Company Name: Time Warner Inc.
Public Availability Date: February 11, 2004Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
December 26, 2003 VIA OVERNIGHT MAIL Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Time Warner Inc. - Proposals Submitted by Central Laborers' Pension Fund and
Domini Social Investments LLC Ladies and Gentlemen:
This letter respectfully requests that the staff of the Division of Corporation
Finance (the "Staff") of the Securities and Exchange Commission (the "SEC")
advise Time Warner Inc. (the "Company") that it will not recommend any
enforcement action to the SEC if the Company omits from its proxy statement and
proxy to be filed and distributed in connection with its 2004 annual meeting of
stockholders (the "Proxy Materials") two proposals, the first of which (the
"Union Proposal") it received from Central Laborers' Pension Fund (the "Union")
and the second of which (the "Domini Proposal" and, together with the Union
Proposal, the "Proposals") it received from Domini Social Investments LLC ("Domini"
and, together with the Union, the "Proponents"). Each of the Proposals requests
that the Company prepare a report detailing its allocation of "corporate
resources" to political entities and candidates. The Union Proposal also
requests additional information on the Company's "political activities,"
including a description of its "decision-making process" as to the "utilization
of Company property and personnel for political purposes" and an accounting of
all "Company monies" contributed to political candidates, political campaigning
or political parties and committees. The Company does not intend to include the Proposals in its Proxy Materials
pursuant to (i) Rule 14a-8(i)(7) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), because they relate to the Company's ordinary
business operations and (ii) Rule 14a-8(i)(3) because they are vague and
misleading. In the alternative, if the Staff is unable to agree with these
positions with respect to both Proposals, then the Company would intend not to
include the Domini Proposal in its Proxy Materials pursuant to Rule 14a-8(i)(11)
because it would substantially duplicate a previously received proposal (the
Union Proposal) that would be included in the Company's Proxy Materials.
Pursuant to Rule 14a-8(j) under the Exchange Act, we are enclosing six copies of
each of this letter, the Union Proposal (Exhibit A) and the Domini Proposal
(Exhibit B). By copy of this letter, the Company hereby notifies each of the
Proponents as required by Rule 14a-8(j) of its intention to exclude the
Proposals from its Proxy Materials. Grounds for Omission
A. The Proposals relate to the Company's ordinary business operations and,
therefore, may be omitted from the Company's Proxy Materials pursuant to Rule
14a-8(i)(7). Rule 14a-8(i)(7) permits the exclusion from the Company's Proxy Materials of
stockholder proposals relating to its "ordinary business operations." Proposals
requesting reports or studies may also be omitted from the Company's Proxy
Materials if the subject of the requested report or study covers a matter
related to the Company's ordinary business operations. See SEC Release No.
34-20091 (August 16, 1983) ("Henceforth, the staff will consider whether the
subject matter of the special report or the committee involves a matter of
ordinary business; where it does, the proposal will be excludable under Rule
14a-8(c)(7)"). The Proposals request a report detailing the Company's allocation
of the Company's "resources" to political entities, political candidates or the
general "political arena." The Company believes that such a broad request
necessarily includes many of its ordinary business operations. This is
particularly true given the Company's unique combination of business assets.
Therefore, the Company respectfully submits that the Proposals are properly
excludable from the Company's Proxy Materials under Rule 14a-8(i)(7).
The Staff has consistently permitted companies to exclude from their proxy
materials proposals with respect to lobbying or advertising that relate to their
products or operations. See e.g., General Electric Co. (January 29, 1997)
(proposal on the use of company funds to oppose certain citizen ballot
initiatives related to ordinary business operations); Phillip Morris Co., Inc.
