Company Name: Johnson & Johnson
Public Availability Date: January 13, 2004Document Sections:
INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER [INQUIRY LETTER]
December 3, 2003 VIA FEDERAL EXPRESS Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Johnson & Johnson Shareholder Proposal of Raymond B. Ruddy Securities
Exchange Act of 1934Rule 14a-8 Ladies and Gentlemen:
This letter is to inform you that it is the intention of Johnson & Johnson, a
New Jersey corporation (the "Company"), to omit from its proxy statement and
form of proxy for its 2004 Annual Meeting of Shareholders (collectively, the
"2004 Proxy Materials") a shareholder proposal and statement in support thereof
(collectively, the "Proposal") received from Raymond B. Ruddy (the "Proponent").
The Proposal resolves that the Company cease making charitable contributions.
The Proponent's letter, dated October 20, 2003, setting forth the Proposal, is
attached hereto as Exhibit A. The Company respectfully requests that the staff of the Division of Corporation
Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") concur in our view that the Proposal may be excluded from the 2004
Proxy Materials on the grounds set forth below. Pursuant to Rule 14a-8(j) under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), enclosed are six (6) copies of this letter and its
attachments. Also in accordance with Rule 14a-8(j), a copy of this letter and
its attachments are being mailed on this date to the Proponent, informing him of
the Company's intention to omit the Proposal from the 2004 Proxy Materials.
The Company presently expects to file its definitive 2004 Proxy Materials with
the Commission on or after March 10, 2004. Accordingly, pursuant to Rule
14a-8(j), this letter is being submitted not less than 80 calendar days before
the Company expects to file its definitive 2004 Proxy Materials with the
Commission. In order to allow the Company to complete its mailing of the 2004
Proxy Materials in a timely fashion, we would appreciate receiving your response
as soon as practicable. The Company's Credo has guided our actions in fulfilling our responsibilities to
our shareholders for over 60 years. Our charitable contribution program is a
fundamental part of the Credo, which states "we must be good citizenssupport
good works and charities." The Company's charitable contributions are
distributed among a diverse array of charities, far-reaching in geographic and
substantive scope, ranging from the Vatsalya Trust Orphanage in India, which
takes in children aged newborn to five years and cares for them until they are
adopted, to Interchurch Medical Assistance, Inc., which coordinated a relief
effort for approximately 300,000 people who were displaced by a natural disaster
in the Congo, to Mobile AIDS Support Services (MASS), which assists people
living with HIV and AIDS in rural Alabama. The Company has received numerous
awards applauding our charitable gifts program. For the reasons cited below, we believe that the Proposal should not be
submitted to the shareholders as part of our 2004 Proxy Materials and may
properly be excluded from the 2004 Proxy Materials on the bases set forth below:
1. Rule 14a-8(i)(1) because the Proposal is improper under state law;
2. Rule 14a-8(i)(2) because the Proposal, if implemented, would cause the
Company to violate the law and Rule 14a-8(i)(6) because the Company lacks the
power or authority to implement the Proposal; 3. Rule 14a-8(i)(7) because the Proposal relates to the Company's ordinary
business operations; and 4. Rule 14a-8(i)(3) because the Proposal is materially false and misleading.
In the alternative, we believe that the Proposal should be revised substantially
in order to comply with the Commission's proxy rules. I. Improper Under State LawRule 14a-8(i)(1)
The Company believes that the Proposal may be excluded from the Company's 2004
Proxy Materials because it is improper under state law pursuant to Rule
14a-8(i)(1). Rule 14a-8(i)(1) permits a company to exclude a shareholder proposal from its
proxy materials if the proposal is improper under state law. The Staff has
clarified that a proposal is improper under state law if it is mandatoryif a
proposal requires the company to take action rather than requests the company to
take action. The Staff explained that a mandatory proposal is improper under the
state law rules that authorize a company's board of directors to manage the
business of a company because the proposal, if implemented, would compromise
such authority. In the past, the Staff has required shareholders to recast
proposals as recommendations or requests rather than mandates in order to have
the proposal included in the company's proxy statement. See, e.g., American
Electric Power Company, Inc. (January 16, 2002) (permitting exclusion of a
proposal mandating director term limits unless recast as a recommendation or
request); PG&E Corporation (January 18, 2001) (permitting exclusion of a
mandatory shareholder proposal that the board automatically approve any
shareholder proposal that has won a majority vote unless the proponent revises
the proposal to formulate it as a recommendation or request); Alaska Air Group,
Inc. (March 26, 2000) (permitting exclusion of a mandatory proposal that the
company reinstate simple majority voting on all matters submitted to a
shareholder vote unless recast as a recommendation or request).
