Company Name: Visteon Corp.
Public Availability Date: February 19, 2004Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
January 7, 2004 VIA OVERNIGHT DELIVERY
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Visteon Corporation - Commission File No. 001-15827 Omission of Shareholder
Proposal of Mr. Mark Latham Pursuant to Rule 14a-8 Ladies and Gentlemen:
Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, on behalf
of our client Visteon Corporation, a Delaware corporation ("Visteon"), we are
submitting this notice of Visteon's intention to omit from its proxy materials
for its 2004 Annual Meeting of Stockholders (the "2004 Proxy Materials") a
proposal submitted by Mr. Mark Latham (the "Proposal").
Visteon's 2004 Annual Meeting is scheduled for May 12, 2004. Definitive copies
of the 2004 Proxy Materials are expected to be mailed to stockholders and filed
with the Commission pursuant to Rule 14a-6(b) on or about March 29, 2004.
Visteon intends to exclude the Proposal from its 2004 Proxy Materials in its
entirety for each of the following, independently significant, reasons:
the Proposal is vague and misleading;
the Proposal has been substantially implemented;
Visteon does not have the power and authority to implement the Proposal;
the Proposal violates the Commission's proxy rules;
the Proposal violates applicable Delaware law; and
the Proposal relates to the ordinary business of Visteon.
I. BACKGROUND By letter dated November 26, 2003, Mr. Latham requested that Visteon include the
Proposal in its 2004 Proxy Materials. The Proposal provides in full as follows:
"VOTING LEVERAGE PROPOSAL "WHEREAS shareowners should have the right to vote any way they want (except for
buying and selling votes); "WHEREAS many individual shareowners lack the time and expertise to make the
best voting decisions themselves, yet prefer not to always follow directors'
recommendations, because of possible conflicts of interest;
"WHEREAS several institutional investors now publish their voting decisions more
than one week before each company's voting deadline; "THEREFORE BE IT RESOLVED that Visteon Corporation shareowners request the Board
of Directors to study and report on the feasibility of enabling shareowners to
conveniently imitate an institutional investor's voting decisions, on all
matters put to shareowner vote except director elections. (Director elections
are excluded here to satisfy SEC Rule 14a-8(i)(8).). So for example, besides
being offered a convenient choice of voting the entire proxy as the Board
recommends, perhaps shareowners could be offered a similarly convenient choice
of voting the entire proxy (except director elections) the same way Domini
Social Investments votes its shares. "Supporting Statement:
"Institutional investors that publish their voting decisions on the worldwide
web include: - CalPERS (California Public Employees' Retirement System) at
www.calpers-governance.org/alert/proxy - Calvert Group at www.calvert.com/planning_2627.html
- Domini Social Investments at www.domini.com/shareholder-advocacy/Proxy-Voting
- MMA Praxis Mutual Funds at www.mmapraxis.com/corporate/proxy_voting_set.html
- Ontario Teachers' Pension Plan at www.otpp.com/web/proxyvot.nsf/proxyvotes?openform
- Pax World Fund at www.paxfund.com/proxyvote4.htm
"In particular, Domini Social Investments published its voting decisions for
last year's Visteon Corporation proxy. "One of the main reasons for having shareowner voting at all is that there would
be conflicts of interest inherent in leaving all decisions to the Board. Simply
following the Board's voting recommendations does little to counterbalance such
conflicts. Introducing competing sources of convenient guidance for individual
shareowners could help make voting more independent of the Board.
"The conflicts of interest among managers, directors and shareowners are
described in Robert Monks' and Nell Minow's 1996 book Watching the Watchers,
along with shareowners' `free rider' and `rational ignorance' problems.
"The potential benefits of this proposal are discussed in the article `Vote Your
Stock' on the web at www.corpmon.com/publications.htm."
Although the Proposal is drafted to request that Visteon's board of directors
"study and report on the feasibility of enabling shareowners to conveniently
imitate an institutional investor's voting decision," the remainder of the
Proposal, as well as the supporting statement, suggest that Visteon should
modify its proxy card to include a separate box on the card in which a
stockholder could direct that his or her shares be voted in accordance with the
vote of an institutional investor. Although some of the analyses contained in
this letter address each aspect of the Proposal separately, we also believe the
Proposal is a unitary whole and should be excluded in its entirety.