(January 3, 1996) (proposal on the company's lobbying efforts to preempt local
rules concerning the sale or distribution of tobacco products related to
ordinary business operations). The Staff has also taken the position that a
company's decision of whether or not to engage in lobbying is part of its
ordinary business operations. See e.g., Pacific Enterprises (February 12, 1996)
(proposal on "involving the company in the political or legislative process"
related to ordinary business operations); Pacific Telesis Group (January 19,
1989) (same). At the same time, the Staff has found that proposals relating to a
company's contributions to political campaigns or entities constitute "general
political activities" that are not excludable under Rule 14a-8(i)(7). See
General Electric Co. (February 22, 2000) (proposal that the company summarize
its campaign finance contributions not related to ordinary business operations);
SBC Communications Inc. (February 8, 1998) (proposal requiring the company to
obtain shareholder approval for any political contribution over $10,000 not
related to ordinary business operations); Citicorp (February 21, 1985) (proposal
requesting the continuous disclosure of all political contributions made by the
company not related to ordinary business operations). The Company is the world's leading media and entertainment company, whose
businesses include filmed entertainment, interactive services, television
networks, cable systems, publishing and music. These businesses are subject to
considerable regulation by federal, state, local and international governmental
authorities and agencies. As such, the Company is intensely interested in the
impact of legislation in numerous areas, ranging from digital rights management,
media ownership rules and cable franchising regulations to Internet privacy and
anti-spam legislation to copyright and trademark protection and even postal
rates and regulations. Changes in one or more of these broad areas of the law
can directly impact the Company's daily business operations.
Because of its significant exposure to government regulation, the Company is
deeply committed to participating in and shaping public debate on the issues
that impact its businesses, employees and customers. Many of these efforts are
part of the Company's day-to-day operations. For example, Company
representatives often are invited to speak at Congressional hearings or to meet
with individual legislators or administrative officials to provide insight into
the practical impact of existing and pending legislation on businesses in the
Company's industries. Such representatives are also in regular contact with the
commissioners of many regulatory agencies to discuss the scope or application of
various regulations that impact its daily business operations. In addition, the
Company frequently participates in industry conferences, roundtable discussions
and other public forums to discuss the impact of current, pending or potential
legislation on its businesses and the media and entertainment industries as a
whole. These events are important opportunities for the Company to influence
public opinion, which, in turn, directly impacts the individuals who shape the
applicable regulatory framework. As such, the Company believes that each of the
above activities may properly be characterized as "political". Since the
Company's decision in 1999 to ban so-called "soft money" contributions, its
public engagement program has played a larger role in its overall lobbying
strategy. Given the nature of the Company's assets, it is very important to
maintain an active program of engaging and educating the public on issues that
affect its business operations. The Company believes that, while the preambles or supporting statements of both
Proposals may focus on the Company's political contributions, the actual
resolutions are considerably broader and encompass many of the Company's
lobbying activities. The Proponents' use of the terms "corporate resources" and
"political entities" or "partisan political activities" seems intended to target
a broad range of activities, many of which are part of the Company's ordinary
business operations. For example, the appearance by a Company employee before a
Congressional committee hearing to support pending legislation might need to be
disclosed in the requested report. Similarly, the retention of an outside
consultant to help draft a comment letter supporting pending FCC regulations
might also need to be reported. Each of these activities entails the allocation
of a "corporate resource" that could be viewed as supporting a political entity
or candidate, especially if particular entities or officials also support the
law or regulation at issue. The Company respectfully submits that these are not
"general political activities" as defined in past no-action letters. Rather, the
breadth of the Proposals is similar to proposals that the Staff has previously
permitted to be excluded as relating to lobbying activities.
In addition, the Union Proposal further broadens the requested report to include
the daily responsibilities of the Company's management team. For example, the
Union Proposal seeks an explanation of the Company's "political participation
policy" and "business rationale for its participation in partisan political
activities." It further requests a description of the "decisionmaking process
related to ... the utilization of Company property and personnel for political
purposes" or "in the political arena." These broad concepts would necessarily
involve matters integrally related to the Company's daily operations. To allow
shareholder proposals that would require a reporting of management's "business
rationale" and "decision-making process" would subject many of the Company's
ordinary, day-to-day business decisions to micro-management by any person whose
special interests or viewpoints, whether personal, financial, political or
otherwise, were touched by an action resulting from that decision. See SEC
Release No. 34-40018 (May 21, 1998)(discussing the avoidance of stockholder
micro-management as a consideration behind the ordinary business exclusion of
Rule 14a-8(i)(7)). The Company respectfully believes that its management team,
not its stockholders, are the best equipped to develop and implement the
Company's lobbying strategy. Finally, the Company believes that given its unique combination of assets, the
Proposals potentially relate to the nature, content and presentation of the
Company's media products. For example, the sale of television advertising space
to one or more political entities or candidates would arguably need to be
disclosed in the requested report. Similarly, the discussion of a politically
charged issue by one of CNN's political commentators, on "Larry King Live" or in
TIME Magazine might also need to be disclosed. In each case, the Company is
allocating a "corporate resource" for a purpose that could be interpreted as
supporting a particular legislative position, political party or candidate for
office. Therefore, the Proposals as drafted potentially relate to content-based
decisions that are a central part of the Company's ordinary business operations.