The Proposal resolves that the Company "cease making charitable contributions"
and states that the Company "should refrain from" making charitable
contributions. The Proposal does not "request" or "recommend" that the Company
cease making charitable contributions. The Proposal is a mandatory proposal
because, if implemented, the Proposal would require the Company to cease making
charitable contributions. The Company is incorporated in New Jersey and is
governed by the New Jersey Business Corporation Act, which vests the Company's
board of directors with the authority to manage the Company's business. See NJ
Business Corporation Act §14A: 6-1. If approved, the Proposal would compromise
the authority of the board of directors of the Company to manage the Company's
business in contravention of New Jersey state law. The Company believes that the Proposal may be excluded from its 2004 Proxy
Materials under Rule 14a-8(i)(1) because it is phrased as a mandatory proposal
that improperly limits the authority granted by the state corporate law rules of
New Jersey to the board of directors of the Company to manage the business of
the Company. II. Violation of the LawRule 14a-8(i)(2) and Lack of Authority or PowerRule
14a-8(i)(6). The Company believes that the Proposal may be excluded from the Company's 2004
Proxy Materials because, if implemented, it would result in a violation of the
law pursuant to Rule 14a-8(i)(2) and because the Company lacks the power and
authority to implement the Proposal pursuant to Rule 14a-8(i)(6).
Rule 14a-8(i)(2) permits a company to exclude a shareholder proposal if the
proposal would cause the company to violate the law. Rule 14a-8(i)(6) permits a
company to exclude a shareholder proposal if the company lacks the authority or
power to implement the proposal. The Staff has often considered the application
of these rules to a particular shareholder proposal in tandem. The Staff has
permitted companies to exclude shareholder proposals from proxy materials that
would cause the companies to breach existing contractual obligations because
such proposals would cause the companies to be in violation of state contract
law, pursuant to Rule 14a-8(i)(2), and because the companies lack the authority
or power to implement the proposal without breaching existing contractual
commitments. See, e.g., NetCurrents, Inc. (June 1, 2001) (permitting exclusion
of a shareholder proposal to replace all existing executive compensation
arrangements "because it may cause NetCurrents to breach existing employment
agreements or other contractual obligations"); Whitman Corporation (February 15,
2000) (permitting exclusion of a proposal relating to an agreement that the
company had with PepsiCo, Inc. from the company's proxy materials "because it
may cause Whitman to breach an existing contract"). The Proposal, if approved and implemented, would force the Company to
immediately cease all charitable giving. However, the Company has a number of
existing multi-year commitments, under which the Company is obligated to make
future charitable contributions. Such commitments currently exceed $2.7 million
through 2005. The Company would be forced, by the terms of the Proposal, to
breach these multi-year obligations. The Proposal is analogous to those proposals that sought to prohibit option
grants or other employee arrangements, which the Commission permitted companies
to exclude unless revised so as not to apply to existing commitments. See, e.g.,
The Gillette Company (March 10, 2003) (permitting exclusion of proposal
requiring option grants to be performance-based unless revised to exclude
existing commitments); Abbott Laboratories (February 18, 2003) (requiring a
shareholder to revise a proposal that the company refrain from granting certain
employee benefits to certain senior executive officers in years in which the
company was subject to $15 million or more in government fines because the
proposal may have caused Abbott to breach existing compensation agreements);
NetCurrents, Inc. (June 1, 2001). The Company believes that the Proposal as written may be excluded from its 2004
Proxy Materials because the Company would be forced to breach certain of its
existing contractual obligationsmulti-year commitments to make future
charitable contributions. The Company would be in violation of state contract
law and the Proposal is thus excludable pursuant to Rule 14a-8(i)(2). In
addition, it would be impossible for the Company to implement the Proposal as
written without breaching its existing contractual commitments so it is
excludable pursuant to Rule 14a-8(i)(6). III. Ordinary Business OperationsRule 14a-8(i)(7)
The Company believes that the Proposal may be excluded from the Company's 2004
Proxy Materials because it relates to the Company's ordinary business operations
pursuant to Rule 14a-8(i)(7). A shareholder proposal may be excluded from a company's proxy if it relates to
the ordinary business operations of the company pursuant to Rule 14a-8(i)(7).