The Proposal is virtually identical to one submitted last year by Mr. Latham.
The Staff permitted exclusion of Mr. Latham's proposal last year pursuant to
rule 14a-8(i)(8), on the basis that it related to an election for membership on
Visteon's board of directors. Mr. Latham has slightly modified last year's
proposal so that it will not apply to director elections. Clearly, by modifying
the Proposal in this manner, he hopes to circumvent the basis of exclusion for
last year's proposal. On behalf of Visteon, however, we assert that the Proposal
may be excluded from the 2004 Proxy Materials nevertheless, pursuant to the
following provisions of the Commission's proxy rules: A. Rule 14a-8(i)(3), because the Proposal is vague and misleading;
B. Rule 14a-8(i)(10), because the Proposal has been substantially implemented;
C. Rule 14a-8(i)(6), because Visteon does not have the power and authority to
implement the Proposal; D. Rule 14a-8(i)(3), because the Proposal violates the Commission's proxy rules;
E. Rule 14a-8(i)(2), because the Proposal violates applicable Delaware law; and
F. Rule 14a-8(i)(7), because the Proposal relates to the ordinary business of
Visteon. To the extent that this letter is based on matters of Delaware law, this letter
also constitutes an opinion of counsel (Foley & Lardner) given pursuant to Rule
14a-8(j)(2)(iii). II. LEGAL ANALYSIS
A. Statements made in the Proposal are false, vague and misleading in violation
of Rule 14a-9 and therefore may be omitted pursuant to Rule 14a-8(i)(3).
1. The Proposal is so indefinite and vague that it is misleading under Rule
14a-9. Pursuant to Rule 14a-8(i)(3), a shareholder proposal may be excluded "if
the proposal or supporting statement is contrary to any of the Commission's
proxy rules, including [Rule 14a-9], which prohibits materially false or
misleading statements in proxy soliciting materials." In several instances, the
Staff has determined that a shareholder proposal is so indefinite and vague that
it is misleading under Rule 14a-9. See IDACORP, Inc. (Dec. 12, 2003), E.I. du
Pont de Nemours and Company (Feb. 13, 1992), The Adams Express Company (Jan. 10,
2000), Pinnacle West Capital Corporation (Mar. 19, 1990) and Niagara Mohawk
Power Corporation (Feb. 16, 1990). As explained below, each of the following statements contained in the Proposal
is false, vague or misleading:
"[S]hareowners should have the right to vote any way they want."
"[M]any individual shareowners lack the time and expertise to make the best
voting decisions themselves, yet prefer not to always follow directors'
recommendations, because of possible conflicts of interest."
"One of the main reasons for having shareowner voting at all is that there
would be conflicts of interest inherent in leaving all decisions to the Board.
Simply following the Board's voting recommendations does little to
counterbalance such conflicts. Introducing competing sources of convenient
guidance for individual shareowners could help make voting more independent of
the Board."
"The conflicts of interest among managers, directors and shareowners are
described in Robert Monks' and Nell Minow's 1996 book Watching the Watchers,
along with shareowners' `free rider' and `rational ignorance' problems."