The Staff has consistently held that such proposals are excludable under Rule
14a-8(i)(7). See e.g., Time Warner Inc. (February 24, 1997) (proposal that the
company research the effect that certain cartoon characters have on encouraging
the teasing and bullying of children); Time Warner Inc. (February 19, 1993)
(proposal to establish a lyric review committee relating to the content of the
company's music recordings); General Electric Co. (February 2, 1993) (proposal
that the company review its television broadcast standards from the perspective
of the role models they create for young children); Walt Disney Productions
(November 19, 1984) (proposal that the company cease the distribution of the
movie "Splash" because it eroded basic moral values).
While the Proponents are clearly interested in obtaining information about the
Company's political contributions, the Proposals are much more broadly drafted
so that they cover many aspects of the Company's ordinary business operations.
As described above, some of these operations are not even related to the
Company's lobbying program but involve the nature, content and presentation of
its media products. Therefore, the Company respectfully submits that both
Proposals are excludable from its Proxy Materials under Rule 14a-8(i)(7).
B. The Proposals are vague and misleading and, therefore, may be omitted from
the Company's Proxy Materials pursuant to Rule 14a-8(i)(3) and Rule 14a-9.
Rule 14a-8(i)(3) permits the omission of a proposal or any statement in support
thereof if such proposal or statement is contrary to any proxy rule or
regulation, including Rule 14a-9, which prohibits materially false or misleading
statements in proxy soliciting material. The Staff has recognized that a
proposal may be excluded under Rule 14a-8(i)(3) if it is so vague and indefinite
that stockholders voting on the proposal would not be able to determine with
reasonable certainty exactly what action or measures would be required in the
event the proposal was adopted and, as a related matter, if the board or
management of a company would not have a clear idea as to what exactly it should
do to effectuate the proposal. See, e.g. Woodward Governor Co. (November 26,
2003) (proposal that the board implement a "compensation" policy for the
"executives in the upper management" excludable as vague); The Procter & Gamble
Co. (October 25, 2002) (permitting omission of a proposal requesting that the
board of directors create a specific type of fund as vague and indefinite where
the company argued that neither the stockholders nor the company would know how
to implement the proposal). Indeed, in the event either Proposal were to be
approved by the Company's stockholders, the Company would not know what was
expected of it and would be unable to properly implement the will of its
stockholders. The Staff has previously recognized that such proposals are
properly excludable under Rule 14a-8(i)(3). See e.g., Wm. Wrigley Jr. Company
(November 18, 1998) (proposal that the company bring an "Employee Charter" to
the next annual meeting, but which failed to detail the contents of such
charter, was excludable as vague and indefinite); US West Inc. (March 4, 1998)
(proposal that the company recognize January 22nd as "American Holocaust Day,"
but which failed to define the meaning of "recognize," was excludable as vague
and indefinite); A.H. Belo Corp. (January 28, 1998) (proposal that the board
sever all connections with organizations which purport to have an
anti-democratic agenda was excludable because it failed to explain what
constitutes an organization that prevents "consent of the governed" and "other
basic freedoms"). As previously discussed, the use in both Proposals of the term "corporate
resources" is extremely broad, particularly given the nature of the Company's
business assets. The Company's "corporate resources" (in addition to its cash)
that could potentially be used to support a particular political entity or
candidate include its employees, outside consultants, television networks or
programs, films, books, magazines and Internet properties. The breadth of the
Proposals could reach the use of any or all of these assets and activities.
Because the Proposals fail to clarify which corporate resources they intend to
cover, neither the Company's stockholders nor its board of directors would be
able to determine the scope of the report that the Proposals seek.
In addition, in their attempts to be as broad as possible, each of the Proposals
contains its own unique vague or misleading statements that further render each
excludable under Rule 14a-8(i)(3). For example, the Union Proposal includes the
terms "political participation policy," "partisan political activities,"
"political purposes" and "political arena." While each of these terms alone is
vague and subject to considerable latitude in interpretation, the Company
believes that when used together in the same proposal, they have the effect of
making the precise requirements of the Union Proposal unknowable. They also
raise the issue of whether each term is intended to encompass more or less than
the phrase "political candidates, political campaigns or political parties and
committees," which is also utilized in the Union Proposal. Furthermore, the
Union Proposal requests an "accounting of Company resources, including Company
property and personnel that have been utilized for political campaign purposes."
