Company Name: Ford Motor Co.
Public Availability Date: February 6, 2004Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX 1
INQUIRY LETTER
APPENDIX 2
APPENDIX 3
APPENDIX 4
APPENDIX 5
STAFF REPLY LETTER [INQUIRY LETTER]
January 15, 2004 Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Omission of Shareholder Proposal Submitted by Mr. Richard A. Mills
Ladies and Gentlemen: Pursuant to Rule 14a-8(j) promulgated under the Securities Exchange Act of 1934,
as amended (the "Act"), Ford Motor Company ("Ford" or the "Company")
respectfully requests the concurrence of the staff of the Division of
Corporation Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") that it will not recommend any enforcement action to the
Commission if the shareholder proposal described below is omitted form Ford's
proxy statement and form of proxy for the Company's 2004 Annual Meeting of
Shareholders (the "Proxy Materials"). The Company's 2004 Annual Meeting of
Shareholders is scheduled for May 13, 2004. Mr. Richard A. Mills, a shareholder of Ford (the "Proponent"), has submitted for
inclusion in the 2004 Proxy Materials a proposal requesting the Company's Board
of Directors to consider amending the Company's Restated Certificate of
Incorporation in order to change the method of electing directors of the Company
(the "Proposal"). The Company proposes to omit the Proposal from its 2004 Proxy
Materials for the following reasons:
The Proposal is excludable under Rule 14a-8(i)(3) because it is contrary to
Rule 14a-9, which prohibits materially false or misleading statements in proxy
soliciting materials.
The Proposal is excludable under Rule 14a-8(i)(8) because it relates to an
election for membership on the Company's board of directors.
The Proposal Violates the Proxy Rules (Rule 14a-8(i)(3) and Rule 14a-9)
Rule 14a-8(i)(3) permits an issuer to omit a shareholder proposal from its proxy
materials if the proposal is contrary to the Commission's proxy rules, including
Rule 14a-9, which prohibits false or misleading statements in proxy soliciting
materials. The Proposal is susceptible to differing interpretations and likely
to confuse the Company's shareholders. The Staff has regularly permitted
companies to omit proposals from their proxy materials on the grounds that any
action ultimately taken upon implementation of the proposal could be different
from the actions envisioned by the shareholders voting on the proposal at the
time their votes were cast. See, e.g., Organogenesis, Inc. (April 2, 1999)
(concurring in exclusion of a proposal that recommended procedures for the
nomination and election of directors because the proposal was vague and
ambiguous) and AnnTaylor Stores Corporation (January 12, 2001) (concurring in
exclusion of proposal that would have committed the company to full
implementation of human rights standards and a program to monitor compliance).
The Proposal is vague, ambiguous and susceptible of various interpretations. The
Proposal requests the Board of Directors to consider an amendment to Ford's
Restated Certificate of Incorporation in order to grant holders of common stock
the right to nominate and elect 60% of the directors of the Company and holders
of Class B stock the right to nominate and elect 40% of the Company's directors
(see Exhibit 1). The important questions left unanswered by the Proposal include
(but are not limited to, as the litany of ambiguities unaddressed by the
Proposal is virtually endless):
How should the Proposal be implemented? That is, how are the holders of common
stock and Class B stock to determine their respective nominees? How is the
Company to know which nominees will not be challenged by the other members of
the class of holders? Will there be separate meetings of each class of stock to
vote on nominees? If so, who will pay for these meetings and how will the
nominees be vetted? Will the nominees be determined by a plurality of votes or
must a nominee receive a majority of the votes? Will there be a general
solicitation among the holders of common stock and Class B stock prior to the
meeting to select the respective nominees?
Who will pay for the cost of the proxy materials? Since the Board of Directors
will no longer nominate any directors for election, should the Company be
required to pay for the proxy solicitation process? Will the cost be split 60/40
among the holders of common stock and Class B stock? If so, how will such
holders be billed? These ambiguities render the Proposal so confusing and uncertain that neither
shareholders nor the Company's Board of Directors could be expected to have a
common understanding of its mechanics or implications. Shareholders will not
understand what it is they are being asked to approve, and the Board would not
know how to implement the Proposal if it chose to do so. For these reasons, the
Proposal is the kind of "inherently vague and indefinite" proposal the Staff has
found properly excludable under Rule 14a-8(i)(3). In addition, the Proposal's Supporting Statement is false and misleading. The
Supporting Statement states that adoption of the Proposal "will broaden the
diversity of the Board of Directors and give Ford Common Stockholders, who own
96% of all Ford Stock, a far greater voice in the direction of their company"
(see Exhibit 1). Because of the vagueness and ambiguity of the Proposal, it
cannot be determined whether or not the Proposal would broaden the diversity of
the Board. Indeed, one cannot determine from the Proposal what is meant by
"diversity." Does this mean more ethnic, religious, racial, political or
economic diversity? Shareholders would be unable to determine what kind
"diversity" they were supporting and whether the Proposal would accomplish such
diversity goals. Furthermore, directly contrary to the Proponent's assertion, holders of common
stock would not be given a far greater voice in determining the direction of the
Company. The Company's By-Laws (see Article III, Section 1 of Exhibit 3) and
Restated Certificate of Incorporation (see Article Fourth, Sub-Section 1.6 of
Exhibit 4) require a majority of votes cast at an annual meeting in order for a
director to be elected to the Board. Moreover, holders of common stock and Class
B stock vote as a single class in respect of the election of directors.
