Company Name: General Motors Corp.
Public Availability Date: March 8, 2004Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
January 30, 2004 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Ladies and Gentlemen:
This is a filing, pursuant to Rule 14a-8(j), to omit the proposal received on
December 19, 2003 from Robert W. Hartnagel (as subsequently revised, Exhibit A)
from the General Motors Corporation proxy materials for the 2004 Annual Meeting
of Stockholders. The proposal would request modification of the retirement plan
for GM salaried employees to change the basis on which pension payments are
determined. General Motors intends to omit the proposal under Rule 14a-8(f)(1) on the
grounds that the proponent has not complied with the ownership requirements of
paragraph (b). In addition, the proposal may be omitted under paragraph (i)(7)
as relating to the company's ordinary business operations.
1. The proponent has not adequately evidenced qualifying stock ownership.
The proponent sent along with his proposal what appears to be a receipt for an
order to purchase of 20 shares of General Motors stock, to be settled on
December 23 (Exhibit B). Since this stock was acquired after the date of
submission for less than $2,000 and the receipt was not appropriate evidence of
stock ownership under Rule 14a-8(b)(2)(i), General Motors wrote to Mr. Hartnagel
on December 22 to request proper evidence that he had owned the necessary amount
of stock for at least a year, enclosing a copy of Rule 14a-8 for his information
(Exhibit C). GM's letter also requested a revision of the proposal to shorten it
to 500 words or less. On January 3, 2004 the proponent sent a revised proposal
in response to GM's notice, which he received on December 28, and stated that he
would contact us regarding the other questions raised in the notice. On January
12, Mr. Hartnagel sent GM a fax (Exhibit D) stating: "The shareholder proposal I
forwarded to you on January 3, 2004 was submitted on the basis of my 40 years as
a GM shareholder and holdings of approximately $200,000 in GM common stock
during the period the practices identified in the proposal were being adopted."
The fax also stated, "Since the proposal has been rejected, further
communications with shareholders on this subject will take place in other ways."
Believing that Mr. Hartnagel was acknowledging his proposal had been rejected
because he did not own the necessary stock to be eligible to submit a proposal,
I wrote on January 13 to confirm that he was withdrawing his proposal (Exhibit
E). On January 20, Mr. Hartnagel faxed a letter denying that he was withdrawing
his proposal and clarifying that he had assumed that GM would refuse to include
his proposal on the basis of Rule 14a-8 (Exhibit F). On January 21, I telephoned
Mr. Hartnagel to confirm that he did not intend to withdraw his proposal and to
inform him that if GM intended to exclude his proposal, he would receive a copy
of GM's noaction letter request and would have an opportunity to respond to the
SEC. Later that same day Mr. Hartnagel faxed a letter setting forth several
items that he believed General Motors had determined (Exhibit G), and on the
same date I left him a telephone message and sent a letter stating that GM did
not confirm his understanding (Exhibit H). On January 22, Mr. Hartnagel faxed a copy of a GM stock certificate dated 1969
evidencing that he owned one share of stock, along with a letter setting forth
two potential bases for eligibility (Exhibit I). First, he stated that he has
been a GM stockholder for more than one year, continues to be, and intends to
remain one until the annual meeting. This assertion, however, does not deal with
the amount of GM stock owned for requisite one-year period, which based on the
documents provided appears to be less than $2,000. Second, he stated that he has
owned GM stock continuously for 40 years and owned approximately $200,000 worth
of GM stock "during the same period the practices identified in the proposal
were being adopted". (The original proposal referred to "restructuring
initiatives" begun in the mid-1980s, which may refer to a change in the formula
for calculating executive annual incentives approved by GM's stockholders in
1987.) This stock ownership appears to be the basis for eligibility, not under
Rule 14a-8, but as a matter of contract in Mr. Hartnagel's view:
I believe the ownership position described above is founded on a contractual
relationship which gives any shareholder an unrestricted right to participate in
any shareholder activity that is open any other [sic] shareholder, irrespective
of the aggregate number of shares which may be held at any one time, and
further, that the right to receive the full benefit of that contract is
protected by the United States Constitution. [emphasis in original]
This proposal therefore may be excluded under Rule 14a-8(f). The proponent does
not claim to satisfy the stock ownership requirements set forth in paragraph (b)
and has not proved his eligibility pursuant to that paragraph, despite receiving
notice of the deficiency and a copy of Rule 14a-8. 2. The proposal deals with employee benefits, which relate to ordinary business
operations. Paragraph (i)(7) provides that a company may exclude a proposal if it deals with
a matter relating to the company's ordinary business operations. Based on this
provision, the Staff has taken a no-action position with regard to proposals
that deal with executive retirement benefits. See, e.g., Hilton Hotels
Corporation (March 14, 2003); NiSource Inc. (March 3, 2003). This is consistent
with no-action letters that permit the exclusion of proposals dealing with
pensions, like Tyco International Ltd (January 2, 2004); ALLETE Inc. (March 5,
2003), as well as other employee benefits, such as SBC Communications Inc.