Here, the Union deliberately leaves the meaning of "resources" open-ended. If
the intended subject of the Union Proposal was the Company's financial
contributions to political candidates and parties, it could have specified such
request. Instead, the Union takes the opposite tack; it broadens its request to
include any and all corporate resources without specifying exactly what
information it is seeking. This deliberately vague and confusing request will
surely leave stockholders uncertain as to what they are being asked to approve,
and it will leave the Company's board unable to determine what information
should be included in the "accounting" should the Union Proposal be approved.
Similarly, the Domini Proposal seeks broad categories of information without
providing the specifics needed to approve or implement the requested report. In
particular, the Domini Proposal requests the disclosure of all "related
expenditures of money and other resources" to political entities and candidates.
This gives stockholders no guidance on what additional information it would be
requesting the board to disclose, and it likewise fails to detail what "related"
or "other" expenditures, and to which "entities," the board should include in
the requested report should it be approved. Additionally, the supporting
statement to the Domini Proposal contains several potentially misleading
statements. For example, the second paragraph cites a recent study by the Center
for Responsible Politics ("CRP") providing political contributions attributed to
the Company. However, Domini fails to indicate that this study includes support
by certain of the Company's employees, over which the Company has no control.
This can be especially misleading because the Domini Proposal deals exclusively
with political contributions by the Company, not its employees. Stockholders
reading the Domini Proposal are likely to incorrectly attribute the entire
amount cited in the CRP study to the Company, which could inappropriately
influence their view on the requested report. Additionally, the third paragraph
discusses the abuses related to soft money contributions but fails to disclose
the Company's policy not to make soft money contributions. Again, given the
tenor of the Domini Proposal, stockholders could infer that the Company makes
soft money contributions, which could improperly impact their view of the
requested report. The Company respectfully submits that the vague and overbroad language used in
each of the Proposals, including the use of the term "corporate resources,"
renders each Proposal susceptible of widely divergent interpretations and may be
misleading to stockholders. Consequently, if the Company's stockholders were to
approve the Proposals, the board would be left without a clear understanding of
their expectations. These are precisely the circumstances under which the Staff
generally renders a proposal excludable under Rule 14a-8(i)(3). The Company
submits that both Proposals are likewise excludable from the Company's Proxy
Materials under such rule. C. The Domini Proposal substantially duplicates the Union Proposal and,
therefore, in the event the Staff does not agree with the above grounds for
excluding both Proposals, the Domini Proposal is excludable under Rule
14a-8(i)(11). Rule 14a-8(i)(11) permits the exclusion from the Company's Proxy Materials of
shareholder proposals that substantially duplicate another proposal previously
submitted by another proponent that will be included in the Company's Proxy
Materials for the same meeting. In the event that the Staff does not agree that
both Proposals are excludable (or that the Union Proposal independently is
excludable from the Company's Proxy Materials for the reasons set forth above),
the Company respectfully submits that the Domini Proposal is excludable under
Rule 14a-8(i)(11) because it substantially duplicates the Union Proposal, which
the Company would then be required to include in its Proxy Materials.
The Staff has previously indicated that a company does not have the option of
selecting between duplicative proposals, but must include in its proxy materials
the first of such proposals. See e.g., Wells Fargo & Co. (February 5, 2003).
While both Proposals are dated December 3, 2003, the Company actually received
the Union Proposal via facsimile on December 3, while it received the Domini
Proposal on December 4. Therefore, the Company would only be permitted to seek
exclusion of the Domini Proposal under Rule 14a-8(i)(11). The Staff has stated that Rule 14a-8(i)(11) was adopted, in part, to eliminate
the possibility that stockholders would have to consider two or more
substantially identical proposals submitted by proponents acting independently
of each other. See SEC Release No. 34-12999 (November 22, 1976). This principle
is most easily applied to proposals that are identical in wording. See e.g.,
AT&T Corp. (January 26, 1999); The New Germany Fund (May 8, 1998); Great Lakes
Chemical Corp. (March 2, 1998). However, proposals do not need to be identical
to be excludable under Rule 14a-8(i)(11). The Staff has consistently taken the
position that proposals with the same "principal thrust or focus" may be
substantially duplicative even if such proposals differ as to terms and scope.