First, Mr. Latham's statement that "shareowners should have the right to vote
any way they want" implies that stockholders of Visteon cannot presently vote
any way they want. This is false because it suggests that restrictions are
imposed on stockholder voting. The truth is that stockholders may vote in any
lawful manner they choose. Second, Mr. Latham gives his opinion that stockholders lack the time and
expertise to make the best voting decisions for themselves, yet prefer not to
follow directors' recommendations because of possible conflicts of interests. He
implies that recommendations made by the directors are not the "best" voting
decisions for the stockholders and that the interests of the board of directors
in general conflict with the interests of the stockholders. Mr. Latham offers no
factual basis for these assertions. He implies, without foundation, that the
board is intentionally misleading Visteon's stockholders when it makes its
voting recommendations to them. The Staff has, on several occasions, permitted
exclusion of statements of opinion by a proponent as well as unsupported factual
assertions. See Peoples Energy Corporation (Nov. 3, 2002) and Kaufman and Broad
Home Corporation (Feb. 1, 2001). The Proposal is also misleading because the reference to stockholders' "free
rider" and "rational ignorance" problems is irrelevant to the subject matter of
the Proposal. On a number of occasions, the Staff has permitted companies to
exclude language contained in supporting statements where such language is
irrelevant to the subject matter of the proposal. For example, in Knight-Ridder,
Inc. (Dec. 28, 1995), the Staff stated that the company could omit paragraphs of
the supporting statement relating to the company's position on a strike against
one of its newspapers and the advisability of the continued employment of an
employee because the paragraphs could be "confusing and misleading to
shareholders because they are unrelated to the subject matter of the proposal"
regarding a shareholder rights plan. See also Freeport-McMoRan Copper & Gold
Inc. (Feb. 10, 1997). The Proposal also suggests that stockholders have no means by which to imitate
the voting of an institution of their choice. This is misleading because, as
will be explained below, Visteon has provided means by which its stockholders
may vote until the polls close at the annual meeting. Stockholders can easily
review the voting decisions of institutional investors and mimic those decisions
if they so choose. The supporting statement for the Proposal is misleading because it contains
numerous references to third-party websites. In addition to violating Rule
14a-8(d), which limits a shareholder proposal and the supporting statement to a
maximum of 500 words, the Staff has observed that a website reference contained
in a proposal "may undermine the proxy process requirements of Rule 14a-8." The
Emerging Germany Fund, Inc. (Dec. 22, 1998). This is because the content of a
website is continually changing and, in addition, can be false and misleading
because the truth and accuracy of the content cannot be verified. See also
Templeton Dragon Fund, Inc. (June 15, 1998) and Pinnacle West Capital
Corporation (Mar. 11, 1998). In Freeport-McMoRan Copper & Gold Inc. (Feb. 22,
1999), the Staff permitted exclusion of references to newspaper articles
contained in the proponent's support statement on the basis that such references
were false and misleading under Rule 14a-9 and therefore could be excluded in
reliance on Rule 14a-8(i)(3). The references to third-party websites is misleading in a second respect. Mr.
Latham states that several institutional investors publish their voting
decisions on their websites; he therefore implies that each institutional
investor listed in his proposal publishes voting decisions with respect to
Visteon. Most of the institutions cited in Mr. Latham's proposal, however, do
not disclose on their websites that they hold Visteon's stock; in particular,
none of CalPERS, MMA Praxis Mutual Funds, Ontario Teachers' Pension Plan or Pax
World Fund states, at its website, that it currently owns Visteon stock. Mr.
Latham's proposal is misleading by naming these institutions because it implies
that they publish voting decisions for Visteon when in fact they do not.
Finally, the supporting statement to the Proposal is misleading because it
contains a reference to an article on Mr. Latham's web site. As discussed above,
Mr. Latham's reference to a book discussing conflicts of interest among
managers, directors and stockholders and "free rider" and "rational ignorance"
problems is misleading and irrelevant to the subject matter of the Proposal.
2. The Proposal is so vague that it cannot be implemented. A proposal may be
excluded under Rule 14a-8(i)(3) when it is "so vague and indefinite that neither
shareholders voting on the proposal, nor the [c]ompany, would be able to
determine with any reasonable certainty exactly what actions or measures would
be required to implement the proposal." Archer-Daniels-Midland Company (June 21,
1991). In this connection, the Proposal requests that Visteon "study and report on the
feasibility of enabling shareowners to conveniently imitate an institutional
investor's voting decisions." The Proposal also states that, "besides being
offered a convenient choice of voting the entire proxy as the board recommends,
perhaps shareowners could be offered a similarly convenient choice of voting the
entire proxy ... the same way Domini Social Investments votes its shares." We
submit that the board of directors would be unable to determine what would
comprise a "study" or a "report" and to whom the report would be made (if other
than the supposedly-conflicted board itself). Furthermore, it is unclear what it
means to "conveniently imitate" an institutional investor's voting, as what is
convenient for one person might be quite inconvenient for another.