The Commission has clarified that a shareholder proposal that relates to a
company's charitable contributions policy is generally not excludable, unless it
relates to specific charities or categories of charities. Even if a proposal is
facially neutral, if the actual intent of the proponent is to target a specific
charity or category of charity, the Staff has concluded that the proposal is
excludable. See, e.g., Bank of America Corporation (January 24, 2003)
(permitting exclusion of a facially neutral shareholder proposal that the
company cease making charitable contributions because the proposal was clearly
intended to target Planned Parenthood and organizations that support abortion);
American Home Products Corporation (March 4, 2002) (permitting exclusion of a
facially neutral shareholder proposal to study and report on the impact of
charitable contributions on the company's business and share value because the
proposal was actually intended to target Planned Parenthood or any other group
that provides or supports abortion); Schering-Plough Corporation (March 4, 2002)
(permitting exclusion of a facially neutral shareholder proposal to study and
report on the impact of charitable contributions on the company's business and
share value because the proposal was clearly designed to involve the company in
the abortion issue). Although the Proposal seeks on its face to compel the Company to cease all
charitable contributions, the Company believes it is clear that the Proposal is
actually attempting to target categories of charities that the Proponent views
as pro-abortion and, in particular, Planned Parenthood. The Proposal states:
For example, abortion rights advocates often use the word choice, without
mentioning what the choice is all about, i.e. abortion. Today there are a number
of prominent charities advocating for abortion and, in at least one case,
Planned Parenthood, actually performing abortions. Other charities, often times
involved in research for cures of disease may advocate the destruction of human
embryos for research purposes. In fact, the only "examples" of charities that the Proponent finds objectionable
are charities that the Proponent views as pro-abortion. Furthermore, it is apparent from the communications that the Company has
received from the Proponent in the past that the Proponent's actual agenda is to
curb the Company's contributions to Planned Parenthood. On August 15, 2002 and
again on October 21, 2002, the Company received letters from the Proponent
demanding that either the Company cease contributions to Planned Parenthood or
he would file a shareholder proposal to compel that result. The Proponent's
letters are attached as Exhibit B and Exhibit C. The Proponent did not request
that the Company cease all charitable donations, but rather made it clear that
his interest was in the Company ceasing donations to one specific
charityPlanned Parenthood. In addition, the Proponent has identified himself in
these letters as the president of the Gerard Health Foundation LLC. In 2002, the
Gerard Health Foundation funded a study of Planned Parenthood by self-professed
pro-life activists. See Chuck Donovan, The Empire of Emptiness: Planned
Parenthood's Political Machine (August 29, 2003), available at http://www.crisismagazine.com/
september2003/donovan.htm. The Company recognizes that the Commission failed to permit Microsoft to exclude
a similar proposal from its 2003 proxy materials on ordinary business operations
grounds where Microsoft argued that the proposal, while facially neutral, was
actually an attempt to target charities that the proponent viewed as
pro-abortion. See Microsoft Corporation (August 11, 2003). The Company believes,
however, that the Proposal should be distinguished from the Microsoft proposal.