(January 9, 2004); Lucent Technologies (December 5, 2003); General Electric
Company (January 10, 2003). The current proposal deals with the formula for determining compensation under
the salaried pension plan, which is not limited to senior executives but which
could affect any executive eligible to receive a bonus. Such executive
retirement benefits are a routine matter of ordinary business, and involve the
type of management function properly left to the attention of management rather
than the board of directors or the stockholders. Accordingly, the proposal can
be omitted under Rule 14a-8(i)(7). Please inform us whether the Staff will recommend any enforcement action if this
proposal is omitted from the proxy materials for General Motors' 2004 Annual
Meeting of Stockholders. If you wish to provide a copy of your response to the
proponent at the same time, we are sending a prepaid Federal Express label
addressed to Mr. Hartnagel, since we do not have a fax number to contact him. GM
currently plans to print its proxy materials at the end of March.
GM plans to begin printing its proxy material at the end of March. We would
appreciate any assistance you can give us in meeting our schedule.
Sincerely yours, /s/
Anne T. Larin
Attorney and Assistant Secretary Enclosures
c: Robert W. Hartnagel [INQUIRY LETTER]
January 3, 2004 Anne T. Larin, Attorney and Assistant Secretary
General Motors Corporation
300 Renaissance Center
Mail Code MC 482-C23-D24
P.O. Box 300
Detroit, MI 48265-5000 Dear Ms. Larin:
In response to the notification I received from you on December 28, 2003, my
previous shareholder proposal has been revised to conform to the 500-word SEC
maximum length requirement. The proposal is as follows: "RESOLVED: That GM shareholders request our company's Board of Directors to halt
the executive compensation windfall that is being created by directing the
entire financial saving resulting from the elimination of incentive award
payments to half of GM's top management group into the annual incentive
compensation and lifetime pension entitlements of surviving executives.
SUPPORTING STATEMENT: When highly paid executives, who are performing duties
associated with their regular management responsibilities, use company-supplied
technology, company facilities, and the efforts of other company personnel
working on company time to achieve a substantial financial saving, that saving
properly belongs to the company and its shareholders. It should not be treated
simply as a compensation windfall for the executives who produced it.
In accordance with early GM "restructuring" objectives, the total number
executives eligible to receive annual incentive compensation awards was reduced
by more than fifty percent. At the same time, the formula which routinely
determines the total amount of revenue which can be made available for the
payment of executive incentive awards in any given year (irrespective of the
number of executives who may be eligible to receive such awards) has remained
unchanged. As a result, each year since this massive executive headcount
reduction was accomplished, the formula has continued to generate the same
aggregate level of funding that previously would have been paid to twice the
current number of GM executives. Instead of directing this potential saving toward the attainment of overall GM
financial operating objectives, the entire amount is being distributed each year
to surviving GM executives in the form of greatly expanded incentive
compensation payments. While this practice has been justified to shareholders on
the basis of surveys of industry-wide compensation practices, these surveys
primarily reflect a "racing-your-own-shadow" comparison with companies whose top
executives are also benefiting from precisely the same kind of
restructuring-generated incentive award windfall. Of even greater significance to GM shareholders, however, are the longer term
consequences of this practice. Due to a series of modifications to the GM
Salaried Employee Retirement Benefit Plan which occurred during the same general
time period, these inflated annual incentive awards now are becoming translated
into greatly expanded pension entitlements for a steadily increasing number of
executive retirees. As a result, this employee benefit plan has been in effect
transformed into a highly lucrative, lifetime, deferred compensation arrangement
for upper level management, as well as a huge potential long term liability for
GM. GM shareholders urge Board members to immediately begin the process of
eliminating this windfall by adopting a "leveling formula" which would reduce
the amount of incentive payments which may be used to calculate both current and
future executive pension entitlements. The proposed formula would act to
routinely adjust executive pension benefit accruals by the same percentage that
the total executive population has changed in any given year compared to an
average baseline executive employment level during the six year period
immediately preceding commencement of GM's restructuring initiatives.