Consequently, the holders of common stock, which the Proponent admits control
60% of the votes of the Company, can elect 100% of the directors of the Company.
By adopting the Proposal, the holders of common stock, who would no longer be
able to elect directors nominated by the holders of Class B stock, would
actually lose a substantial "voice" in the Company's direction. Accordingly, the
Supporting Statement is false and misleading and the Proposal can be omitted
under Rule 14a-8(i)(3). The Proposal Relates to an Election for Membership on the Company's Board of
Directors As stated above, the Proposal requests that the method of nominating and
electing the Company's directors be changed so that the holders of common stock
nominate and elect 60% of the directors of the Company and holders of Class B
stock nominate and elect 40% of the Company's directors. Rule 14a-8(i)(8) allows
the exclusion of a proposal if it "relates to an election for membership on the
company's board of directors ... ." The Commission has stated that the
"principal purpose of [paragraph (c)(8) (renumbered (i)(8))] is to make clear,
with respect to corporate elections, that Rule 14a-8 is not the proper means for
conducting campaigns or effecting reforms in elections of that nature, since the
proxy rules, including [then existing] Rule 14a-11, are applicable." See Release
No. 34-12598 (July 7, 1976). As noted, the Company is given no guidance as to how the holders of common or
Class B stock should nominate their respective nominees. It is probable that all
the holders of common stock and Class B stock will not agree on the specific
nominees to represent the 60% and 40% of the nominated directors, respectively.
No process is suggested to resolve such disputes. One group of holders of common
stock may want different nominees to be included in the proxy materials than
another. Will the Company be put in the position of including more nominees in
its proxy materials than seats available on the board? Will there have to be
some sort of pre-election by the holders of common stock and Class B stock? Ford
has over 1.7 billion shares of common stock outstanding and over 70 million
shares of Class B stock outstanding. Is every shareholder entitled to propose a
nominee that must be included in the Company's proxy materials or subjected to
some sort of "primary" contest? If so, the Company could receive thousands of
nominees. This proposal thus presents the likelihood for exactly the kind of
contested election proposals that Rule 14a-8(i)(8) was intended to prevent.
The Staff has consistently allowed the exclusion of proposals that have the
effect of fostering contested elections for directors or that would establish
procedures that would make election contests more likely. See Citigroup Inc.
(January 21, 2000) and Citigroup Inc. (January 31, 2003). The proposals in the
Citigroup letters required amending the By-Laws so that the company would
include in its proxy materials the name of a nominee for election to Citigroup's
Board chosen by certain stockholders. In both Citigroup letters, the Staff
stated that the proposals, rather than establishing procedures for nomination or
qualification generally, would establish a procedure that may result in
contested elections of directors. Likewise in Storage Technology Corporation
(March 22, 2002) the Staff granted a no-action letter request to exclude a
proposal that would have required the company to amend its By-Laws to require
management to include the names of each candidate nominated by a stockholder in
the company's proxy materials. See also General Motors Corporation (March 22,
2001) (proposal requiring the registrant to publish the names of all nominees
for director in its proxy statement excluded on the ground that the proposal,
rather than establishing procedures for nomination or qualification generally,
would establish a procedure that may result in contested elections for
directors). Although not dispositive, it is noteworthy that the Proposal would establish a
process for shareholder nominees to be included in the Company's Proxy Materials
substantially different than, and contrary to, a shareholder nominee process
presently under consideration by the Commission. In the Commission's Release No.
34-48626 (October 14, 2003) (the "Proposed Rule"), which addresses the issue of
security holder director nominations, the Commission states that it has proposed
an amendment to Rule 14a-5 that would require the company, where a security
holder director nominee proposal is submitted by a more than 1% security holder
who has held the securities for at least one year, to advise security holders of
this fact in the proxy statement relating to the meeting at which the security
holder proposal will be presented. The Commission recommended that "pending
final action on that proposal, companies make such an identification, both in
their interest and in the interest of their security holders."