The Staff also has permitted the exclusion of proposals that do not specify the
means for implementation. In Duquesne Light Company (Jan. 6, 1981), exclusion of
a proposal relating to the establishment of a national utility shareholders
union was permitted under Rule 14a-8(c)(3) (the predecessor to Rule 14a-8(i)(3))
where the proposal failed to state what role the company should take in
implementing the proposal. The Staff stated that "the proposal may be
misleading, in that any action ultimately taken upon the implementation of the
proposal could be quite different from the type of action envisioned by the
shareholders at the time their votes were cast." In Wendy's International, Inc.
(Feb. 6, 1990), the Staff permitted exclusion of a proposal requesting the board
to "eliminate all anti-takeover measures previously adopted," stating that "the
proposal, if implemented, would require the Company to determine what
constitutes an anti-takeover measure. In the Division's view the determination
would have to be made without guidance from the proposal and would be subject to
differing interpretations by both shareholders voting on the proposal and the
[Company] if the proposal was implemented." It is very unclear how Visteon couldbeyond permitting stockholders to submit
proxies via telephone call or the Internetoffer stockholders "a ... convenient
choice of voting the entire proxy the same way" an institutional investor votes.
In the first place, which institutional investor would be selected for the other
stockholders to imitate? Institutional investors themselves do not vote in
identical manner, as evidenced by the fact that the two institutions cited in
the Proposal who did publish voting decisions for VisteonCalvert Group and
Domini Social Investmentsdid not vote in the same manner last year. Secondly,
how would stockholder votes be tabulated at a stockholders' meeting? Visteon
would be required to segregate the proxies that stated they should be voted the
same way an institutional stockholder voted its shares until such time as
Visteon could be certain how that institutional investor had voted. Effectively,
Visteon would be required to perform a preliminary closing of the polls at a
stockholders' meeting in order to have the voting "stand still," determine how a
particular institutional investor had voted, then re-open the polls for the
purpose of tabulating the votes of the stockholders that had submitted proxies
directing that their shares be voted the same way the institutional investor
votes. Apart from raising problems under Delaware law, this would create a
chaotic and confusing environment in which to tabulate votes and conduct the
stockholders' meeting. For the reasons discussed above, the Proposal is vague and misleading, violates
Rule 14a-9 and may be excluded from the 2004 Proxy Materials under Rule
14a-8(i)(3). Alternatively, on our advice Visteon intends to delete each part of
the Proposal quoted in this section, as well as the references to third-party
websites, in the event that the Proposal is not excluded in its entirety.
B. The Proposal may be excluded under Rule 14a-8(i)(10) because it has been
substantially implemented. Rule 14a-8(i)(10) permits a shareholder proposal to be excluded from a proxy
statement "if the company has already substantially implemented the proposal."
Under former Rule 14a-8(c)(10), the predecessor to Rule 14a-8(i)(10), no-action
letters were granted only when a shareholder proposal had already been fully
effected. In 1983, the Commission announced a new interpretive position allowing
companies to omit shareholder proposals that had already been "substantially
implemented by the issuer." Release No. 34-20091 (Aug. 16, 1983) (pages 19-20).
The reason for the change was to make application of the provision more
subjective, as the "previous formalistic application of [Rule 14a-8(c)(10)]
defeated its purpose." Id. at 20. Former Rule 14a-8(c)(10) was revised and
renumbered in 1998 to reflect this interpretation (Release No. 34-40018 (May 21,
1998)). Interpreting the "substantially implemented" standard, the Staff has said that
"a determination that [a company] has substantially implemented the proposal
depends upon whether its particular policies, practices and procedures compare
favorably with the guidelines of the proposal." Texaco, Inc. (Mar. 28, 1991).
Thus, the Staff will consider whether a company has satisfactorily addressed the
major issues and themes underlying the proposal, rather than limiting its review
to whether a company has complied with the proposal point by point. In The
Limited, Inc. (Mar. 15, 1996), the Staff permitted exclusion of a shareholder
proposal pursuant to Rule 14a-8(c)(10) where the company had adopted, published
and implemented a policy addressing the matters underlying the proposal and
represented that the company's management was willing to discuss with interested
shareholders the matters addressed in the proposal. In The Home Depot, Inc.