See Pacific Gas & Electric Co. (February 1, 1993) (proposal to limit CEO's
compensation excludable because its "principal thrust" and "principal focus" was
the same as another proposal being included in company's proxy materials). See
also, Wal-Mart Stores, Inc. (April 3, 2002) (proposal that company prepare an
"Equal Employment Opportunity Report" excludable because it had the same
"principal thrust and focus" as another proposal relating to affirmative
action); General Electric Co. (February 9, 1994) (proposal that company prepare
a report regarding violence in television programming excludable because it was
substantially identical to another proposal that company form a committee to
review the same issue). The rationale behind the "principal thrust or focus" test is that the presence
in one proxy statement of multiple proposals that address the same issue in
different terms creates the risk that, if stockholders approve each of the
proposals, the board of directors would not be left with a clear expression of
stockholder intent on the issue. Thus, while Rule 14a-8(i)(11) protects
stockholders from having to consider substantially similar proposals submitted
by different proponents, it also protects the board from being placed in a
position where it cannot properly implement the stockholders' will because the
terms of such proposals are different, even though the subject matter is
identical. See Centerior Energy Corp. (February 27, 1995) (proposals relating to
(1) freezing executive compensation, (2) reducing executive compensation and
eliminating executive bonuses, and (3) freezing annual executive salaries and
eliminating bonuses were "substantially duplicative" of a previous proposal
placing ceilings on executive compensation, tying future executive compensation
to future company performance, and eliminating bonuses and stock options); Union
Camp Corp. (January 24, 1990) (multiple proposals requesting the company to
withdraw investments in South Africa were substantially duplicative even though
one proposal also included "specific steps in implementing" the request);
Procter & Gamble Co. (June 15, 1983) (second proposal that was identical to a
portion of a broader proposal excluded as "substantially identical").
The "principal thrust or focus" of both Proposals is to increase disclosure of
the Company's involvement and use of its resources in connection with the
political process. Although the wording of the Domini Proposal is slightly
different from that of the Union Proposal, it is nevertheless substantially
duplicative because the subject matter is the same. In particular:
Both Proposals seek information on the Company's participation in "political
election campaigns" (the Union Proposal) or "political candidates and political
entities" (the Domini Proposal).
Both Proposals apply to federal and state political activities. The Union
Proposal also seeks information on local political activities, but this
extension in scope is not sufficient to alter its "principal thrust and focus."
Both Proposals seek to address the fact that current disclosure requirements
are insufficient, in the Proponents' opinions, to properly inform stockholders
about the Company's activities in this area. Finally, both Proposals seek Company action in the form of a report. Thus, the
Staff's relief previously granted to Wal-Mart and General Electric (previously
cited), both of which related to requests for reports on substantially the same
issue, are particularly relevant in this matter. For these reasons, the Company respectfully submits that the Domini Proposal is
"substantially duplicative" of the Union Proposal and, therefore, may be
excluded from the Proxy Materials pursuant to Rule 14a-8(i)(11).
***** For the foregoing reasons, the Company respectfully requests that the Staff
confirm that it would not recommend enforcement action if the Company omits both
Proposals from its Proxy Materials. In the alternative, if the Staff is unable
to confirm such recommendation with respect to both Proposals, the Company
respectfully requests that the Staff confirm that it would not recommend
enforcement action if the Company omits the Domini Proposal from its Proxy
Materials. If the Staff is unable to concur with either of these conclusions or
if the Staff has any questions or requires additional information, we
respectfully request the opportunity to confer with members of the Staff prior
to issuance of any written response to this letter. Please do not hesitate to
call the undersigned at (212) 484-7350. Please acknowledge receipt of this letter and its attachments by date-stamping
the enclosed copy of the first page of this letter and returning it in the
self-addressed stamped envelope provided for your convenience.
Very truly yours, /s/
Susan A. Waxenberg
Assistant General Counsel and Assistant Secretary Attachments
cc: Adam Kanzer
Domini Social Investments LLC
536 Broadway, 7thFloor
New York, NY 10012-3915 Linda Priscilla
Laborers' International Union of North America Corporate Governance Project
905 16thStreet, N.W.