The Proponent does not propose adoption of the shareholder access procedures
contemplated by the Commission in the Proposed Rule, nor does he address how the
Proposal and the Proposed Rule, if each were to be adopted, could co-exist. The
Proposed Rule would provide certain shareholders the right to nominate a
specified number of directors to a company's board where a triggering event has
occurred with respect to the company. The Proposed Rule allows an eligible
shareholder to propose that a company be subject to the shareholder access
procedures of the Proposed Rule. The Proponent does not propose that the Company
open its Board nomination process to shareholders in accordance with the
procedures outlined in the Proposed Rule. Indeed, the Proposal contemplates that
100% of the board of directors be nominated by the Company's shareholders. In
contrast, the Proposed Rule would allow eligible shareholders to nominate only
two nominees in the case of Ford, which has a total of 15 directors.
Furthermore, the Proponent would not meet the 1% share ownership test
contemplated by the Proposed Rule. The Proponent owns approximately 390 shares
as a participant in the Company's 401(k) plan (see Attachment II to Exhibit 1).
The Company's transfer agent stated that 1,763,151,477 shares of Ford common
stock were outstanding as of December 31, 2003 (see Exhibit 2).
The Proponent is attempting to effect a reform in Ford's procedures for electing
directors by shareholders that likely would result in contested elections (and
that could, in the near future, be contrary to a Commission proxy rule).
Accordingly, the Company believes that the Proposal may be omitted under Rule
14a-8(i)(8). Conclusion For the foregoing reasons, it is respectfully submitted that the Proposal may be
excluded from Ford's 2004 Proxy Materials on the grounds that it violates Rule
14a-8(i)(3) because it is contrary to Rule 14a-9 prohibiting false and
misleading statements in proxy soliciting materials and under Rule 14a-8(i)(8)
as a matter relating to an election for membership on the Company's Board of
Directors. Your confirmation that the Staff will not recommend enforcement
action if the Proposal is omitted from the 2004 Proxy Materials is respectfully
requested. In accordance with Rule 14a-8(j), the Proponent is being informed of the
Company's intention to omit the Proposal from its 2004 Proxy Materials by
sending him a copy of this letter and its exhibits. Seven copies of this letter
are enclosed. Please acknowledge receipt by stamping and returning one copy in
the enclosed self-addressed stamped envelop. If you have any questions, require further information, or wish to discuss this
matter, please call Jerome Zaremba (313-337-3913) of my office or me
(313-323-2130). Very truly yours, /s/
Peter J. Sherry, Jr. Enclosure
Exhibits cc: Richard A. Mills (via Federal Express) [INQUIRY LETTER]
February 3, 2004 Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Omission of Shareholder Proposal Submitted by Mr. Richard A. Mills
Ladies and Gentlemen: Reference is made to the letter dated January 29, 2004, of Mr. Richard A. Mills
(the "Proponent") in response to the No-Action Request of Ford Motor Company
("Ford" or the "Company") dated January 15, 2004, regarding the Proponent's
shareholder proposal to amend the Company's Restated Certificate of
Incorporation (the "Proposal"). The Proponent has asked the Division of
Corporation Finance (the "Staff") of the Securities and Exchange Commission
("SEC") to deny Ford's No-Action Request. The Proponent argues that because substantially similar proposals were included
in the Company's proxy materials in 2002 and 2003, the Company is somehow
precluded from excluding the Proposal from its 2004 proxy materials. Please note
that with regard to the 2002 and 2003 proposals, the Company did not request
No-Action relief from the Staff. Of course, the fact that the Company may have
voluntarily included substantially similar proposals in prior years has no
relevance in determining whether the Proposal is excludable this year. As stated
in our letter of January 15, 2004, Ford believes that proper grounds exist to
exclude the Proposal in accordance with Rule 14a-8(i)(3) and Rule 14a-8(i)(8)
and respectfully requests the Staff to concur in the exclusion of the Proposal
on those grounds. If you have any questions, require further information, or wish to discuss this
matter, please call Jerome Zaremba (313-337-3913) of my officer or me
(313-323-2130). Very truly yours, /s/
cc: Richard A. Mills (via Federal Express) [APPENDIX 1]
Attachment I Election of Directors by Common Stock and Class B Stock Shareholders
Richard A. Mills, 408 Falls of Venice Circle, Venice, Florida 34292, who states
that he is a Ford Motor Company salaried retiree and the owner of 389 shares of
common stock, has informed the Company that he plans to present the following
proposal at the meeting: WHEREAS: Holders of common stock own 96% of all shares of Ford Stock and have 60% of the
general voting power. Holders of Class B Stock own 4% of all shares of Ford Stock and have 40% of the
general voting power. LET IT BE RESOLVED:
The Ford Board of Directors consider an amendment to Ford's Restated Certificate
of Incorporation so as to: 1. Grant the holders of Common Stock the right to nominate and elect 60% of the
directors to be elected to the Board of Directors. 2. Grant to the holders of Class B Stock the right to nominate and elect 40% of
the directors to be elected to the Board of Directors. SUPPORTING STATEMENT:
Ford has reached a crossroads in its history. Unless the Company can reverse its
present course, the long term prospects for Ford's continued success are poor.
