ILO's Convention 105
regarding forced labor which had been ratified by the U.S., relating to concerns
raised in the proposal. The proponent countered by pointing out precisely how
the measures cited by the company fell short of substantial implementation. The
proponent also argued that the heart of the proposal was to create a single
document that explicitly and in one place committed the company to the
enumerated principles. A vote is consistent with fiduciary duty
A vote gives the board greater incentive to meet its fiduciary duty
The second part of this poison pill proposal emphasizes the importance of
shareholder opportunity to vote. This is reinforced by company response
statements to shareholder proposals which repeatedly state that companies
carefully evaluate precatory shareholder votes. For instance The Boeing Company 2003 response statement to the poison pill
shareholder proposal specifically noted the 50% vote the proposal topic received
at the company 2003 annual meeting and added, "... the Board of Directors and
its Governance and Nominating Committee have carefully considered and evaluated
the proposal, after being briefed on the proposals' historical, policy, economic
and legal implications." The Boeing Company seems to have arranged a special
briefing for the Board as a result of the shareholder vote.
It appears from The Boeing Company 2003 response statement that the non-binding
shareholder vote gave the board added incentive to consider its position on the
proposal topic. Giving the board added incentive to consider the merits of a key
governance topic gives the board greater incentive to meet its fiduciary duty to
shareholders under state law. The two-element policy calls for a vote at each of the two points. If the
company sets up a condition where it can avoid a vote at, particularly at the
foundational element then there is no substantial (extensive) implementation.
The board can take a false sense of security in knowing it can remove the policy
at any time without any shareholder vote at any time. This false sense of
security can impact shareholder value. It can also lead to management
complacency and to the board marginally meeting fiduciary duty or less.
The company has not provided a precedent where a proposal which called for a
shareholder vote under two circumstances was substantially implemented by a
policy that enabled the company to avoid both such votes. Hewlett Packard (December 24, 2003) essentially said that half the baby was as
good as the whole baby on poison pills and shareholder votes. One possible
interpretation of Hewlett Packard is that it gives a company the power to repeal
a poison pill policy as soon as it receives a no action letter based on adopting
that very policy. The company has not claimed that the company would lack the power in this
instance to take the Office of Chief Council Response letter, issued on the
substantially implemented issue, on day-one and on day-two repeal the policy
which was the linchpin to obtaining the day-one Response letter.
The key point of this poison pill proposal is a shareholder vote. It does not
seem credible that a policy is substantially implemented when the company has
the power to take a December 24, 2003 Response letter and on December 26, 2003
repeal the policy that was the linchpin to the December 24, 2003 Response.
Furthermore there would be no shareholder vote before or after.
The company has not provided a precedent where a Staff Response of substantial
implementation allowed the repeal of the policy critical to the staff Response.
Thus the repeal could be timed to the very minute after the fax arrival of the
Staff Response letter. The company has provided no argument rebutting the
ability of the board to pass a resolution now that repeals the policy once the
Response letter comes through on the company fax machine. Pfizer Inc. (PFE) in 2003 had the transparency to adopt this same half-baby
policy with more detail to reveal the limitations (from a shareholder viewpoint)
of such a policy: "This policy may be revised or repealed without prior public notice and the
Board may thereafter determine to act on its own to adopt a poison pill"
The enclosed Dow Chemical Company Adoption of Stockholder Rights (Poison Pill)
Policy, adopted February 13, 2003, prior to the company policy, added two key
provisions beyond what one company called its "as far as it can go" company
policy: 1) Any stockholder rights plan so adopted by the Board without prior stockholder
approval will be submitted to a non-binding vote of stockholders as a separate
ballot item at the next subsequent meeting of Dow stockholders.
2) The Board shall not repeal this Policy without first submitting it to a
non-binding vote of Dow shareholders. The company has not argued that the Dow Policy is contrary to state law.
