Company Name: Verizon Communications Inc.
Public Availability Date: January 19, 2004Document Sections:
INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER [INQUIRY LETTER]
December 30, 2003 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Verizon Communications Inc.Omission of Shareholder Proposal Pursuant to
Rule 14a-8 Dear Sir or Madam: We are writing on behalf of our client, Verizon Communications Inc., a Delaware
corporation (the "Company"), pursuant to Rule 14a-8(j) under the Securities
Exchange Act of 1934, as amended, to respectfully request that the Staff of the
Division of Corporation Finance (the "Staff") of the Securities and Exchange
Commission (the "Commission") concur with the Company's view that, for the
reasons stated below, the shareholder proposal and supporting statement (the
"Proposal") submitted by Richard A. Dee (the "Proponent"), may properly be
omitted from the proxy materials (the "Proxy Materials") to be distributed by
the Company in connection with its 2004 annual meeting of shareholders (the
"2004 Annual Meeting"). This letter relates to the second proposal submitted by
theProponent in connection with the Company's 2004 Annual Meeting. The
undersigned, on behalf of the Company, has previously submitted two letters to
the Staff, dated December 18, 2003 and December 23, 2003, in response to the
Proponent's first proposal submitted to the Company in connection with the 2004
Annual Meeting. Pursuant to Rule 14a-8(j)(2), we are enclosing six copies of (i) this letter and
(ii) the Proposal and cover letter dated December 19, 2003 submitted by the
Proponent, attached hereto as Exhibit A. In accordance with Rule 14a-8(j), a
copy of this submission is being sent simultaneously to the Proponent.
I. Introduction The Proposal requests that the Board of Directors (the "Board") of the Company
adopt a resolution that would require its Chairman of the Board to serve only in
such capacity, and would prohibit the Chairman of the Board from serving as a
member of the Company's management. The text of the resolution is as follows:
"Stockholders hereby request that the Verizon Communications Board of Directors
adopt promptly a resolution requiring that the Chairman of the Board serve in
that capacity only, and have no management duties, titles, or responsibilities."
The Company requests that the Staff concur with the Company's view that the
Proposal may be excluded from the Proxy Materials because (i) in violation of
Rule 14a-8(e)(2), the Proponent has submitted the Proposal in an untimely
manner, and (ii) the Proposal substantially duplicates another proposal
previously submitted to the Company by another proponent that will be included
in the Company's Proxy Materials to be distributed in connection with its 2004
Annual Meeting and is therefore properly excludable under Rule 14a-8(i)(11). In
addition, as discussed in Section III below, because the Proposal was submitted
in an untimely manner, the Company requests that the Staff waive the requirement
under Rule 14a-8(j)(1) that this letter be submitted at least 80 calendar days
before the date of the Company's filing of its definitive Proxy Materials with
the Commission. II. Bases for Excluding the Proposal
A. The Proposal May Be Omitted Under Rule 14a-8(e)(2) Because the Proponent
Submitted the Proposal in an Untimely Manner Rule 14a-8(e)(2) states that a shareholder proposal "must be received at the
company's principle executive offices not less than 120 calendar days before the
date of the company's proxy statement released to shareholders in connection
with the previous year's annual meeting" for the submission of such proposal to
be deemed timely for Rule 14a-8 purposes. The Proposal was received by the
Company on December 19, 2003, five weeks after the November 14, 2003 submission
deadline. Because the Proponent failed to submit the Proposal within the time
frame required under Rule 14a-8(e)(2), the Proposal may properly be excluded
from the Proxy Materials. The Staff has strictly construed the timeliness requirement of Rule 14a-8(e)(2),
permitting companies to exclude proposals that were received even one day after
the 120-day deadline. See, e.g., Viacom Inc. (March 10, 2003); The Coca-Cola
Company (January 11, 2001); and Hewlett Packard Company (November 9, 1999)
(proposals received one day after the 120-day deadline may properly be excluded
as untimely). On page 17 of the Company's proxy statement distributed to shareholders in
connection with the Company's 2003 annual meeting of shareholders, the Company
informed shareholders that proposals must be received no later than November 14,
2003 to be considered for inclusion in the Proxy Materials to be distributed in
connection with the 2004 Annual Meeting. This date was calculated in accordance
with the 120-day requirement under Rule 14a-8(e)(2). Because the Company
received the Proposal on December 19, 200335 days after this deadlinethe
Proponent has failed to meet the timeliness requirement under Rule 14a-8.