While Ford's management is finally focused on its core business and is
attempting to correct profound problems that our company has faced for many
years, a turnaround of our Company is far from assured. I believe the ultimate
success of this turnaround effort will be based on exceptionally vigorous
oversight by our Board of Directors. Ford's debt has been downgraded to slightly
above junk status and profits are meager at best. A majority of the Directors in
office during this period of precipitous decline still sit on our Board today.
Ford's woeful performance during their tenure speaks for itself. I believe it is
critical that Ford replace those directors associated with the failed polices of
the past, if the Board is to successfully take the steps necessary to ensure a
turnaround. This proposal will broaden the diversity of the Board of Directors and give Ford
Common Stockholders, who own 96% of all Ford Stock, a far greater voice in the
direction of their company. It should be noted that 100% of the current Board of
Directors owns Ford Common Stock, however, in my opinion, they are beholden to
Class B Stockholders and will do whatever they want them to do. I seriously
doubt that any of today's nominees for the Board of Directors or any nominees
from past years were put on the ballot as a result of a nomination by an
independent common stockholder. In my opinion, the Board of Directors has been
out to lunch for quite a few years, which is the major reason the Ford Motor
Company is in deep trouble today. As shareholders we need to send a powerful
mandate to the Board by insisting on greater Director accountability and
aligning Directors' interests more closely with shareholders. If you agree,
please mark your proxy FOR this proposal. [INQUIRY LETTER]
January 29, 2004 Securities and Exchange Commission
Division of Corporate Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Subject: Ford Motor Company's Omission of Shareholder Proposal Submitted by Mr.
Richard A. Mills Reference: Peter Sherry, Jr.'s letter dated January 15, 2004, same subject
To Whom It May Concern: I respectfully request that the staff of the Division of Corporate Finance of
the Securities and Exchange Commission deny Ford Motor Company's request
(Attachment IV) to allow omission of my stockholder proposal (Attachment I) from
Ford's proxy statement and form of proxy for the Company's 2004 Annual Meeting
of Stockholders to be held May 13, 2004. It should be noted that this shareholder proposal for 2004 is essentially the
same as the proposals I presented at Ford Motor Company's Annual Meetings in
2003 (Attachment II) and 2002 (Attachment III) which received favorable votes of
8.9% and 5.6% respectively. The proposal itself is identical for 2004, 2003 and
2002, only the supporting statements have been revised. The main difference
between 2004 and 2003 is the addition of the first paragraph of the supporting
statement, which reads as follows: "Ford has reached a crossroads in its history. Unless the Company can reverse
its present course, the long term prospects for Ford's continued success are
poor. While Ford's management is finally focused on its core business and is
attempting to correct profound problems that our company has faced for many
years, a turnaround of our Company is far from assured. I believe the ultimate
success of this turnaround effort will be based on exceptionally vigorous
oversight by our Board of Directors. Ford's debt has been downgraded to slightly
above junk status and profits are meager at best. A majority of the Directors in
office during this period of precipitous decline still sit on our Board today.
Ford's woeful performance during their tenure speaks for itself. I believe it is
critical that Ford replace those directors associated with the failed polices of
the past, if the Board is to successfully take the steps necessary to ensure a
turnaround." Also, the following was added near the end of the second paragraph of the
supporting statement: "As shareholders we need to send a powerful mandate to the Board by insisting on
greater Director accountability and aligning Directors' interests more closely
with shareholders." Other than these additions to the 2004 supporting statement, the proposal
remains unchanged from the proposal I presented in 2003 which was the same as
the 2002 proposal except supporting statement.. Sincerely,
/s/ Richard A. Mills
408 Falls of Venice Circle
Venice, FL 34292 Attachments
cc: Peter Sherry, Jr. [APPENDIX 2]
Attachment I Election of Directors by Common Stock and Class B Stock Shareholders
Richard A. Mills, 408 Falls of Venice Circle, Venice, Florida 34292, who states
that he is a Ford Motor Company salaried retiree and the owner of 389 shares of
common stock, has informed the Company that he plans to present the following
proposal at the meeting: WHEREAS: Holders of common stock own 96% of all shares of Ford Stock and have 60% of the
general voting power. Holders of Class B Stock own 4% of all shares of Ford Stock and have 40% of the
general voting power. LET IT BE RESOLVED:
The Ford Board of Directors consider an amendment to Ford's Restated Certificate
of Incorporation so as to: 1. Grant the holders of Common Stock the right to nominate and elect 60% of the
directors to be elected to the Board of Directors. 2. Grant to the holders of Class B Stock the right to nominate and elect 40% of
the directors to be elected to the Board of Directors. SUPPORTING STATEMENT:
Ford has reached a crossroads in its history. Unless the Company can reverse its
present course, the long term prospects for Ford's continued success are poor.