* * * I will contact you prior to the expiration of the deadline you identified (i.e.,
on or before January 12, 2004) regarding the other questions you raised. In
connection with additional shareholder communications regarding this proposal, I
would like to request the Secretary of General Motors Corporation to provide me
with a listing of the current business mailing addresses for all "outside" Board
members. Thank you. Very truly yours,
/s/ Robert W. Hartnagel
7605 Carta Valley Drive
Dallas, TX 75248 [APPENDIX]
EXHIBIT February 8, 2004 Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Ladies and Gentlemen:
This is a response to a January 30, 2004, filing under Rule 14a-8(j) by Anne T.
Larin, Attorney and Assistant Secretary, General Motors Corporation. For reasons
which are explained below, GM's request for a no-action determination under
Rules 14a-8(f)(1) and (i)(7) in conjunction with the planned omission of the
proponent's shareholder proposal from proxy materials for the 2004 Annual
Meeting of GM Stockholders should be denied: Because the proposal identified in this filing incorporates a recommendation
which conceivably could lead to a significant reduction in GM executive
retirement benefit entitlements, and because inclusion of the proposal is being
opposed by the management of General Motors Corporation, an extensive effort has
been made to thoroughly explain both the rationale supporting the recommendation
and the basis upon which the Commission is being asked to reject the Rule 14a-8
objections GM has identified in its filing. The following documents are included among those which have been incorporated as
exhibits to this presentation: Attachment A: Fax communication to Harvey J. Goldsmid, dated January 26, 2004,
with attachments Attachment B: Fax communication to Harvey J. Goldsmid, dated January 27, 2004,
with attachments Attachment C: Letter to Nancy E. Polis, GM Secretary, dated December 19, 2003,
with attachment Attachment D: Fax communication to Anne T. Larin, Assistant GM Secretary, dated
January 14, 2004, without attachment Attachment E: Description of contract considerations applicable to stock
ownership Attachment F: Summary of undisputed and/or indisputable facts
In support of this request to deny GM's no-action filing, the proponent
respectfully states the following: 1. GM's Rule 14a-8(i)(7) objection is founded on a false characterization of the
shareholder proposal and an incorrect interpretation of the SEC's "management
function" exclusion. a. Materially false statement: Paragraph one of Ms. Larin's January 30th letter
presents a false characterization of the central element of the shareholder
proposal by asserting (in pertinent part): "The proposal would request modification of the retirement plan (emphasis added)
for GM salaried employees to change the basis on which pension payments are
determined." This statement is untrue. The fact is, the final paragraph of the proposal urges
the GM Board of Directors to adopt an administrative course of action which
would not require any modification whatsoever to the existing Salaried
Retirement Plan. Moreover, the recommended course of action would fall entirely
within the scope of authority already granted to the Board under the Plan
provision dealing with an "alternative formula" which may be used in calculating
the amount of incentive compensation which is credited toward determining
executive pension benefit entitlements. This authority is specifically set forth
in the 1990 GM proxy statement (Attachment G) as follows: "Consistent with current supplemental retirement plan benefits, the benefits
determined by application of the alternative formula will not be guaranteed.