Washington, D.C. 20006 [APPENDIX 1]
Political Contribution & Participation Report Proposal Resolved, that the shareholders of Time Warner, Inc. ("Company") request that
the Company prepare a Corporate Political Contribution and Participation Report
("Political Report") describing our Company's participation in federal, state
and local political election campaigns. The Political Report should include the
following information: A statement describing the Company's political participation policy and business
rationale for its participation in partisan political activities;
A description of the Company's decision-making process related to contributions
of financial resources or the utilization of Company property and personnel for
political purposes; An accounting of Company monies contributed to political candidates, political
campaigns or political parties and committees; An accounting of Company resources, including Company property and personnel,
that have been utilized for political campaign purposes or made available to
incumbent federal, state or local political officials or those seeking political
office; An accounting of Company resources, including Company property and personnel,
that have been utilized in support of or in opposition to any ballot initiative
brought before voters on a local or state level; and The identification of Company personnel with the authority to approve the
utilization of Company resources in the political arena. The Political Report should be prepared at reasonable expense, updated annually,
and posted on the Company's website or distributed to shareholders in any other
manner determined to be efficient by the Company. Supporting Statement: Our Company is permitted by law and regulation to
participate in political campaigns and elections through the contribution and
expenditure of money and other Company resources. While various aspects of these
political participation activities are covered by federal and state reporting
requirements, we believe shareholders would benefit by the detailed disclosure
requested by the proposal. We do not believe that current disclosure
requirements by federal and state regulatory agencies present shareholders with
the complete information necessary to make informed decisions about the
Company's activities in this area. This proposal does not prohibit lawful political participation and contribution
actions by the Company. It does not even request that shareholders be given the
right to approve the expenditure of corporate resources in the political arena.
Rather, it simply requests detailed disclosure so that shareholders may be
informed concerning the rationale for the expenditure of corporate resources in
various political arenas. We believe that corporate political participation is becoming increasingly
controversial and that shareholders need to be fully informed of their Company's
political contribution activities. In our view, the detailed disclosure we
request will allow shareholders to form an educated opinion concerning our
Company's political participation and whether they believe such actions are in
the best long-term interests of the Company and its owners. [APPENDIX 2]
Political Contrlbutions Whereas: The media industry, and Time Warner in particular, spend significant financial
and other resources to support political candidates and political entities.
From 1999-2002, the 25 largest media companies in the U.S. gave $26.7 million in
political contributions. AOL/Time Warner led the industry in political
contributions, giving $6.2 million in this period. (Source: Center for
Responsive Politics. This figure includes the spending of both AOL and Time
Warner in the 2000 election cycle, and AOL/Time Warner's spending in the 2002
cycle.) Whereas: We believe shareholders are entitled to know how their company is spending its
funds for political purposes. However, although there are various disclosure
requirements for political contributions, they are difficult for shareholders to
access and they are not complete. For example, corporate soft money
contributions are currently legal in 49 states, but the disclosure standards can
vary. Also, while corporations are not allowed to make direct contributions to
candidates, they are allowed to fund the administrative support for PACs to
which employees make contributions. Corporations can also make unlimited
contributions to "Section 527" organizations, which are political committees
formed for the purpose of influencing elections, but not supporting or opposing
specific candidates. These contributions do not have to be reported.
Whereas: We believe that our company should be using its resources to win in the
marketplace through superior products and services to its customers, not because
it has superior access to political leaders. Political power can change, leaving
companies relying on this strategy vulnerable. Whereas:
We believe that public backlash against corporate political influence may harm
our company's reputation and, as a result, its longer-term business prospects.
We believe that this is especially true because our company's brands include
CNN, Time Magazine, and other providers of political coverage whose success
depends upon a perception of objectivity. Therefore, be it resolved: The shareholders request that the Board of Directors
adopt a policy to report annually to shareholders in a separate report on
corporate resources devoted to supporting political entities or candidates on
both state and federal levels. The report should be prepared at reasonable
expense, and omit proprietary information. We suggest that the requested
comprehensive report set forth and quantify, specifically and not in aggregate,
company resources devoted to supporting political entities and candidates, to
supporting third-party organizations that engage in political activity including
section 527 organizations, and related expenditures of money and other
resources. [INQUIRY LETTER]
February 3, 2004 Office of Chief Counsel
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Response to Time Warner Inc.'s Request for No-Action Advice Concerning the
Central Laborers' Pension Fund's Shareholder Proposal Dear Sir or Madam:
The Central Laborers' Pension Fund (the "Fund") hereby submits this letter in
reply to Time Warner Inc.'s ("Time Warner" or "the Company") Request for
No-Action Advice concerning the shareholder proposal ("Proposal") and supporting
statement our Fund submitted to the Company for inclusion in its 2004 proxy
materials. Pursuant to Rule 14a-8(k), six paper copies of the Fund's response
are hereby included and a copy has been provided to the Company.