(Mar. 28, 2002), the Staff permitted exclusion of a proposal requesting
reinstatement of a simple majority on all issues subject to a shareholder vote
where Home Depot's proxy material was to include the company's proposal to amend
the certificate of incorporation to eliminate all super-majority provisions
applicable to voting of the company's shareholders. Here, the Proposal requests that Visteon's board of directors "study and report
on the feasibility of enabling shareowners to conveniently imitate an
institutional investor's voting decisions." The Proposal also suggests that
Visteon include a box on the proxy card enabling a stockholder to direct that
his or her shares be voted in accordance with the vote of an institutional
investor. The Proposal is excludable under Rule 14a-8(i)(10) because, as
explained below, Visteon's stockholders are, in fact, able to conveniently
imitate the voting decisions of Visteon's institutional investors if they so
choose. Mr. Latham states in the Proposal that several institutions publish their voting
decisions on their websites more than one week before voting deadlines. As noted
above, last year Calvert Group and Domini Social Investments did publish their
voting decisions for Visteon. Visteon's stockholders are able to submit their
proxies until the time that the polls close at the stockholders' meeting by
calling a toll-free telephone number or by submitting their proxies via the
Internet. See Visteon's proxy card from last year's annual meeting, enclosed
with this letter, containing instructions for all methods by which a stockholder
might submit the proxy card. Since institutions' voting decisions are readily
available on the World Wide Web well in advance of Visteon's voting deadline,
Visteon's stockholders may easily access the websites of various institutional
investors to review those institution's voting decisions before submitting their
own proxies via the Internet or toll-free telephone call. Visteon's stockholders
have had the ability to submit their proxies via the Internet or toll-free
telephone call since Visteon's first annual meeting of stockholders in May 2001.
Visteon intends to continue to provide its stockholders with the opportunity to
submit their proxies via the Internet or toll-free telephone call for the 2004
annual meeting, as well as for all subsequent meetings of stockholders.
By providing means by which stockholders can easily and conveniently submit
their proxies until the polls close on the day of the stockholders' meeting,
Visteon has, in fact, satisfactorily addressed the issues raised in the Proposal
by implementing means by which stockholders can "conveniently imitate an
institutional investor's voting decisions." Therefore, the Proposal may be
omitted from the 2004 Proxy Materials pursuant to Rule 14a-8(i)(10).
C. The Proposal may be omitted under Rule 14a-8(i)(6) for absence of
power/authority. 1. The Proposal is so vague as to be beyond Visteon's power to effectuate. The
Proposal may be excluded under Rule 14a-8(i)(6) because Visteon lacks "the power
or authority to implement the Proposal" if approved by the stockholders. This
rule previously provided that a proposal could be omitted from proxy materials
if the proposal were "beyond the issuer's power to effectuate" (former Rule
14a-8(c)(6)). The Staff said that a proposal could be beyond a company's power
to effectuate if the proposal were "so vague and indefinite that a registrant
would be unable to determine what action should be taken" if the proposal were
adopted. International Business Machines Corporation (Jan. 14, 1992)
(interpreting Rule 14a-8(c)(6), the predecessor to Rule 14a-8(i)(6)). In
proposing revisions to the rules on shareholder proposals, the Commission
commented that the revised Rule 14a-8(i)(6) was to be interpreted in the same
manner as the prior rule. Release No. 34-39093 (Sept. 18, 1997) at 23.