While Ford's management is finally focused on its core business and is
attempting to correct profound problems that our company has faced for many
years, a turnaround of our Company is far from assured. I believe the ultimate
success of this turnaround effort will be based on exceptionally vigorous
oversight by our Board of Directors. Ford's debt has been downgraded to slightly
above junk status and profits are meager at best. A majority of the Directors in
office during this period of precipitous decline still sit on our Board today.
Ford's woeful performance during their tenure speaks for itself. I believe it is
critical that Ford replace those directors associated with the failed polices of
the past, if the Board is to successfully take the steps necessary to ensure a
turnaround. This proposal will broaden the diversity of the Board of Directors and give Ford
Common Stockholders, who own 96% of all Ford Stock, a far greater voice in the
direction of their company. It should be noted that 100% of the current Board of
Directors owns Ford Common Stock, however, in my opinion, they are beholden to
Class B Stockholders and will do whatever they want them to do. I seriously
doubt that any of today's nominees for the Board of Directors or any nominees
from past years were put on the ballot as a result of a nomination by an
independent common stockholder. In my opinion, the Board of Directors has been
out to lunch for quite a few years, which is the major reason the Ford Motor
Company is in deep trouble today. As shareholders we need to send a powerful
mandate to the Board by insisting on greater Director accountability and
aligning Directors' interests more closely with shareholders. If you agree,
please mark your proxy FOR this proposal. [APPENDIX 3]
PROPOSAL 6 Election of Directors by Common and Class B Shareholders
Richard A. Mills, 204 Falls of Venice Circle, Venice, Florida, who is the owner
of 1,822 shares of common stock, has informed the Company that he plans to
present the following proposal at the meeting: WHEREAS:
Holders of common stock own 96% of all shares of Ford Stock and have 60% of the
general voting power. Holders of Class B Stock own 4% of all shares of Ford Stock and have 40% of the
general voting power. LET IT BE RESOLVED:
The Ford Board of Directors consider an amendment to Ford's Restated Certificate
of Incorporation so as to: 1. Grant the holders of Common Stock the right to nominate and elect 60% of the
directors to be elected to the Board of Directors. 2. Grant to the holders of Class B Stock the right to nominate and elect 40% of
the directors to be elected to the Board of Directors. Supporting Statement:
This proposal will broaden the diversity of the Board of Directors and give Ford
Common Stockholders, who own 96% of all Ford Stock, a far greater voice in the
direction of their company. It should be noted that 100% of the current Board of
Directors owns Ford Common Stock, however, in my opinion, they are beholden to
Class B Stockholders and will do whatever they want them to do. I seriously
doubt that any of today's nominees for the Board of Directors or any nominees
from past years were put on the ballot as a result of a nomination by an
independent stockholder. In my opinion, the Board of Directors has been out to
lunch for quite a few years, which is the major reason the Ford Motor Company is
in deep trouble today. If you agree, please mark your proxy FOR this proposal.
The Board of Directors recommends a Vote "against" Proposal 6.
We believe that this proposal would not result in any appreciable benefit to you
or the Company and is, therefore, not in the best interests of you or Ford.
The Company's current practice of nominating and electing directors has proven
successful for many years. Further, as described in the proxy statement on page
15, the Nominating and Governance Committee, which is responsible for making
recommendations to the Board of Directors on the nominees for director,
considers thoroughly all shareholder suggestions for nominees for director,
other than self-nominations. Thus, shareholders have available to them a process
for presenting proposed nominees to the Nominating and Governance Committee.
Furthermore, if adopted, the proposal would take away power from common stock
shareholders, rather than give them more power. As described on page 3 of this
proxy statement, each director must receive a majority of the votes cast in
order to be elected to the Board. As such, the common stock shareholders could
elect the entire Board since they have 60% of the overall vote. The proposal
would not confer any benefit on the Company or you. The Board of Directors recommends a Vote "against" Proposal 6. [APPENDIX 4]
PROPOSAL 6 Election of Directors by Common Stock and Class B Stock Shareholders
Richard A. Mills, 740 Tobin Drive, Apt. 205, Inkster, Michigan, who is the owner
of 534 shares of common stock, has informed the Company that he plans to present
the following proposal at the meeting: WHEREAS:
Holders of common stock own 96% of all shares of Ford Stock and have 60% of the
general voting power. Holders of Class B Stock own 4% of all shares of Ford Stock and have 40% of the
general voting power. LET IT BE RESOLVED:
The Ford Board of Directors consider an amendment to Ford's Restated Certificate
of Incorporation so as to: 1. Grant the holders of Common Stock the right to nominate and elect 60% of the
directors to be elected to the Board of Directors. 2. Grant to the holders of Class B Stock the right to nominate and elect 40% of
the directors to be elected to the Board of Directors. Supporting Statement:
It should be noted that 100% of the current Board of Directors owns Ford Common
Stock, however, in my opinion, they are beholden to Class B Stockholders and
will do whatever they want them to do. Per the March 28, 2000 issue of "Fortune"
magazine: "And they (Ford Board of Directors) made sure Nasser understood that
in the event of a shootout, the Fords had all the guns." This proposal will
broaden the diversity of the Board of Directors and give Ford Common
Stockholders, who own 96% of all Ford Stock, a far greater voice in the
direction of their company. The Board of Directors recommends a Vote "against" Proposal 6.