In this case, as expressly stated in the Proponent's own prior correspondence to
the Company, there is a clear and direct link between the Proposal and the
Proponent's efforts to stop contributions to Planned Parenthood. The Proponent
stated that he would submit a shareholder proposal if the Company did not cease
contributions to Planned Parenthood, and he has done so. The Proposal is the
next step in the Proponent's efforts to block such specific contributions. In
addition, unlike the Microsoft proposal which also referenced research cloning,
the Proposal's discussion of objectionable charities is focused exclusively on
abortion-related ones. As a result, the Company believes that the Proposal is more analogous to the
facially neutral proposals considered by the Staff as being targeted to specific
categories of charities or organizations. For example, as cited earlier in this
letter, earlier this year, Bank of America requested a no-action letter from the
Staff relating to a shareholder proposal that requested that Bank of America
refrain from making charitable donations. While the proposal appeared facially
neutral, Bank of America argued that the proposal was actually an attempt to
target contributions to Planned Parenthood and organizations that support
abortions because of several statements in the proposal relating to abortion.
The Staff concluded that the proposal was in fact an attempt by the proponent to
target specific types of organizations and was thus excludable pursuant to Rule
14a-8(i)(7). While the Proposal appears to have a neutral goal on its faceto
cause the company to cease all charitable givingthe actual intent of the
Proponent is very similar to the intent of the Bank of America proponent, i.e.
to target organizations viewed by the Proponent as pro-abortion. See Bank of
America Corporation (January 24, 2003). In addition, the Company believes that many of the Company's charitable
contributions are directly related to the Company's business. For example, the
Company makes charitable contributions to organizations that offer extensive
training and support programs that, among other things, provide instruction on
the proper use of the Company's products. The Company also makes significant
in-kind donations of the Company's products, which increases the exposure of the
Company's products. Moreover, making charitable contributions has been an
express part of the Company's Credo, which has guided the Company for the past
60 years. And at times, like on September 11, 2001, when Johnson & Johnson was
one of the first companies to transport emergency medical supplies to lower
Manhattan, it would have been unconscionable and against everything that this
Company represents to do as the Proponent would suggest. The Company's
charitable donations are often integrally linked with the Company's ordinary
business operations. For these reasons, the Company believes that the Proposal relates to the
Company's ordinary business operations. While facially broader, the Proposal in
fact is targeted by the Proponent (on its face and based on the Proponent's
prior course of conduct) at specific charitable activities. As a result, the
Company believes that the Proposal may be excluded pursuant to Rule 14a-8(i)(7)
as relating to the Company's ordinary business operations.
IV. Materially False or MisleadingRule 14a-8(i)(3)
The Company believes that a number of statements in the Proposal should be
excluded from the Company's 2004 Proxy Materials because these statements are
materially false and misleading pursuant to Rule 14a-8(i)(3). We also believe,
based on the number of these false and misleading statements, that there is a
basis for excluding the entire Proposal. The Staff has required shareholders to revise their proposals so that they are
no longer materially false or misleading. See, e.g., Marriott International,
Inc. (March 10, 2003) (permitting exclusion of a shareholder proposal that the
company make certain disclosures about its charitable contributions from its
proxy materials because "portions of the supporting statements may be materially
false or misleading" if the shareholder fails to revise the proposal in
accordance with the Staff's instructions); UST Inc. (February 26, 2002)
(permitting the company to omit portions of a proposal that the company make
certain disclosures about its charitable contributions because those portions
"may be materially false or misleading under Rule 14a-9").
However, the Staff noted, "when a proposal and supporting statement will require
detailed and extensive editing in order to bring them into compliance with the
proxy rules, we may find it appropriate for companies to exclude the entire
proposal, supporting statement, or both, as materially false or misleading."