As discussed above, because the Proposal is vague and indefinite, it is beyond
Visteon's power to effectuate and therefore may be excluded from the 2004 Proxy
Materials under Rule 14a-8(i)(6). 2. Modification of Proxies and Stockholder Voting is a Matter for State and
Federal lawmakers. The Proposal would have Visteon study and report on
stockholder voting issues and revise its proxy card. Far from being management
and stockholder prerogatives, in the federalist system of laws governing a
Delaware corporation these matters are to be addressed by the Delaware
legislature and the Commission. Delaware statutes and the Commission's proxy
rules combine to establish the means by which a stockholder authorizes another
person to act on the stockholder's behalf, as a proxy, as well as the manner in
which the proxy card of an issuer registered with the Commission must be
configured. It is beyond Visteon's power and authority to revise the law with
respect to proxies, proxy cards and stockholder voting. Because the matters
contemplated by the Proposal are beyond Visteon's power and authority, it would
be a waste of corporate resources to study and report on them. Thus, the
Proposal is beyond Visteon's power to effectuate and, accordingly, may be
omitted under Rule 14a-8(i)(6). D. The Proposal violates the proxy rules and therefore may be excluded under
Rule 14a-8(i)(3). The Proposal violates several proxy rules, as discussed below, and thus may be
excluded from the 2004 Proxy Materials pursuant to Rule 14a-8(i)(3).
1. Violation of Rule 14a-4, Requirements as to Proxy. Rule 14a-4 sets forth the
requirements for proxies provided to shareholders. The Proposal violates Rule
14a-4 in two ways, as discussed below. (a) Violation of Discretionary Authority Rule. Rule 14a-4(b)(1) states that "[a]
proxy may confer discretionary authority with respect to matters as to which a
choice is not specified by the security holder provided that the form of proxy
states in bold-face type how it is intended to vote the shares represented by
the proxy in each such case." In asking that Visteon revise its proxy card to
provide a means by which stockholders can imitate the voting of a particular
institutional stockholder, the Proposal could be construed as granting
discretionary authority to Visteon's proxies to vote the stockholder's shares
the same way as an institutional investor votes. Because Visteon would not know
at the time that the proxy materials are compiled, however, how any
institutional investor will later vote, Visteon would not be able to disclose in
the proxy materials how it would exercise that discretionary authority.
Accordingly, the Proposal violates Rule 14a-4(b)(1) and may be omitted from the
2004 Proxy Materials. (b) Violation of Proxy Card Format Rule. Rule 14a-4(b)(1) also states that
"[m]eans shall be provided in the form of proxy whereby the person solicited is
afforded an opportunity to specify by boxes a choice between approval or
disapproval of, or abstention with respect to each separate matter referred to
therein as intended to be acted upon, other than election to office" (emphasis
added). The proxy may confer discretionary authority to vote on certain matters
as set forth in Rule 14a-4(c). Thus, Rule 14a-4 clearly specifies the form that
the proxy card must take and the voting choices to be provided to shareholders
on the proxy card. In the Proposal, Mr. Latham suggests that, "besides being offered a convenient
choice of voting the entire proxy as the Board recommends, perhaps shareowners
could be offered a similarly convenient choice of voting the entire proxy ...
the same way Domini Social Investments votes its shares." Mr. Latham thus
suggests that an additional voting choice be added to Visteon's proxy card. Rule
14a-4 simply does not permit additional voting choices beyond those set forth in
the Rule. Therefore, the Proposal violates Rule 14a-4 and may be excluded from
the 2004 Proxy Materials pursuant to Rule 14a-8(i)(3). 2. Violation of Rules 14a-3, 14a-4 and 14a-5 relating to solicitation of
proxies. The Proposal would have Visteon provide a means on the proxy card by
which a stockholder could elect to have his or her shares voted the same way as
a particular institutional investor votes its shares. This could be construed as
the de facto nomination of a particular institutional investor to act as a proxy
for the stockholder. The effect of the Proposal would therefore be a stockholder
solicitation of proxies under cover of Visteon's own proxy solicitation. To
allow stockholders to utilize Visteon's proxy in lieu of conducting a
shareholder solicitation in accordance with the proxy rules would be to permit
circumvention of the proxy rules. Rule 14a-1(l)(1), clauses (i) and (iii), states that a solicitation includes
"any request for a proxy whether or not accompanied by or included in a form of
proxy" and "a furnishing of a form of proxy or other communication to
securityholders under circumstances reasonably calculated to result in the
procurement, withholding or revocation of a proxy." When a solicitation is made,
the person or company making the solicitation must comply with Rules 14a-3,
14a-4 and 14a-5, which apply "to every solicitation of a proxy with respect to
securities registered pursuant to Section 12" of the Securities Exchange Act of
1934. The Proposal violates the proxy rules because it would enable a particular
institutional investor, in essence, to solicit proxies without complying with
the disclosure requirements and procedural safeguards of the proxy rules. In
contrast, if a shareholder desires to solicit proxies from a corporation's
shareholders, the means by which a shareholder may do this are clearly set forth
in the Commission's proxy rules. The Staff has previously held that proposals
submitted under Rule 14a-8, which would, if included in a company's proxy
materials, circumvent the requirements of the proxy rules, may be excluded under
Rule 14a-8(i)(3). For example, in Nortek Inc. (Aug. 13, 1996) (interpreting Rule
14a-8(c)(3), the predecessor to Rule 14a-8(i)(3)), the Staff permitted exclusion
of so much of a shareholder proposal as was deemed to amount to a solicitation
contesting an election. In addition to conflicting with Rule 14a-1(l)(1), the Proposal undermines the
policy considerations underlying the Commission's proxy rules. In Release No.
