Company Name: Lucent Technologies Inc.
Public Availability Date: October 28, 2004
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0402
DIVISION OF
CORPORATION FINANCE
October 28, 2004
Michael C. Keefe
Managing Corporate Counsel
and Assistant Secretary
Lucent Technologies Inc.
Room 6G-232
600 Mountain Avenue
Murray Hill, NJ 07974
Re: Lucent Technologies Inc.
Incoming letter dated September 30, 2004
Dear Mr. Keefe:
This is in response to your letter dated September 30, 2004 concerning the
shareholder proposal submitted to Lucent by Walter J. Ehmer. We also have received a
letter on the proponent's behalf dated October 27, 2004. Our response is attached to the
enclosed photocopy of your correspondence. By doing this, we avoid having to recite or
summarize the facts set forth in the correspondence. Copies of all of the correspondence
also will be provided to the proponent.
In connection with this matter, your attention is directed to the enclosure, which
sets forth a brief discussion of the Division's informal procedures regarding shareholder
proposals.
Sincerely,
Jonathan A. Ingram
Deputy Chief Counsel
Enclosures
cc: Walter J. Ehmer
1785 Brandon Hall Drive
Atlanta, GA 30350
October 28, 2004
Response of the Office of Chief Counsel
Division of Corporation Finance
Re: Lucent Technologies Inc.
Incoming letter dated September 30, 2004
The proposal would amend Lucent's bylaws to require that the board seek
shareholder approval for future severance agreements with senior executive officers that
provide benefits with a total present value exceeding 2.99 times the sum of the
executive's base salary plus bonus.
We are unable to concur in your view that Lucent may exclude the proposal under
rule 14a-8(i)(10). Accordingly, we do not believe that Lucent may omit the proposal
from its proxy materials in reliance on rule 14a-8(i)(10).
Sincerely,
Robyn Manos
Special Counsel
Lucent Technologies
Bell Labs Innovations
Michael C. Keefe Room 6G-232
Corporate Counsel 600 Mountain Avenue
Murray Hill, NJ 07974
Telephone: 908-582-8754
FAX 908-582-2209
VIA UPS NEXT DAY AIR
September 30, 2004
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Lucent Technologies Inc./Request for Exclusion From
Proxy Materials of Shareholder Proposal by Walter J. Ehmer
Ladies and Gentlemen:
Lucent Technologies Inc., a Delaware corporation (the "Company"), is
submitting this letter pursuant to Rule 14a-8(j) under the Securities Exchange Act of
1934 (the "Act") to notify the Securities and Exchange Commission (the "Commission")
of the Company's intention to exclude from its proxy materials for its 2005 annual
meeting of shareholders (the "Proxy Materials") a shareholder proposal (attached as
Exhibit A) (the "Proposal") submitted by Walter J. Ehmer (the "Proponent"). We
request that the Division of Corporation Finance (the "Staff") not recommend to the
Commission that any enforcement action be taken if the Company excludes the
Proposal from its Proxy Materials for the reasons set forth below. In order to allow us
to complete the mailing of our Proxy Materials in a timely fashion, we would appreciate
receiving the Staff's response by November 1, 2004.
The Company believes that the Proposal may be omitted from the Company's
Proxy Materials pursuant to Rule 14a-8(i)(10) under the Act because the Company has
substantially implemented the Proposal.
To the extent the reasons for omission stated in this letter are based upon
matters of law, these reasons are the opinion of the undersigned as counsel for the
Company and of Richards, Layton & Finger, special Delaware counsel to the Company,
who have provided a written opinion to the Company, which is attached as Exhibit B.
Securities and Exchange Commission
September 30, 2004
Page 2
The Proposal Should be Omitted under Rule 14a-8(i)(10) because the Company
has Substantially Implemented the Proposal.