The company has not submitted an argument stating that item 1) and 2) above are
inconsistent with a fiduciary out. CII Alerts, Council Research Service, November 13, 2003 establishes concern
regarding meaningless poison pill policies. It stated: SO FAR, WE'VE TRACKED 62 majority votes on poison pill proposals submitted in
2003. Only seven have adopted policies terminating their pills or amending their
policies. 3M, Hewlett-Packard and JP Morgan Chase, which also don't have poison pills,
responded to the majority votes by approving policies to get shareholder
approval before adopting any poison pills. But their policies include a huge
loophole giving their boards the right to adopt pills without prior shareholder
approval if, as fiduciaries, they decide a pill would be in the best interests
of shareholders. These clauses effectively render the policies meaningless.
The following are precedents where substantially implement was not concurred
with. Alaska Air Group, Inc. (March 31, 2003)
A shareholder proposal, which recommends that this company's board of directors
redeem any poison pill previously issued and not adopt or extend any poison pill
unless such adoption or extension has been submitted to a shareholder vote, may
not be omitted under rule 14a-8(i)(10). AMR Corp. (April 4, 2003)
A shareholder proposal, which requests that this company annually submit to a
shareholder vote any poison pill adopted since the company's previous annual
meeting and/or currently in place, may not be omitted from the company's proxy
material under rule 14a-8(i)(10). 3M Co. (Jan. 28, 2003)
A shareholder proposal, which requests that this company's board of directors
"redeem any poison pill previously issued (if applicable) and not adopt or
extend any poison pill unless such adoption or extension has been submitted to a
shareholder vote," may not be omitted from the company's proxy material under
rule 14a-8(i)(10). Sabre Holdings Corp. (March 20, 2003)
A shareholder proposal, which requests that this company's board of directors
redeem any poison pill previously issued and not adopt or extend any poison pill
unless such adoption or extension has been submitted to a shareholder vote, may
not be omitted from the company's proxy material under rule 14a-8(i)(10).
UST Inc. (Dec. 26, 2003) A shareholder proposal, which requests that this company's board of directors
"redeem any poison pill previously issued (if applicable) and not adopt or
extend any poison pill unless such adoption or extension has been submitted to a
shareholder vote," may not be omitted from the company's proxy material under
rule 14a-8(i)(10). The proposal here goes beyond each of the above proposals in calling for a
precatory vote if the board repeals the foundational pill policy itself.
Fiduciary Out A non-binding vote on the second part of this two-element proposal regarding the
removal of the proposal once adopted is consistent with a fiduciary out.
Not all proposals with a fiduciary out are substantially identical
A non-binding vote on repealing a policy is consistent with a fiduciary out
Not all poison pill proposals with a fiduciary out are substantially identical.
Both a two-point policy and a one-point policy can have a fiduciary out. The
fiduciary out of the two-point policy does not force it to be substantially
implemented by a one-point policy. I do not believe that the company has met its burden of proof obligation
according to rule 14a-8 on substantially implement in regard to a half-baby
poison pill policy. For the above reasons this is to respectfully request non-concurrence with the
company no action requests on this issue in particular. Sincerely,
/s/ John Chevedden
[STAFF REPLY LETTER]
February 11, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: Entergy Corporation
Incoming letter dated January 5, 2004
The proposal requests that the board submit the adoption, maintenance or
extension of any poison pill to a shareholder vote and further requests that
once adopted, dilution or removal of this proposal be submitted to a shareholder
vote at the earliest possible shareholder election. The proposal gives directors
the "flexibility of discretion" in scheduling the earliest shareholder vote and
in responding to shareholder votes. There appears to be some basis for your view that Entergy may exclude the
proposal under rule 14a-8(i)(10). We note Entergy's representation that it has
adopted a policy that requires shareholder approval of any poison pills.
Accordingly, we will not recommend enforcement action to the Commission if
Entergy omits the proposal from its proxy materials in reliance on rule
14a-8(i)(10). Sincerely, /s/
Daniel Greenspan
Attorney-Advisor
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