We note that the Company has not provided the Proponent with the 14-day notice
under Rule 14a-8(f)(1), since such notice is not required if the defect in a
proposal cannot be cured. Rule 14a-8(f)(1) does not require the 14-day notice in
connection with violations of Rule 14a-8(e). Section C.6.c. of the Division of
Corporation Finance: Staff Legal Bulletin No. 14 (July 13, 2001) cites the
failure of a proponent to submit a proposal by the submission deadline as an
example of a defect that cannot be remedied and, therefore, not subject to the
14-day notice requirement of Rule 14a-8(f)(1). B. The Proposal May Be Omitted Under Rule 14a-8(i)(11) Because It Is
Substantially Duplicative of a Proposal Previously Submitted That Will Be
Included in the Proxy Materials for the 2004 Annual Meeting
Rule 14a-8(i)(11) allows a company to exclude a shareholder proposal if it
"substantially duplicates another proposal previously submitted to the company
by another proponent that will be included in the company's proxy materials for
the same meeting." The Staff has consistently found that shareholder proposals are substantially
duplicative for purposes of Rule 14a-8(i)(11) if the core issues and principles
addressed are substantially the same even if they differ in terms or breadth.
See, e.g., Wells Fargo & Company (December 26, 2002) (proposal requesting that
the board of directors adopt a policy expensing the cost of future stock options
substantially duplicated a proposal requesting that the board of directors cease
using any form of executive compensation, including executive stock options,
unless the costs of such compensation were expensed); BellSouth Corporation
(January 14, 1999) (proposal recommending the abolition of the company's
incentive award program and its replacement with an incentive award tied to the
stock price of the company substantially duplicated a proposal demanding the
abolition of the company's incentive award program and its replacement with an
incentive award program tied to revenue or dividend growth); and UAL Corporation
(March 11, 1994) (proposal recommending a policy of secret ballot voting
substantially duplicated a proposal recommending a policy of confidential voting
that would be suspended in the case of a proxy contest where non-management
groups have access to voting results). See also, Verizon Communications Inc.
(January 31, 2001); Freeport-McMoRan Copper & Gold Inc. (February 22, 1999); and
Excel Industries, Inc. (January 26, 1999). Prior to its receipt of the Proposal on December 19, 2003, the Company received
a substantially similar proposal submitted by the American Federation of Labor
and Congress of Industrial Organizations on November 13, 2003 (the "AFL-CIO
Proposal"), a copy of which is attached hereto as Exhibit B. The Company intends
to include the AFL-CIO proposal in the Proxy Materials to be distributed in
connection with the 2004 Annual Meeting. The text of the resolution included in
the AFL-CIO Proposal provides: "RESOLVED: The stockholders request that the Board of Directors: (1) adopt a
policy that the Chairman of the Board will be an independent director who has
not previously served as an officer of Verizon Communications; and (2) provide
thatthe policy shall be implemented on or after the date of the 2005 Annual
Meeting without violating any existing contractual provision."
Although the Proposal requests that the Board "adopt a resolution" and the
AFL-CIO Proposal requests that the Board "adopt a policy", the primary purpose
of both proposals is to have the Company require that the Chairman of the Board
be an independent director who does not serve as a member of management. Because
the Proposal deals with the same core issues and principles as the AFL-CIO
Proposal, it is substantially duplicative of such proposal within the meaning of
Rule 14a-8(i)(11). For the foregoing reasons, the Company believes that the Proposal may properly
be omitted under Rule 14a-8(i)(11) because it is substantially duplicative of
the AFL-CIO Proposal that the Company intends to include in the Proxy Materials
to be distributed in connection with the 2004 Annual Meeting.