This ensures that Management has the right to reduce the benefit level as
appropriate for retirees who may be receiving benefits based upon the
alternative formula, as well as for active employees who would be eligible for
benefits based upon the alternate formula upon retirement. The plan language
will explicitly state that the supplemental retirement benefit based upon the
alternative formula can be reduced with the approval of the Incentive and
Compensation Committee and the Board." Any suggestion that this proposal requests the Board to arbitrarily alter any
benefit plan provision which had been authorized by a vote of GM shareholders is
simply untrue. The actual recommendation which is presented in the final
paragraph of the shareholder proposal (Attachment A, page 4) states the
following: "The shareholders of our company urge the GM Board of Directors to immediately
begin the process of eliminating this windfall by adopting a "leveling formula"
which would reduce the amount of incentive payments which may be used to
calculate both current and future executive pension entitlements. The proposed
formula would act to routinely adjust executive pension benefit accruals by the
same percentage that the total executive population has changed in any given
year compared to an average baseline executive employment level during the six
year period immediately preceding commencement of GM's restructuring
initiatives." On the remote chance that the GM representatives who prepared this SEC filing
were somehow unaware of the Salaried Retirement Plan language quoted above, it
should be noted that it would be a relatively simple matter to eliminate any
possibility for shareholder misunderstanding regarding the "leveling" approach
being proposed simply by inserting the words "an administrative" before the term
"leveling formula" in the second line of the above paragraph, and the word
"administrative" before the word "leveling" in the fourth line of the same
paragraph. b. Incorrect interpretation of the "management function" exclusion: The
proponent believes the planned omission of this proposal under Rule 14a-8(i)(7)
is inappropriate based on the guidelines expressed in CF Legal Staff Bulletin
No. 14A; dated July 12, 2002, which state in pertinent part,
"The fact that a proposal relates to ordinary business matters does not
conclusively establish that a company may exclude the proposal from its proxy
materials. As the Commission has stated in Exchange Act Release No. 40018,
proposals that relate to ordinary business matters but that focus on
"sufficiently significant social policy issues ... would not be considered to be
excludable because the proposals would transcend the day-to-day business
matters." As will be discussed in Section 2 below, the particular proposal being
considered in this filing addresses precisely this kind of highly important and
increasingly visible public policy issue. The same kind of exception that this
Commission Bulletin identifies is also entirely appropriate for application in
the present context as a means of properly facilitating, rather than preventing,
the response of shareholderseven small shareholdersto the ongoing escalation
of executive compensation and benefit entitlements. c. Inapplicability of the recommended action to the general workforce: Staff
Bulletin No. 14A also rejects the use of a Rule 14a-8(i)(7) exclusion in the
context of an equity compensation plan which is not applicable to the general
workforce. Because GM's annual incentive awards have at times been payable in
either cash or stock, and because the same incentive awards are solely
applicable to top level executives as opposed to the general workforce, it is
conceivable that such an exclusion might also be considered inappropriate on
this basis as well. 2. GM's request for a no-action determination under Rule 14-8 14a-8(f)(1) should
be denied on the basis of broadly significant and directly relevant public
policy implications applicable to the matters addressed in this shareholder
proposal. The proponent has never claimed, and does not now assert, that the total current
market value of his GM common stock holdings is sufficient to meet the financial
limitation identified in Rule 14a-8(f)(1). Rather, the contention being offered
for purposes of responding to the specific matters identified in GM's filing is
that an EXCEPTION to the SEC's customary practice of specifying a particular
minimum dollar amount of stock ownership as a requirement for being able to have
a shareholder proposal included in a company proxy statement is FULLY AND
URGENTLY JUSTIFIED in this instance. Specifically, the requested exception is
appropriate based on, among other things, the following compelling public policy
considerations: (1) the deeply serious and broadly significant nature of the
action being proposed; (2) the sheer magnitude of the aggregate financial impact
of the particular practices the proposal addresses; and (3) the need to avoid
any unnecessary delay in resolving the identified problems. Clear precedent
supporting the use of the requested exception is provided in CF Legal Staff
Bulletin No. 14A. The primary objective of this proposal is to encourage GM shareholder awareness
of, and prompt attention to, what might arguably be called the most challenging
and important corporate governance issue facing this company and this country
today: controlling skyrocketing executive compensation and pension benefit
entitlements. The proposal is moreover an attempt to frame the discussion within
the context of a possible solution, as opposed to a simple restatement of the
problem, and more importantly, to do so while the problem is still potentially
correctable. Delaying this discussion for an additional sixteen months (or until
another proposal addressing the same problem can be incorporated into future GM
proxy materials) would not only postpone a badly needed shareholder response to
this pressing concern, but possibly permit additional impediments to be placed
in the path of ever finding a workable solution. (An example of such an
impediment might include the possible amendment of State Constitutions to
prevent any future modification of existing pension benefits).