We believe that this proposal would not result in any appreciable benefit to you
or the Company and is, therefore, not in the best interests of you or Ford.
The Company's current practice of nominating and electing directors has proven
successful for many years. Further, as described in the proxy statement on page
14, the Nominating and Governance Committee, which is responsible for making
recommendations to the Board of Directors on the nominees for director,
considers thoroughly all shareholder suggestions for nominees for director,
other than self-nominations. Thus, shareholders have available to them a process
for presenting proposed nominees to the Nominating and Governance Committee.
Furthermore, if adopted the proposal would take away power from common stock
shareholders, rather than give them more power. As described on page 3 of this
proxy statement, each director must receive a majority of the votes cast in
order to be elected to the Board. As such, the common stock shareholders could
elect the entire Board since they have 60% of the overall vote. The proposal
would not confer any benefit on the Company or its shareholders.
The Board of Directors recommends a Vote "against" Proposal 6. [APPENDIX 5]
January 15, 2004 Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Omission of Shareholder Proposal Submitted by Mr. Richard A. Mills
Ladies and Gentlemen: Pursuant to Rule 14a-8(j) promulgated under the Securities Exchange Act of 1934,
as amended (the "Act"), Ford Motor Company ("Ford" or the "Company")
respectfully requests the concurrence of the staff of the Division of
Corporation Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") that it will not recommend any enforcement action to the
Commission if the shareholder proposal described below is omitted form Ford's
proxy statement and form of proxy for the Company's 2004 Annual Meeting of
Shareholders (the "Proxy Materials"). The Company's 2004 Annual Meeting of
Shareholders is scheduled for May 13, 2004. Mr. Richard A. Mills, a shareholder of Ford (the "Proponent"), has submitted for
inclusion in the 2004 Proxy Materials a proposal requesting the Company's Board
of Directors to consider amending the Company's Restated Certificate of
Incorporation in order to change the method of electing directors of the Company
(the "Proposal"). The Company proposes to omit the Proposal from its 2004 Proxy
Materials for the following reasons:
The Proposal is excludable under Rule 14a-8(i)(3) because it is contrary to
Rule 14a-9, which prohibits materially false or misleading statements in proxy
soliciting materials.
The Proposal is excludable under Rule 14a-8(i)(8) because it relates to an
election for membership on the Company's board of directors.
The Proposal Violates the Proxy Rules (Rule 14a-8(i)(3) and Rule 14a-9)
Rule 14a-8(i)(3) permits an issuer to omit a shareholder proposal from its proxy
materials if the proposal is contrary to the Commission's proxy rules, including
Rule 14a-9, which prohibits false or misleading statements in proxy soliciting
materials. The Proposal is susceptible to differing interpretations and likely
to confuse the Company's shareholders. The Staff has regularly permitted
companies to omit proposals from their proxy materials on the grounds that any
action ultimately taken upon implementation of the proposal could be different
from the actions envisioned by the shareholders voting on the proposal at the
time their votes were cast. See, e.g., Organogenesis, Inc. (April 2, 1999)
(concurring in exclusion of a proposal that recommended procedures for the
nomination and election of directors because the proposal was vague and
ambiguous) and AnnTaylor Stores Corporation (January 12, 2001) (concurring in
exclusion of proposal that would have committed the company to full
implementation of human rights standards and a program to monitor compliance).
The Proposal is vague, ambiguous and susceptible of various interpretations. The
Proposal requests the Board of Directors to consider an amendment to Ford's
Restated Certificate of Incorporation in order to grant holders of common stock
the right to nominate and elect 60% of the directors of the Company and holders
of Class B stock the right to nominate and elect 40% of the Company's directors
(see Exhibit 1). The important questions left unanswered by the Proposal include
(but are not limited to, as the litany of ambiguities unaddressed by the
Proposal is virtually endless):
How should the Proposal be implemented? That is, how are the holders of common
stock and Class B stock to determine their respective nominees? How is the
Company to know which nominees will not be challenged by the other members of
the class of holders? Will there be separate meetings of each class of stock to
vote on nominees? If so, who will pay for these meetings and how will the
nominees be vetted? Will the nominees be determined by a plurality of votes or
must a nominee receive a majority of the votes? Will there be a general
solicitation among the holders of common stock and Class B stock prior to the
meeting to select the respective nominees?