Staff Legal Bulletin No. 14 (July 13, 2001). The Proposal contains a number of materially false and misleading statements
that could mislead shareholders. The Proposal states the following: "By making
charitable contributions at the corporate level we have usurped the right and
duty of individuals to support the charities of their choice." The Company
believes that this statement falsely suggests that the Company's charitable
contributions somehow prevent or control the charitable activities of
shareholders. There is no foundation for this statement, as shareholders are
free to make whatever personal charitable contributions they choose. The
Company's charitable contributions do not limit the shareholders' charitable
activities. Because this statement is materially false and misleading, it should
be omitted from the Proposal. In addition, although the Proposal seeks to prohibit all charitable
contributions, the supporting statement of the Proposal is focused entirely on
charities relating to abortion. The Proposal states: For example, abortion rights advocates often use the word choice, without
mentioning what the choice is all about, i.e., abortion. Today there are a
number of prominent charities advocating for abortion and, in at least one case,
Planned Parenthood, actually performing abortions. Other charities, often times
involved in research for cures of disease, may advocate the destruction of human
embryos for research purposes. The Company believes that these statements are materially false and misleading
in a number of ways. By discussing abortion at length and as the only type of charity discussed, the
statements are inflammatory and may mislead shareholders into voting based on
their views on abortion rather than on corporate charitable contributions.
Moreover, the Proposal can create the false and misleading impression that the
Company provides significant support to these charitable organizations. This is
particularly misleading given that the Company's annual donations in 2002 to
Planned Parenthood accounted for less than 0.005% of the Company's total
charitable donations in 2002. It is clear that the Proposal has been made by the Proponent to stop
contributions to charities the Proponent views as supporting abortion, and in
particular, Planned Parenthood. As discussed above, the Proponent's true intent
is further revealed in his history of correspondence with the Company and his
leadership position at the Gerard Health Foundation. While the Proposal appears facially neutral, for the aforementioned reasons, it
is in fact an attempt to target charities that the Proponent believes to be
promoting abortion and curry shareholder support for the Proposal by suggesting
that the shareholder vote will be a referendum on abortion. As a result, the
Proposal is analogous to the proposal that was challenged by Weyerhaeuser.
Weyerhaeuser received a shareholder proposal that requested that the company
refrain from giving charitable contributions to organizations that perform
abortion. The Weyerhaeuser proposal contained a number of unsubstantiated and
inflammatory remarks about abortion. The Staff determined that it would not
recommend an enforcement action to the Commission if the company omitted the
proposal from its proxy materials. Weyerhaeuser Company (January 22, 1997).
Similar to Weyerhaeuser, the Proposal is also inflammatory and materially false
and misleading because it states that "choice" is "all about abortion" and
Planned Parenthood "advocat[es] for abortion." These are one-sided anti-abortion
statements that do not accurately or completely describe the abortion debate or
the services that Planned Parenthood may provide. There is furthermore no
foundation for this characterization of Planned Parenthood's activities.
In addition, the Proposal includes a quotation of Thomas Jefferson, but does not
provide a citation to the source material. It also makes reference to a book by
Milton Freidman, who the Proponent claims is a "Nobel prize winning economist
and long time critic of corporate charitable contributions." By making these
references, the Proponent is attempting to add authority to his argument, but
does not indicate the relevance of these authorities to the Proposal or provide
citations to permit the reader to verify the sources. The Company believes that the Commission should require the Proponent to exclude
the Proposal in its entirety based on the number of false and misleading
statements contained within the Proposal or revise the Proposal to remove the
materially false and misleading statements cited above. ***
For the foregoing reasons, we respectfully request that the Staff concur in our
opinion that the Proposal may be properly omitted from the 2004 Proxy Materials.
If you have any questions with respect to the foregoing or if you need any
additional information, please feel free to give me a call at Johnson & Johnson
at (732) 524-2464. If for any reason the Staff does not agree with the
conclusions expressed herein, we would appreciate an opportunity to confer with
the Staff before issuance of its response. We request that you acknowledge receipt of this letter and the enclosures by
stamping and returning the enclosed additional copy of this letter using the
enclosed self-addressed stamped envelope. Thank you for your prompt attention to this matter.