A complete understanding of the public policy significance of this particular
governance issue requires careful consideration of the cumulative effect of the
massive transfer of wealth that would occur, for example, over the next 25 years
if, for the first time in this nation's history, American businesses (often
called the "engines of our democracy") become "harnessed" to an obligation for
providing enormously inflated lifetime so-called "pension" benefits to a
steadily increasing number of former executives. The beneficiaries of these huge
retirement benefit payments would no longer perform any services whatsoever to
the corporations whose (future) employees will be responsible for supplying the
productivity gains needed to meet the largely unfunded financial obligations
that these expanded future "pension" entitlements have created.
Evaluating the full implications of the issues addressed in this shareholder
proposal also requires consideration of the particular manner in which this
enormous expansion of executive compensation has been accomplished. By way of
illustration, it is significant to note that it required just twelve words,
inserted in the middle of a single paragraph in a 38-page 1985 GM proxy
statement to remove a "cap" which historically had limited the maximum amount of
any salaried employee pension to $110,000 annually. (Attachment H) This
seemingly "minor" change, along with several equally subtle revisions to the
compensation "recovery formula" which determines the total amount of employee
retirement benefits (and the subsequent addition of an "alternate formula" which
added incentive awards to the same calculation), has permitted the pension
entitlements of top GM executives to literally explode in a single decade into
multi-million-dollar lifetime annual entitlements, compared to the $110,000
maximum limit which existed prior to the start of "restructuring" initiatives.
The point is, few individual shareholders, then or now, would have been in a
position to recognize the full significance of this seemingly "minor" change.
Another public policy consideration involves not just the actual, but perhaps
more significantly, the symbolic position small individual investors have come
to occupy in the overall governance scheme of things. The fact that "the big
guys control everything" may be a truism, but it is a truism that has produced
an appalling state of affairs in many respects. When small investors are brushed
aside or are otherwise disparaged by either companies or the SEC, it is both
counterproductive to the ownership process and personally demeaning as well. It
is difficult to imagine that eligibility for a drivers license would ever be
made dependent on the value of somebody's car; or participation in a PTA meeting
would be based on the current balance in a parent's checking account; or the
right to sing in a church choir would depend on the size of the donation
deposited in the collection plate ... etc., etc. It is difficult to think of a
single precedent or parallel for the application of this sort of economic-based
restraint on the exercise of any rights or privileges of citizenship.
Individual shareholders, even very small individual investors, need to become
more involved in the process, not less, and this needs to happen whether or not
it is an inconvenience to company management, if for no reason other than this
participation imposes an entirely different kind of restraint, and yes, even
humility, on company executives. Small investors need to be better informed by,
and not essentially victimized by, the sometimes questionable communication
practices and proxy statement "slight-of-hand" that has in certain respects
helped to create the unprecedented surge in executive compensation. And this
heightened level of awareness should begin now, not sixteen months from now when
another shareholder proposal can be included in GM's proxy materials.
Shareholders need factual information about the long term consequences of the
compensation and benefit plan changes they are repeatedly asked to approve, and
this information needs to be presented in an understandable manner. That never
will happen if they are chronically deterred from participating in the
governance process. Unsophisticated investors should not be subjected to a
constant barrage of self-serving management propaganda about how "competitive
factors" are forcing up compensation levels. Proxy statements are not simply
management "house organs." They are, or at least should be, vital channels of
communication between, and not simply to, people who own corporations and the
people who run them. These goals can only be diminished by restrictions like the
those that would be created by an inflexible application of Rule 14a-8(f)(1).