III. The Company's No-Action Request Falls Under the Good-Cause Exception to
Rule 14a-8(j)(1) The Company also respectfully requests that the Staff waive the requirement
under Rule 14a-8(j)(1) that the Company file its reasons for excluding the
Proposal no later than 80 calendar days before it files its definitive proxy
statement and form of proxy with the Commission. Rule 14a-8(j)(1) provides that
the Staff may permit the Company to seek relief from the such 80-day deadline
upon a showing that good cause exists for missing the deadline.
As discussed in Section II.A. above, the Proposal was submitted by the Proponent
five weeks after the submission deadline. The Proposal was received by the
Company by facsimile transmission on the evening of Friday, December 19, 2003.
Given that the following week was a holiday week, it necessarily took a number
of days for the Company to consider and consult with counsel concerning the
Proposal, and for this letter to be prepared. Although the Company has not set a
precise date for the filing of its definitive Proxy Materials with the
Commission, it is possible that this letter is being submitted to the Staff less
than 80 calendar days before such date. Accordingly, the Company is requesting a
waiver of such 80-day period. The Staff previously has granted waivers under the 80-day requirement of Rule
14a-8(j)(1) in numerous similar instances. See, e.g., UGI Corporation (November
20, 2002) (request granted for waiver of 80-day requirementwhere company would
have had only six days to consider and prepare a response to an untimely
proposal prior to the commencement of 80-day period) and Lone Star Steakhouse &
Saloon, Inc. (March 22, 2002) (request granted for wavier of 80-day requirement
where the date of the company's filing of its definitive proxy was uncertain
and, therefore, the company's no-action request ultimately might not have been
submitted before the required 80-day period). See also, Andrew Corporation
(October 15, 1998); United Parcel Services (February 19, 1998); and Star
Technologies, Inc. (June 25, 1996). IV. Conclusion
For the reasons discussed above, the Company requests that the Staff concur with
the Company's view that the Proposal may properly be omitted from its Proxy
Materials (i) under Rule 14a-8(e) because the Proponent has submitted the
Proposal in an untimely manner, and (ii) under Rule 14a-8(i)(11) because the
Proposal substantially duplicates another proposal previously submitted to the
Company by another proponent that will be included in the Company's Proxy
Materials to be distributed in connection with the 2004 Annual Meeting. The
Company also requests that the Staff waive the requirement under Rule
14a-8(j)(1) that this letter be submitted at least 80 calendar days before the
date of filing of its definitive Proxy Materials with the Commission. Should the
Staff disagree with the Company's position or require any additional
information, we would appreciate the opportunity to confer with the Staff
concerning these matters prior to the issuance of its response.
If the Staff has any questions or comments regarding the foregoing, please
contact the undersigned at (212) 735-3360, or, in my absence, Richard J.
Grossman of this firm at (212) 735-2116. Very truly yours,
/s/ Daniel E. Stoller
Enclosures cc: Marianne Drost, Esq., Senior Vice President, Deputy General Counsel and
Corporate Secretary, Verizon Communications Inc. Mr. Richard A. Dee [APPENDIX]
Shareholder Proposal RESOLVED: The stockholders request that the Board of Directors: (1) adopt a
policy that the Chairman of the Board will be an independent director who has
not previously served as an officer of Verizon Communications; and (2) provide
that the policy shall be implemented on or after the date of the 2005 Annual
Meeting without violating any existing contractual provision.
Statement of Support Verizon Communications has announced that, at the close of business on December
31, 2003, CEO Ivan Seidenberg will assume the additional position of Chairman of
the Board. However, as one expert has observed, "leading the board and leading
the company are two distinct and important jobs." (Fortune, October 14, 2002).