Very truly yours, /s/
Michael H. Ullmann
Corporate Secretary and
Associate General Counsel Enclosures
cc: Raymond B. Ruddy
26 Rolling Lane
Dover, MA 02030 [APPENDIX]
EXHIBIT A October 20, 2003 26 Rolling Lane
Dover, MA 02030
Johnson & Johnson
Attention: Ann Dibble Jordan
Johnson & Johnson World Headquarters
One Johnson & Johnson Plaza
New Brunswick, NJ 08901 Dear Madam:
I am the owner of 66 shares of Johnson & Johnson. I have owned the shares since
12/02/99 and intend to hold them through the time of the next annual meeting. At
that meeting I wish to propose the following resolution: Resolved, Johnson & Johnson cease making charitable contributions.
Supporting Statement Thomas Jefferson once wrote, "To compel a man to furnish contributions of money
for propagation of opinions which he disbelieves is sinful and tyrannical."
Choice is a popular word in our culture. Noble prize winning economist and long
time critic of corporate charitable contributions, Milton Friedman, writes about
the importance of choice in his book, Free to Choose. By making charitable
contributions at the corporate level we have usurped the right and duty of
individuals to support the charities of their choice. We may also be forcing
thousands of people to support causes they may disagree with on a most profound
level. For example, abortion rights advocates often use the word choice, without
mentioning what the choice is all about, i.e., abortion. Today there are a
number of prominent charities advocating for abortion and, in at least one case,
Planned Parenthood, actually performing abortions. Other charities, often times
involved in research for cures of disease, may advocate the destruction of human
embryos for research purposes. These may be more controversial examples, but
they illustrate the point today, many charities are involved in activities that
are divisive and not universally supported. Johnson & Johnson employees and
shareholders represent a broad range of interests. It is truly impossible to be
sensitive to the moral, religious and cultural sensitivities of so many people.
Rather than compel our stakeholders to support potentially controversial
charitable groups we should refrain from giving their money away for them. Let
each person choose. The importance of individual choice and the importance of
each individual cannot be underestimated. /s/
Raymond B. Ruddy
[STAFF REPLY LETTER]
January 13, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: Johnson & Johnson Incoming letter dated December 3, 2003
The proposal mandates that the company cease making charitable contributions.
There appears to be some basis for your view that Johnson & Johnson may exclude
the proposal under rule 14a-8(i)(1) as an improper subject for shareholder
action under applicable state law. It appears that this defect could be cured,
however, if the proposal were recast as a recommendation or request that the
board of directors take the steps necessary to implement the proposal.
Accordingly, unless the proponent provides Johnson & Johnson with a proposal
revised in this manner, within seven calendar days after receiving this letter,
we will not recommend enforcement action to the Commission if Johnson & Johnson
omits the proposal from its proxy materials in reliance on rule 14a-8(i)(1).
We are unable to conclude that Johnson & Johnson has met its burden of
establishing that the proposal would violate applicable state law. Accordingly,
we do not believe that Johnson & Johnson may omit the proposal from its proxy
materials in reliance on rules 14a-8(i)(2) and 14a-8(i)(6).
We are unable to concur in your view that Johnson & Johnson may exclude the
entire proposal under rule 14a-8(i)(3). There appears to be some basis for your
view, however, that portions of the supporting statement may be materially false
or misleading under rule 14a-9. In our view, the proponent must:
provide a citation to a specific source for the sentence that begins "Thomas
Jefferson once wrote ..." and ends "... sinful and tyrannical'";
provide a citation to a specific source for the sentence that begins "Noble
prize winning ..." and ends "... Free to Choose"; and
provide a citation to a specific source for the phrase "... Planned
Parenthood, actually performing abortions." Accordingly, unless the proponent provides Johnson & Johnson with a proposal and
supporting statement revised in this manner, within seven calendar days after
receiving this letter, we will not recommend enforcement action to the
Commission if Johnson & Johnson omits only those portions of the supporting
statement from its proxy materials in reliance on rule 14a-8(i)(3).
We are unable to concur in your view that Johnson & Johnson may exclude the
proposal under rule 14a-8(i)(7). Accordingly, we do not believe that Johnson &
Johnson may omit the proposal from its proxy materials in reliance on rule
14a-8(i)(7). Sincerely, /s/
Daniel Greenspan
Attorney-Advisor
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