34-31326 (Oct. 6, 1992) (emphasis added) at pages 9-10, adopting amendments to
the rules regarding solicitation and communications between shareholders, the
Commission stated: Prior to a shareholder granting the legal power to someone elsewhether
management or an outsiderto vote his or her stock, the shareholder needs to
know what matters will be voted on, and how the recipient of the proxy intends
to vote the shareholder's shares.... Thus, the description of the matters to be
brought before a meeting for a vote (including the election of directors), the
material information related to all such matters (including any substantial
interest the soliciting person has in the subject matter of the vote), and the
specifics on how the proxy recipient proposes to vote on behalf of the proxy
giver unless otherwise instructed are core information critical to shareholders
as part of the proxy process. A Visteon stockholder presented with a proxy containing an additional choice to
vote the stockholder's shares in accordance with the vote of a particular
institutional investor would read nothing in the proxy materials regarding how
that particular investor intended to vote. The stockholder would not, therefore,
know how the shares would be voted, with respect to matters presented in the
proxy statement, if the stockholder directed that the shares be voted as the
particular investor voted. Thus, the Proposal violates Rules 14a-3, 14a-4 and
14a-5, specifying the information to be furnished to shareholders with a
solicitation, as well as the policy considerations underlying these rules, and
so the Proposal may be excluded pursuant to Rule 14a-8(i)(3).
3. Violation of Rule 14a-9, False or Misleading Statements. The Proposal
violates Rule 14a-9 and therefore may be excluded from the 2004 Proxy Materials
pursuant to Rule 14a-8(i)(3). In this connection, the Proposal would have Visteon provide to its stockholders
a means by which the stockholders could imitate a particular institutional
investor's voting decisions. As noted above, however, at the time the proxy
materials are printed and mailed to stockholders, Visteon does not know the
manner in which any institutional investor will vote. Therefore, Visteon can
provide no information to the stockholders regarding how any particular
institutional investor intends to vote on the proposals contained in the proxy
materials. Rule 14a-9(a) states that no solicitation shall be made by means of a proxy
statement or form of proxy "which omits to state any material fact necessary in
order to make the statements therein not false or misleading with respect to any
material fact...." The policy underlying Rule 14a-9 is clearly stated in Release
No. 34-39093 (Sept. 18, 1997), in which the Commission proposed amendments to
Rule 14a-8. Under Rule 14a-9, "companies must provide shareholders with
sufficient information to make informed voting decisions as well as a meaningful
opportunity to review the information" (page 81). Under the Proposal, Visteon's
proxy materials would not provide sufficient information to its stockholders to
make a meaningful, informed decision regarding whether the stockholder should or
should not follow the voting decision of an institutional investor.