The Proposal is essentially the same as the proposal submitted by the
Proponent last year and included in the Company's 2004 proxy materials (the "2004
proposal"). A copy of the 2004 proposal as printed in the Company's 2004 proxy
materials is attached as Exhibit C. The 2004 proposal garnered a majority of the
shareholder votes cast at the Company's 2004 annual meeting in February 2004. In
April 2004, the Leadership Development and Compensation Committee (the
"Compensation Committee") of the Company's Board of Directors (the "Board") adopted
the Executive Officer Severance Policy (the "Policy") attached as Exhibit D, which
substantially implemented the 2004 proposal. The Proponent now submits the same
proposal he submitted last year, but now in the form of a by-law amendment. In light of
the Compensation Committee's adoption of the Policy, which substantially implements
the Proponent's Proposal, the Company intends to omit the Proposal from the Proxy
Materials pursuant to Rule 14a-8(i)(10).
Rule 14a-8(i)(10) permits the exclusion of a shareholder proposal "[i]f the
company has already substantially implemented the proposal." The purpose of this
exclusion is to "avoid the possibility of shareholders having to consider matters which
already have been favorably acted upon by management .. " SEC Release No. 12598
(July 7, 1976). Rule 14a-8(i)(10) does not require that a shareholder's proposal be
implemented precisely as proposed, but only that it has been "substantially
implemented." SEC Release No. 34-20091 (Aug. 16, 1983). The Staff has indicated
that "a determination that the c]ompany has substantially implemented the proposal
depends upon whether its particular policies, practices and procedures compare
favorably with the guidelines of the proposal." Texaco, Inc. (March 28, 1991) (where
the company's environmental policies, practices and procedures rendered moot the
proposal requesting the company subscribe to the "Valdez principles"). See also
ConAgra Foods, Inc. (July 1, 2004) (excluding a proposal seeking shareholder approval
of poison pill on the grounds that the board had adopted a policy requiring shareholder
approval in order to adopt a rights plan); Safeway Inc. (April 1, 2004) (same); Exxon
Mobil Corp. (March 18, 2004) (excluding a proposal requesting that the board prepare a
report explaining how the company was responding to climate change and greenhouse
gas emissions since the company had communicated how it was dealing with these
issues through several venues, including a comprehensive report on those and related
issues); Exxon Mobil Corp. (Jan. 24, 2001) (excluding a proposal requesting the board
review the environmental impact of a company pipeline project on the grounds that the
proposal was substantially implemented by the company's existing guidelines).
The Proposal urges the shareholders to vote to amend the Company's by-laws
to require that the Board "seek shareholder ratification of severance agreements with
senior executive officers that provide benefits with a total present value exceeding 2.99
times the sum of the executive's base salary plus target bonus." The Proposal defines
Securities and Exchange Commission
September 30, 2004
Page 3
"benefits" as "all post-termination payments (in cash or in kind) not earned or vested
prior to termination, including any lump sum payments, fringe benefits, perquisites,
consulting fees, or the accelerated vesting of equity grants."
In large part due to the shareholders' favorable response to the Proponent's
2004 proposal, the Compensation Committee, which consists solely of directors who
are independent under the New York Stock Exchange listing standards, adopted the
Policy. The Policy substantially implements the Proposal because it requires that
"Lucent obtain shareowner approval before entering into ... severance agreements with
senior executives that provide severance benefits that exceed 2.99 times base salary
and bonus ..." Proponent has two primary objections to the Policy.
First, Proponent complains that the Company can modify the Policy at any time
and, therefore, fashioned the Proposal in the form of a by-law amendment. Section 8.1
of the Company's By-laws does allow for shareholders to alter or repeal existing by-
laws or to adopt new by-laws. However, Section 8.1 also authorizes a majority of the
Board to alter or repeal the by-laws or to adopt new by-laws, without any limitation on
the Board's authority. In addition, Article VIII of the Company's Restated Certificate of
Incorporation provides that the Board may amend the By-laws, also without limitation on
the Board's authority. Therefore, even if the Proposal received the requisite
shareholder approval to adopt the proposed new by-law, the Board would have the
power and discretion to alter or repeal this new by-law. The Company's special
Delaware counsel, Richards, Layton & Finger, arrived at the same conclusion in its
opinion to the Company, which is attached as Exhibit B. Furthermore, in Auto Nation,
Inc. (March 5, 2003), the Staff did not object to the exclusion of a proposal seeking
shareholder approval of poison pills because the board had already adopted a policy
substantially implementing the proposal, even though the policy was subject to future
revocation by the board.