The Company has requested that the staff of the Division of Corporation Finance
(the "Staff") of the Securities and Exchange Commission (the "SEC") advise it
that no action will be taken if the Company omits the Fund's Proposal pursuant
to Rule 14a-8(i)(7) as a matter of ordinary business or under Rule 14a-8(i)(3)
as vague and misleading. As we demonstrate below, the Company has failed to
satisfy its burden of persuasion under either basis and should be ordered to
include the Proposal in its upcoming proxy statement. The Proposal submitted by the Fund provides:
Resolved, that the shareholders of Time Warner, Inc. ("Company") request that
the Company prepare a Corporate Political Contribution and Participation Report
("Political Report") describing our Company's participation in federal, state
and local political election campaigns. The Political Report should include the
following information: A statement describing the Company's political participation policy and business
rationale for its participation in partisan political activities;
A description of the Company's decision-making process related to contributions
of financial resources or the utilization of Company property and personnel for
political purposes; An accounting of Company monies contributed to political candidates, political
campaigns or political parties and committees; An accounting of Company resources, including Company property and personnel,
that have been utilized for political campaign purposes or made available to
incumbent federal, state or local political officials or those seeking political
office; An accounting of Company resources, including Company property and personnel,
that have been utilized in support of or in opposition to any ballot initiative
brought before voters on a local or state level; and The identification of Company personnel with the authority to approve the
utilization of Company resources in the political arena. The Political Report should be prepared at reasonable expense, updated annually,
and posted on the Company's website or distributed to shareholders in any other
manner determined to be efficient by the Company. The Proposal Does Not Relate to the Company's Ordinary Business
The Company argues that it should be allowed to omit the Proposal because "[t]he
Staff has consistently permitted companies to exclude from their proxy materials
proposals with respect to lobbying or advertising that relate to their products
or operations." The Company proceeds to acknowledge, though, that "At the same
time, the Staff has found that proposals relating to a company's contributions
to political campaigns or entities constitute `general political activities that
are not excludable under Rule 14a-8(i)(7). See General Electric Co. (February
22, 2000) ("GE") (proposal that the company summarize its campaign finance
contributions not related to ordinary business operations)"
The proposal at issue in General Electric stated:
RESOLVED, that General Electric publish a report to shareholders outlining its
policies and use of shareholder funds for political purposes. The report shall:
a) summarize GE's federal, state and local campaign finance contributions
(including soft money contributions) and lobbying expenses; b) summarize the
company's policies applied in allocating shareholder funds for political
purposes; and c) summarize the corporation's lobbying position on campaign
finance reform. This report shall be prepared at reasonable cost, and may omit
confidential information. The report shall be made available to shareholders, no
later than September 30, 2000. General Electric argued then, as the Company does now, that
It is in fact imperative to GE's ordinary business operations that it maintain
the ability to expend corporate funds to participate in the administrative,
legislative, and political arenas to inform, support, and sometimes oppose,
initiatives that affect GE's ordinary business activities and the interests of
the Company and its shareowners. It is long-settled that proposals relating to a
company's involvement in administrative, legislative, and political processes
may be excluded under Rule 14a-8(i)(7), the `ordinary business' exclusion. Often
this line of precedent characterizes such potential activities as `lobbying,'
and in this case the Proposal itself focuses on GE's `lobbying' activities.
The Staff ruled against General Electric, finding that the proposal was not
excludable on ordinary business grounds. In its no-action response, the Staff
advised: The proposal would require that GE publish a report to shareholders outlining
GE's policies and use of shareholder funds for political purposes. The report
would summarize: (1) GE's federal state and local campaign finance contributions
(including soft money) and lobbying expenses; (2) GE's policies applied in
allocating shareholder funds for political purposes; and (3) GE's lobbying
position on campaign finance reform. We are unable to concur in your view that GE may exclude the proposal under rule
14a-8(i)(7). We note that the proposal appears to focus on GE's general
political activities rather than GE's products, services or operations.