With genuine appreciation and respect for the truly mammoth task the Commission
faces in attempting to regulate U.S. securities markets, it is becoming
increasingly clear that any practice, or any rule, which unnecessarily impedes
this kind of exchangeno matter how well intended, and no matter how many shares
an individual proponent might ownis simply out of step with the realities and
challenges of today's one-sided, stacked-deck, management-controlled information
dissemination process. In addition to the incredible volume of far more pressing
concerns that obviously demand the Commission's attention, it is hoped that this
letter can somehow receive careful (and if possible favorable) consideration. It
is in fact a plea to the SEC to NOT to permit this proposal to be excluded on
the grounds General Motors has identified. The time might well have arrived when it has become not only appropriate, but
unavoidable, to face what could be the most important "public policy"
consideration of all, not simply as it concerns any particular shareholder
proposal, but as it relates to virtually every aspect of today's
computer-controlled, money-dominated, twenty first century "Information Age."
The consideration is simply this: There are those who appear to believe that this country's brightest promise lies
in creating a new generation of "governing elite" drawn from the ranks of
current and former corporate leaders who are sustained by enormous
company-provided compensation and "pension" entitlements to assume the awesome
responsibility for guiding this nation's destiny. There are others who believe just as strongly in the need to retain a reward
system that places its primary focus on expanding opportunities for the greatest
number of citizens, and who are equally convinced thatIF this type of reward
system remains in placethe same hard-working, high-principled, sometimes
rough-edged, but always remarkable people who built this nation into the envy of
the civilized world can somehow manage to keep the ball rolling for a little
while longer. An open exchange of ideas is a vital force in any democracy, including a
"shareholder democracy," and any restraint on participation in that exchange can
be subject to abuse. While limitations such as the one created by Rule
14a-8(f)(1) could have been appropriate in the past, in today's business
climate, they may well have become just another impediment to effective
shareholder governance. I have tried the best way I can to explain the justification for permitting this
proposal to be included in GM's proxy materials. It will be up to the Securities
and Exchange Commission to determine where, if anywhere, it goes from here.
Sincerely, /s/
Robert W. Hartnagel
7605 Carta Valley Drive
Dallas, TX 75248 [INQUIRY LETTER]
February 25, 2004 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Ladies and Gentlemen:
I am writing to respond to two letters sent by Robert W. Hartnagel, dated
February 8 and February 23, 2004, in which he responded to GM's letter of
January 30, 2004 requesting a noaction letter under Rule 14a-8(f)(1) with regard
to Mr. Hartnagel's stockholder proposal. Copies of the two response letters are
attached as Exhibits A and B; attachments to the response letters are not
included. The proposal would request a change to the formula for calculating annual
executive incentives or bonuses as credited toward determining the amount of
final compensation used in setting pension payment levels. In GM's January 30
letter I stated incorrectly that the proposal requested modification of the
retirement plan; as Mr. Hartnagel points out on page 2 of his February 4 letter,
such a change would be made administratively without any modification of the
plan. I regret if my misstatement has misled the Staff, or caused any difficulty
in analyzing the proposal and GM's statement of its reasons for omission. My
error, however, is entirely irrelevant to the issue of Mr. Hartnagel's
eligibility to submit a stockholder proposal based on his stock ownership.