Who will pay for the cost of the proxy materials? Since the Board of Directors
will no longer nominate any directors for election, should the Company be
required to pay for the proxy solicitation process? Will the cost be split 60/40
among the holders of common stock and Class B stock? If so, how will such
holders be billed? These ambiguities render the Proposal so confusing and uncertain that neither
shareholders nor the Company's Board of Directors could be expected to have a
common understanding of its mechanics or implications. Shareholders will not
understand what it is they are being asked to approve, and the Board would not
know how to implement the Proposal if it chose to do so. For these reasons, the
Proposal is the kind of "inherently vague and indefinite" proposal the Staff has
found properly excludable under Rule 14a-8(i)(3). In addition, the Proposal's Supporting Statement is false and misleading. The
Supporting Statement states that adoption of the Proposal "will broaden the
diversity of the Board of Directors and give Ford Common Stockholders, who own
96% of all Ford Stock, a far greater voice in the direction of their company"
(see Exhibit 1). Because of the vagueness and ambiguity of the Proposal, it
cannot be determined whether or not the Proposal would broaden the diversity of
the Board. Indeed, one cannot determine from the Proposal what is meant by
"diversity." Does this mean more ethnic, religious, racial, political or
economic diversity? Shareholders would be unable to determine what kind
"diversity" they were supporting and whether the Proposal would accomplish such
diversity goals. Furthermore, directly contrary to the Proponent's assertion, holders of common
stock would not be given a far greater voice in determining the direction of the
Company. The Company's By-Laws (see Article III, Section 1 of Exhibit 3) and
Restated Certificate of Incorporation (see Article Fourth, Sub-Section 1.6 of
Exhibit 4) require a majority of votes cast at an annual meeting in order for a
director to be elected to the Board. Moreover, holders of common stock and Class
B stock vote as a single class in respect of the election of directors.
Consequently, the holders of common stock, which the Proponent admits control
60% of the votes of the Company, can elect 100% of the directors of the Company.
By adopting the Proposal, the holders of common stock, who would no longer be
able to elect directors nominated by the holders of Class B stock, would
actually lose a substantial "voice" in the Company's direction. Accordingly, the
Supporting Statement is false and misleading and the Proposal can be omitted
under Rule 14a-8(i)(3). The Proposal Relates to an Election for Membership on the Company's Board of
Directors As stated above, the Proposal requests that the method of nominating and
electing the Company's directors be changed so that the holders of common stock
nominate and elect 60% of the directors of the Company and holders of Class B
stock nominate and elect 40% of the Company's directors. Rule 14a-8(i)(8) allows
the exclusion of a proposal if it "relates to an election for membership on the
company's board of directors ...." The Commission has stated that the "principal
purpose of [paragraph (c)(8) (renumbered (i)(8))] is to make clear, with respect
to corporate elections, that Rule 14a-8 is not the proper means for conducting
campaigns or effecting reforms in elections of that nature, since the proxy
rules, including [then existing] Rule 14a-11, are applicable." See Release No.
34-12598 (July 7, 1976). As noted, the Company is given no guidance as to how the holders of common or
Class B stock should nominate their respective nominees. It is probable that all
the holders of common stock and Class B stock will not agree on the specific
nominees to represent the 60% and 40% of the nominated directors, respectively.
No process is suggested to resolve such disputes. One group of holders of common
stock may want different nominees to be included in the proxy materials than
another. Will the Company be put in the position of including more nominees in
its proxy materials than seats available on the board? Will there have to be
some sort of pre-election by the holders of common stock and Class B stock? Ford
has over 1.7 billion shares of common stock outstanding and over 70 million
shares of Class B stock outstanding. Is every shareholder entitled to propose a
nominee that must be included in the Company's proxy materials or subjected to
some sort of "primary" contest? If so, the Company could receive thousands of
nominees. This proposal thus presents the likelihood for exactly the kind of
contested election proposals that Rule 14a-8(i)(8) was intended to prevent.
The Staff has consistently allowed the exclusion of proposals that have the
effect of fostering contested elections for directors or that would establish
procedures that would make election contests more likely. See Citigroup Inc.