We believe the need for separate positions of Chairman and CEO is especially
important at Verizon. In June 2002, the Corporate Library, an independent
research firm, named the Verizon Board as one of the ten least effective in the
United States. The Chairman of the Board is generally responsible for presiding at Board
meetings and setting the agenda of the Board. This agenda may include the review
and approval of major strategies and plans, the annual corporate budget, the
evaluation and compensation of the CEO, and the review of systems for compliance
with applicable laws, regulations and accounting rules. In contrast, the Chief
Executive Officer is primarily responsible for managing operations. He also
executes the strategies and plans that the Board approves.
Jeffrey Garten, the Dean of the Yale School of Management, has declared that
"fundamental conflicts of interest can exist" when the "CEO also runs his
company's board." (Business Week, Nov. 11, 2002). Such conflicts could arise
whenever the Board performs its duty of evaluating the performance of the CEO,
questioning major strategies and plans, or monitoring the Company's compliance
with laws, regulations and accounting rules. Dean Garten concluded, "it is much
more difficult for a board to monitor a chief executive's performance and hold
him accountable for results if the CEO is also the chairman."
On January 9, 2003, a blue-ribbon commission of financial leaders expressed a
preference for separating the positions of Chairman and CEO, while giving a
lesser endorsement to alternatives that call for a lead or presiding director.
(Report of the Conference Board Commission on Public Trust and Private
Enterprise). The Co-Chair of the Commission declared that "a primary concern in
a significant number of scandals is that strong CEO's appear to have exerted a
dominant influence over their boards, often stifling the efforts of directors to
play the central oversight role." (Chicago Tribune, Jan. 10, 2003).
A recent report of the Investor Responsibility Research Center states that
"thirty percent of S&P 1,500 companies now have a CEO who does not
simultaneously serve as the company chair, up from 26 percent in 2001." It adds
that 17 percent of those companies "now have a lead or presiding director
position." We believe this trend favors separation of the positions of Chairman
and CEO. Please vote FOR this proposal.
Exhibit A December 19, 2003
RICHARD A. DEE
By Fax to (202) 942-9525
Office of Chief Counsel
Division of Corporation Finance
The Securities and Exchange Commission
Judiciary Plaza 450 Fifth Street, N.W.
Washington, DC 20549 Re: Verizon Communications Inc.2004 Stockholder Proposal
Ladies and Gentlemen: On behalf of its clierit, Verizon Communications Inc., Skadden, Arp, Slate,
Meagher & Flom has written to you to request that you agree to omission of the
2004 proposal that I submitted to Verizon calling upon it to provide
stockholders with a choice of director candidates. I originated this Corporate Governance proposal, and I sponsored it first in
1995 when it was voted on by stockholders of Verizon's predecessors, Nynex and
Bell Atlaritic - and by the stockholders of three other major companies. I have
sponsored the proposal on a number of occasions since 1995, and it was voted on
by Verizon stockholders most recently in 2003. Verizon informed me by letter, a copy of which is enclosed, that at its 2003
Annual Meeting 10% of its shares had been voted For my proposal, and 90% Against
it. I took Verizon at its word. My 2004 proposal, which is almost identical to that voted on in 2003, actually
was submitted to and received by Verizon on January 2, 2001. And, I shall
petition for its inclusion in 2004 proxy materials. Following its April 2003 annual meeting, Verizon, with my 2004 proposal in hand,
had eight months time during which to challenge it on the basis that it may have
received a hair less than the 10% of the voto that it confirmed to me. It did
not do so. Instead of informing me of the slight inconsistency in its reporting, Verizon
acknowledged receipt of my 2004 proposal, asked for proof of my holdings (which
I fumished), and then waited until about a month after the submission date for
2004 proposals had passed before issuing its challenge - via outside counsel.