Moreover, his offer to amend his proposal by inserting "an administrative"
before "leveling formula" in the last paragraph of the supporting statement
merely underlines GM's alternative grounds for exclusion, as a matter of
ordinary, routine business. Mr. Hartnagel concedes on page 3 of his February 8 letter that he does not meet
the qualifications to submit a stockholder proposal under Rule 14a-8(b). After
the heading numbered (2), the letter states, "The proponent has never claimed,
and does not now assert, that the total current market value of his GM common
stockholders is sufficient to meet the financial limitation identified in Rule
14a-8(f)(1)." GM's intention to omit Mr. Hartnagel's proposal is based on his
failure to satisfy the stock ownership requirement. GM and Mr. Hartnagel
apparently agree that, although he is a long-time stockholder, he has not
provided the evidence GM requested showing that at the time he submitted his
proposal he had owned at least $2000 worth of GM voting stock for at least one
year. Instead, Mr. Hartnagel is asking the Staff to make an exception to the SEC's
"customary practice of specifying a minimum dollar amount of stock ownership as
a requirement" for submitting a stockholder proposal. We note that the required
stock ownership is not merely a "customary practice" but mandated by the proxy
rules as properly adopted by the Commission. We note Mr. Hartnagel's position
that the proxy rules should be set aside in this instance because of the urgent
importance of his proposal, but the subject matter does not seem so
extraordinary that it would justify an unprecedented abandonment of the proxy
rules. Mr. Hartnagel has also suggested that he should be deemed eligible since
he owned the required stock during the period when the practices complained of
in his proposal were adopted. On the contrary, Rule 14a-8(b)(1) clearly states
that a proponent's eligibility period is based on the date the proposal is
submitted. Attachment E to the February 8 letter also seems to set forth an argument that
state corporation law or contract law entitles a holder of any GM voting stock
to the same rights as any other holder, regardless of the amount of stock held.
Neither the General Corporation Law of the State of Delaware, nor the
Certificate of Incorporation of GM, nor any contract between GM and Mr.
Hartnagel entitles him to have his proposal included in the company's proxy
material. Stockholders have that opportunity in certain circumstances as a
matter of federal securities law under Rule 14a-8 promulgated under the
Securities Exchange Act of 1934, as amended. The Commission in adopting Rule
14a-8 had the authority to choose not to extend that ability to all
stockholders, but to limit that ability to stockholders with the requisite
significant, long-term interest as measured on the date of that the proposal is
submitted. Since Mr. Hartnagel concedes he does not now own a qualifying amount of GM
voting stock and has never provided any evidence that as of the date his
proposal was submitted he had held a qualifying amount of GM stock for at least
one year, General Motors may exclude his proposal pursuant to Rule 14a-8(f)(1).
Sincerely, /s/
Anne T. Larin
Attorney Enclosures [INQUIRY LETTER]
February 26, 2004 Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D. C. 20549 Ladies and Gentlemen:
This fax communication is intended to provide a prompt initial response to the
letter dated February 25, 2004, which this office (presumably) received today
from Anne T. Larin, Attorney and Assistant Secretary, General Motors
Corporation. My copy of the letter arrived by overnight Federal Express shipment
this morning. My purpose is to (once again) inform the Commission that Ms. Larin's letter
contains materially false statements which are directly relevant to the basis
upon which the SEC is being asked to review GM's planned omission of my
shareholder proposal from 2004 proxy materials. I intend to address each of
these misstatements separately as quickly as possible, however, I believe one of
them in particular requires this immediate response. The central issue of law upon which my request of February 8, 2004, to the
Securities and Exchange Commission is based is this: The contract specification
printed on the face of the GM Common stock certificate which was registered in
my name on January 23, 1969, states as follows: "This certificate and the shares represented hereby are subject to all the
terms, conditions and limitations of the Certificate of Incorporation and all
Amendments thereto and Supplements thereof." The only (circa 1990) version of GM's Certificate of Incorporation currently in
my possession (which significantly Ms. Larin neither enclosed nor quoted),
states as follows: "Article FOURTH, Division J: The Common Stock, the Class E Common Stock and the
Class H Common Stock shall be identical in all respects and shall have equal
rights and privileges, except as otherwise provided in this Article FOURTH."
(emphasis added) To the very best of my knowledge, absolutely none of the provisions identified
in Article FOURTH grant any right whatsoever to General Motors Corporation to
discriminate in any manner between shareholders based solely on the number of
shares they may happen to own at any particular point in time with respect to
any right or privilege of stock ownership (and most certainly including that of
having a shareholder proposal incorporated in annual proxy material).