Second, Proponent asserts that the Policy's definition of the term "severance
benefits" includes "only a portion of the true cost of golden parachutes" and contends
that his Proposal ensures inclusion of the total cost - including lump sum payments,
perks, "consulting" payments and accelerated vesting of equity grants. The Policy
includes within the definition of "severance benefits" the following: (i) cash severance
benefits; (ii) the value of other special benefits or perquisites for post-termination
periods, which are not applicable to Lucent employees generally; (iii) the value of
"gross-up" payments; (iv) the value of special additional benefit or service period "credit"
under Lucent retirement programs; (v) the value of consulting services for periods
exceeding one year after termination of employment; and (vi) the value of special
accelerated vesting of outstanding long term compensation awards. The only real
difference between the Policy and the Proposal relates to consulting arrangements,
because the Policy may not reflect precisely what the Proposal appears to request on
this one minor point. The Proposal requests that all consulting payments be considered
severance benefits, whereas the Policy provides that consulting agreements of one
Securities and Exchange Commission
September 30, 2004
Page 4
year or less are not deemed separation benefits. However, the Policy does require that
such consulting agreements be "reasonable" and any such agreements over one year
are considered severance benefits. The Board's determination of "severance benefits"
under the Policy, as well as the Policy overall, achieve an appropriate balance between
the interests of shareholders and the need to attract and retain the talented leadership
necessary for the Company to be successful. Accordingly, the Policy adopted by the
Compensation Committee substantially implements the Proposal.
Conclusion
In summary, the Company's Executive Officer Severance Policy substantially
implements the Proponent's Proposal and renders it moot under Rule 14a-8(i)(10).
Therefore, it is our opinion that the Proposal is excludable pursuant to Rule 14a-
8(i)(10). If the Staff disagrees with our conclusion that the Proposal may be omitted
from the Proxy Materials, I would appreciate an opportunity to discuss the matter with
the Staff prior to issuance of its formal response.
As required by Rule 14a-8(j), we have enclosed six copies of this letter, and the
exhibits referenced in the letter. We are also sending a copy of this letter to the
Proponent,
Please acknowledge receipt of this letter and the enclosed materials by stamping
the enclosed copy of this letter and returning it to me in the self-addressed, stamped
envelope provided. If you have any questions regarding this matter, please contact me
at (908) 582-8754.
Very truly yours,
Michael C. Keefe
Managing Corporate Counsel
and Assistant Secretary
Enclosures
DIVISION OF CORPORATION FINANCE
INFORMAL PROCEDURES REGARDING SHAREHOLDER PROPOSALS
The Division of Corporation Finance believes that its responsibility with respect to
matters arising under Rule 14a-8 [17 CFR 240.14a-8], as with other matters under the proxy
rules, is to aid those who must comply with the rule by offering informal advice and suggestions
and to determine, initially, whether or not it may be appropriate in a particular matter to
recommend enforcement action to the Commission. In connection with a shareholder proposal
under Rule 14a-8, the Division's staff considers the information furnished to it by the Company
in support of its intention to exclude the proposals from the Company's proxy materials, as well
as any information furnished by the proponent or the proponent's representative.
Although Rule 14a-8(k) does not require any communications from shareholders to the
Commission's staff, the staff will always consider information concerning alleged violations of
the statutes administered by the Commission, including argument as to whether or not activities
proposed to be taken would be violative of the statute or rule involved. The receipt by the staff
of such information, however, should not be construed as changing the staff's informal
procedures and proxy review into a formal or adversary procedure.
It is important to note that the staff's and Commission's no-action responses to
Rule 14a-8(j) submissions reflect only informal views. The determinations reached in these no-
action letters do not and cannot adjudicate the merits of a company's position with respect to the
proposal. Only a court such as a U.S. District Court can decide whether a company is obligated
to include shareholder proposals in its proxy materials. Accordingly a discretionary
determination not to recommend or take Commission enforcement action, does not preclude a
proponent, or any shareholder of a company, from pursuing any rights he or she may have
against the company in court, should the management omit the proposal from the company's
proxy material.
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