(January 21, 2000) and Citigroup Inc. (January 31, 2003). The proposals in the
Citigroup letters required amending the By-Laws so that the company would
include in its proxy materials the name of a nominee for election to Citigroup's
Board chosen by certain stockholders. In both Citigroup letters, the Staff
stated that the proposals, rather than establishing procedures for nomination or
qualification generally, would establish a procedure that may result in
contested elections of directors. Likewise in Storage Technology Corporation
(March 22, 2002) the Staff granted a no-action letter request to exclude a
proposal that would have required the company to amend its By-Laws to require
management to include the names of each candidate nominated by a stockholder in
the company's proxy materials. See also General Motors Corporation (March 22,
2001) (proposal requiring the registrant to publish the names of all nominees
for director in its proxy statement excluded on the ground that the proposal,
rather than establishing procedures for nomination or qualification generally,
would establish a procedure that may result in contested elections for
directors). Although not dispositive, it is noteworthy that the Proposal would establish a
process for shareholder nominees to be included in the Company's Proxy Materials
substantially different than, and contrary to, a shareholder nominee process
presently under consideration by the Commission. In the Commission's Release No.
34-48626 (October 14, 2003) (the "Proposed Rule"), which addresses the issue of
security holder director nominations, the Commission states that it has proposed
an amendment to Rule 14a-5 that would require the company, where a security
holder director nominee proposal is submitted by a more than 1% security holder
who has held the securities for at least one year, to advise security holders of
this fact in the proxy statement relating to the meeting at which the security
holder proposal will be presented. The Commission recommended that "pending
final action on that proposal, companies make such an identification, both in
their interest and in the interest of their security holders."
The Proponent does not propose adoption of the shareholder access procedures
contemplated by the Commission in the Proposed Rule, nor does he address how the
Proposal and the Proposed Rule, if each were to be adopted, could co-exist. The
Proposed Rule would provide certain shareholders the right to nominate a
specified number of directors to a company's board where a triggering event has
occurred with respect to the company. The Proposed Rule allows an eligible
shareholder to propose that a company be subject to the shareholder access
procedures of the Proposed Rule. The Proponent does not propose that the Company
open its Board nomination process to shareholders in accordance with the
procedures outlined in the Proposed Rule. Indeed, the Proposal contemplates that
100% of the board of directors be nominated by the Company's shareholders. In
contrast, the Proposed Rule would allow eligible shareholders to nominate only
two nominees in the case of Ford, which has a total of 15 directors.
Furthermore, the Proponent would not meet the 1% share ownership test
contemplated by the Proposed Rule. The Proponent owns approximately 390 shares
as a participant in the Company's 401(k) plan (see Attachment II to Exhibit 1).
The Company's transfer agent stated that 1,763,151,477 shares of Ford common
stock were outstanding as of December 31, 2003 (see Exhibit 2).
The Proponent is attempting to effect a reform in Ford's procedures for electing
directors by shareholders that likely would result in contested elections (and
that could, in the near future, be contrary to a Commission proxy rule).
Accordingly, the Company believes that the Proposal may be omitted under Rule
14a-8(i)(8). Conclusion For the foregoing reasons, it is respectfully submitted that the Proposal may be
excluded from Ford's 2004 Proxy Materials on the grounds that it violates Rule
14a-8(i)(3) because it is contrary to Rule 14a-9 prohibiting false and
misleading statements in proxy soliciting materials and under Rule 14a-8(i)(8)
as a matter relating to an election for membership on the Company's Board of
Directors. Your confirmation that the Staff will not recommend enforcement
action if the Proposal is omitted from the 2004 Proxy Materials is respectfully
requested. In accordance with Rule 14a-8(j), the Proponent is being informed of the
Company's intention to omit the Proposal from its 2004 Proxy Materials by
sending him a copy of this letter and its exhibits. Seven copies of this letter
are enclosed. Please acknowledge receipt by stamping and returning one copy in
the enclosed self-addressed stamped envelop. If you have any questions, require further information, or wish to discuss this
matter, please call Jerome Zaremba (313-337-3913) of my office or me
(313-323-2130). Very truly yours, /s/
Peter J. Sherry, Jr. Enclosure
Exhibits cc: Richard A. Mills (via Federal Express)
[STAFF REPLY LETTER]
February 6, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: Ford Motor Company Incoming letter dated January 15, 2004
The proposal requests that the board amend the company's Certificate of
Incorporation to grant holders of Common Stock "the right to nominate and elect
60% of the directors to be elected" to the board and grant holders of Class B
stock "the right to nominate and elect 40% of the directors to be elected" to
the board. There appears to be some basis for your view that Ford may exclude the proposal
under rule 14a-8(i)(8), as relating to an election for membership on its board
of directors. Accordingly, we will not recommend enforcement action to the
Commission if Ford omits the proposal from its proxy materials in reliance on
rule 14a-8(i)(8). In reaching this position, we have not found it necessary to
address the alternative basis for omission upon which Ford relies.
Sincerely /s/
Grace K. Lee
Special Counsel
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