Moreover, the agreed contractual specifications applicable to the sale and
purchase of GM securities are binding on both parties as a matter of law, and
despite the fact that Ms. Laim's letter refers to the Securities and Exchange
Act of 1934 (clearly inferring that this date gives it predates my purchase of
the subject GM stock certificate), I feel certain that Rule 14a-8 is a
considerably more recent adaptation of the original statute, and would therefore
not take precedence over the intent of the parties when the transaction
occurred. My request to the SEC is not simply to consider a public policy exception under
the circumstances of this particular proposal (despite the fact that it would
indeed be justified on this basis alone), but rather to reconsider both the
fundamental legality of its application under the particular contractual
specifications of this relationship and the public policy justification for its
continued general application in the face of the widespread practices of
deliberate deceit and proxy statement slight-of-hand which clearly have combined
to create the enormous executive compensation excesses which this proposal
addresses. Through a copy of this letter, I am requesting Ms. Lairn to provide both your
office and me with a copy of the current amended Certificate of Incorporation of
General Motors Corporation. In addition, despite GM's obvious attempt to downplay the truly "extraordinary"
significance of the particular "subject matter" of this proposal, I would
respectfully request that the SEC issue a formal legal opinion concerning the
practice of imposing any kind of subordinate status with respect to any right or
privilege of stock ownership (including the right or privilege of having a
shareholder proposal included in company proxy material) based on the ownership
of one, as opposed to more than one, shares of common stock under the particular
contractual specifications described above. Additional responses to other incorrect statements contained in Ms. Lairn's
letter of February 25, 2004, will be provided promptly under separate cover.
Sincerely, /s/
Robert W. Hartnagel
7605 Carta Valley Drive
Dallas, TX 75248 [INQUIRY LETTER]
March 3, 2004 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Ladies and Gentlemen:
Robert W. Hartnagel has submitted a stockholder proposal for the proxy materials
for General Motors Corporation's annual meeting, which GM intends to omit
pursuant to Rule 14a-8(f)(1), described in GM's letter dated January 30, 2004.
In a letter directed to the SEC dated February 26, 2004 (Exhibit A), Mr.
Hartnagel requested me to provide him and the SEC with a copy of GM's current
Certificate of Incorporation, which is enclosed as Exhibit B.
The language in Article FOURTH, Division I that Mr. Hartnagel quotes in his
letterproviding that all classes of common stock are identical and have equal
rights except as set forth in Article Fourthwas deleted from the Certificate of
Incorporation in December 2003 as no longer relevant when the multiple classes
of common stock were eliminated. (The Restated Certificate of Incorporation in
Exhibit B was filed on March 1, 2004, but did not contain any substantive
changes from the December amendment.) The quoted language, however, was not
relevant to Mr. Hartnagel's ability to have his proposal included in the GM
proxy material. When he submitted the proposal, Mr. Hartnagel did not own $2,000
worth of GM voting stock; the rationale for excluding his proposal is not that
different classes of stock of GM common stock were treated differently but
simply that he did not own the required amount of stock. Contrary to Mr. Hartnagel's assumption, neither Delaware corporate law nor the
certificate of incorporation or bylaws of GM give him the right to have his
stockholder proposal included in the Corporation's proxy material. That ability
arises under the proxy rules adopted by the SEC under the Securities Exchange
Act of 1934, as amended, and is limited by the eligibility requirements set
forth in Rule 14a-8(b). I express the legal opinion in the preceding paragraph based on the U.S. federal
laws and the General Corporation Law of the State of Delaware as an attorney and
a member of the State Bars of California and Michigan. Sincerely,
/s/ Anne T. Larin
Attorney Enclosures
c: Robert W. Hartnagel (w/enclosures)
[STAFF REPLY LETTER]
March 8, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: General Motors Corporation Incoming letter dated January 30, 2004
The proposal relates to management compensation.
There appears to be some basis for your view that General Motors may exclude the
proposal under rule 14a-8(f). Accordingly, we will not recommend enforcement
action to the Commission if General Motors omits the proposal from its proxy
materials in reliance on rules 14a-8(b) and 14a-8(f). In reaching this position,
we have not found it necessary to address the alternative basis for omission
upon which General Motors's relies. Sincerely,
/s/ Michael R. McCoy
Attorney-Advisor
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