Planning to complicate if not preclude inclusion of any proposal sponsored by
me? Possibly. I am optimistic that Verizon will consider carefully the circumstances involved
here - and that we can come to a fair and reasonable understanding that will not
require the Commission's involvement. I think this problem can be settled
simply, easily, and amicably by me and Verizon, and I shall proceed on that
basis at once. Hopefully, we will be able to come up with a mutually
satisfactory solution. Sincerely, /s/
Enclosures (2) Stockholder Proposal - 2004 Proxy Statement
VERIZON COMMUNICATIONS INC. Submitted 12/19/03
(Replacing proposal submitted 1/2/2001)
"Stockholders hereby request that the Verizon Communications Board of Directors
adopt promptly a resolution requiring that the Chairman of the Board serve in
that capacity only, and have no management duties, titles, or responsibilities.
"When a person acts, for example, as both a corporation's chairman and its CEO,
a vital separation of power and responsibility is eliminated - and the owners of
the corporation, its stockholders, are deprived not only of a crucial protection
against conflicts of interest, they are deprived of a clear and direct channel
of communication with the corporation. "What stockholder-damaging conflicts of interest can be more serious than those
that so often occur when overseers are allowed to oversee and supervise
themselves? When a corporation's chairman is also its CEO, such conflicts can
and do happen. "It is well to remember that at Enron, WorldCom, Tyco, and other legends of
mismanagement and/or corruption, the chairmen also served as CEO's. And their
dual roles helped those individuals to achieve virtually total control of the
companies. "Clearly, when a chairman runs a company, the information received by directors
and others may or may not be accurate. If a CEO wants to cover up corporate
improprieties, how difficult is it to convince subordinates to go along? If they
disagree, with whom do they lodge complaints? The chairman?
"As banker, investment banker, and concerned and outspoken stockholder, my
experience with corporate chairmen, presidents, CEO's, and directors has been
very considerable. And I do not come lately to Corporate Governance. The term
was new when, in 1979, I originated and sponsored the first Corporate Governance
proposal ever voted upon - at 3M Company, calling upon it to reconstitute its
board so that a majority of directors would be non-management Outside Directors.
"Few individual stockholders know enough about companies to question their
activities, and institutional investors, many of whom know just as little, are
too busy currying favor with managements to have the guts to question them - and
by doing so risk loss of access to the widely profitable "Inside Information
Superhighway". That combination of stockholders has proven a recipe for
disasters. "Stockholders must continue to expect the unexpected unless and until they
demand that company boards be composed of substantial majorities of independent
and objective outside directors who are particularly well-qualified to serve
their interests - and until directors select as chairmen those who are
independent of managements. "While individual stockholders are responsible only to themselves, institutional
stockholders are responsible to millions of investors. All too often they have
betrayed not only their moral obligations, but their duties as fiduciaries.
"Efforts to improve Corporate Governance have been embodied increasingly in
stockholder proposals such as thiswhich have been opposed almost universally by
institutional stockholders. It is time for those whose financial futures are in
the hands of money managers to inform those fiduciaries that they expect them to
recognize their duties and to fulfil their legal obligations. There is no other
priority. Voting in favor of this proposal will help. "Please vote FOR this proposal."
******
[STAFF REPLY LETTER]
January 19, 2004 Response of the Office of Chief Counsel
Division of Corporation Finance Re: Verizon Communications Inc. Incoming letter dated December 30, 2003
The proposal relates to limitations on the responsibilities of the Chairman of
the Board. There appears to be some basis for your view that Verizon may exclude the
proposal under rule 14a-8(e)(2) because Verizon received it after the deadline
for submitting proposals. We note in particular your representation that Verizon
did not receive the proposal until after this deadline. Accordingly we will not
recommend enforcement action to the Commission if Verizon omits the proposal
from its proxy materials in reliance on rule 14a-8(e)(2). In reaching this
position, we have not found it necessary to address the alternative basis for
exclusion upon which Verizon relies. Sincerely,
/s/ Grace K. Lee
Special Counsel
|