Accordingly, we do not believe that GE may omit the proposal from its proxy
materials in reliance on this rule. Like the proposal in GE, the Proposal submitted by our Fund focuses on Time
Warner's general political activities. Our Proposal seeks information concerning
both the amount of political contributions as well as information about the
process by which such contributions are determined and made. The Proposal
clearly relates to the Company's general political activities, not its products,
services or operations. See also American Telephone and Telegraph Company (Jan.
11, 1984) ("This Division is unable to concur in your opinion that the proposal
may be excluded under Rule 14a-8(c)(7). The Company's statement that it does
`legitimately incur expenses in order to attempt to assure a legislative climate
solicitous to the needs of the Company's business' does not provide a sufficient
basis to permit a determination that the Company's activities are limited to
those relating to specific referenda or lobbying activities that relate directly
to the Company's ordinary business rather than general political activities.
Accordingly, we do not believe that the management has demonstrated that the
proposal would relate solely to the Company's ordinary business.");
International Business Machines Corporation (Mar. 7, 1988); General Motors
Corporation (Mar. 10, 1989). The Company Has Failed to Satisfy Its Burden of Persuasion That the Proposal Is
False and Misleading The Company next argues that the Proposal should be excluded under Rule
14a-8(i)(3) and 14a-9 as false and misleading. It notes that the term "corporate
resources" is broad and that the terms "political participation policy,"
"partisan political activities," "political purposes," and "political arena" are
"vague and subject to considerable latitude in interpretation." It concludes
that combining these terms makes the requirements of the Proposal "unknowable."
As noted above, the Proposal requests that the Company prepare a report at
reasonable expense to inform shareholders about several aspects of the Company's
political activities. The terms cited by the Company as purportedly rendering
the Proposal false and misleading are actually simple, straightforward terms
designed to ascertain information concerning the Company's participation in the
political process. For example, the Proposal requests an accounting of Company
resources that have been utilized for political campaign purposes or made
available to incumbents or candidates. We believe the Company should disclose to
shareholders Company resources that are being donated to candidates for office,
whether it be a monetary contribution or placing other resources at the disposal
of candidates. Shareholders are clearly entitled to submit shareholder proposals
concerning a company's political activities. Thus, we are hard-pressed to
understand why requesting disclosure concerning the Company's policy concerning
"political participation" would render the Proposal false and misleading.
For all these reasons, we respectfully submit that the Company has failed to
satisfy its burden of persuasion that the Proposal is a matter of ordinary
business or false and misleading. Therefore, the Company should be ordered to
include the Proposal in its 2004 proxy statement. Sincerely,
/s/ Barry McAnarney
Executive Director Cc: Linda Priscilla, Corporate Governance Advisor Paul Cappuccio, Esq.
[STAFF REPLY LETTER]
February 11, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: Time Warner, Inc. Incoming letter dated December 26, 2003
The first proposal requests that Time Warner prepare and submit to shareholders
a report, updated annually, containing the following: (1) a statement describing
Time Warner's political participation policy and business rationale for its
participation in partisan politics; (2) a description of Time Warner's
decision-making process relating to political contributions; (3) an accounting
of Time Warner's money contributed to political candidates, campaigns, parties
or committees; (4) an accounting of Time Warner's resources utilized for
political campaign purposes, or made available to political candidates; (5) an
accounting of Time Warner's resources utilized with respect to ballot
initiatives; and (6) the identity Time Warner personnel involved in making
decisions with respect to Time Warner's political contributions. The second
proposal requests that the board of directors adopt a policy to report annually
on the corporate resources Time Warner devotes to supporting political entities
or candidates on the state and federal levels. We are unable to concur in your view that Time Warner may exclude the first
proposal under rule 14a-8(i)(3). Accordingly, we do not believe that Time Warner
may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(3).
We are unable to concur in your view that Time Warner may exclude the first
proposal under rule 14a-8(i)(7). Accordingly, we do not believe that Time Warner
may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(7).
There appears to be some basis for your view that Time Warner may exclude the
second proposal under rule 14a-8(i)(11), as substantially duplicative of the
first proposal that will be included in Time Warner's 2004 proxy materials.
Accordingly, we will not recommend enforcement action to the Commission if Time
Warner omits the second proposal from its proxy materials in reliance on rule
14a-8(i)(11). In reaching this position, we have not found it necessary to
address the alternative bases for omission upon which Time Warner relies.
Sincerely, /s/
John J. Mahon
Attorney-Advisor
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