In addition to the fact that Visteon's stockholders would not have information
regarding how the specified institutional investor intended to vote its shares,
the individual stockholders also would have no means by which to evaluate
whether the interests of the institutional investor and other bases for the
institution's voting decisions corresponded to their own interests. The Proposal
falsely suggests that the interests of all stockholders, be they individuals or
institutions, are alike. By not acknowledging that one stockholder's interests
may vary significantly from the interests of another stockholder, the Proposal
neglects to state a material fact necessary to make the other statements in the
Proposal not misleading, further violating Rule 14a-9. Thus, as a violation of
Rule 14a-9, the Proposal may be excluded from the 2004 Proxy Materials pursuant
to Rule 14a-8(i)(3). E. The Proposal violates Delaware law and therefore may be omitted under Rule
14a-8(i)(2). Implementing the Proposal would cause Visteon to violate applicable Delaware
law. Therefore, Visteon may properly omit the Proposal from the 2004 Proxy
Materials pursuant to Rule 14a-8(i)(2), permitting exclusion of proposals that
would, if implemented, cause a company to violate any law to which the company
is subject. The Proposal suggests that Visteon's proxy be revised so that stockholders
"could be offered a ... convenient choice of voting the entire proxy ... the
same way Domini Social Investments votes its shares." The Proposal
mischaracterizes the proxy card as a ballot upon which a stockholder casts a
vote. But the proxy card is not a ballot; rather, it is evidence of an agency
relationship that has been established between the stockholder and the
stockholder's proxy. Thus, the revision to the proxy card suggested by the
Proposal would essentially result in the nomination of a particular
institutional investor to act as a proxy for the stockholder executing the proxy
card. If a stockholder desires to appoint a proxy other than a person listed on
a company's proxy card, however, that agency relationship must first be
established by the stockholder and the chosen proxy; under Delaware law, the
stockholder cannot utilize the company's proxy card to establish the agency
relationship. In Duffy v. Loft, 17 Del. Ch. 140, 147-48 (1930), aff'd. 17 Del.
376 (1930), the court stated, "The paper writing which we call a proxy is
nothing more than evidence of a relationship. It is not the relationship. It
simply testifies that A. has constituted B. his agent to act for him in a
vicarious capacity. The producing of the proxy is not the creation of the
agency. It is only proof of it to the satisfaction of others."
Indeed, an agency relationship cannot be created where the agent is unaware of
the fact that he, she or it is to act on behalf of another. "It is the law that
an agency relationship does not exist unless there is a manifestation by the
principal that the agent act for him in accomplishing some undertaking, the
agent accepts the undertaking, and there is an understanding between the parties
that the principal is to be in control of the undertaking." Marshal v.
University of Delaware, 1986 WL 11566, *10 (Del. Super. 1986) (unpublished)
(citing Restatement (2nd of Agency §1 (1958)). Further, section 212(c)(2) of
the Delaware General Corporation Law ("DGCL") states that "[a] stockholder may
authorize another person or persons to act for such stockholder as proxy by
transmitting or authorizing the transmission of a telegram, cablegram, or other
means of electronic transmission to the person who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy to
receive such transmission ..." (emphasis added). Delaware law clearly requires
that the person who will act as the proxy receive notice of such relationship
from the stockholder. If the Proposal were implemented as suggested by Mr.
Latham, however, an institutional investor would have no knowledge that it had
been nominated as a proxy for other stockholders, violating Delaware law.
Furthermore, under Delaware law, once the agency relationship is created, the
proxy holder as agent has a duty to act in strict accordance with the authority
granted by the principal and in a fiduciary capacity. Rice and Hutchins,
Incorporated. v. Triplex Shoe Company, 16 Del. Ch. 298, 309 (1929), aff'd. 17
Del. Ch. 356 (1930). Under the Proposal, the institutional stockholder would
have no knowledge that it had been selected to act as a proxy for a stockholder,
resulting in a situation where an institutional investor could be subject to
fiduciary duties without having accepted the responsibility of acting as an
agent for another stockholder. For these reasons, it is our opinion that implementation of the Proposal would
cause Visteon to violate Delaware law. Therefore, Visteon may properly exclude
the Proposal from the 2004 Proxy Materials under Rule 14a-8(i)(2).
F. The Proposal is excludable under Rule 14a-8(i)(7) because it relates to
Visteon's ordinary business. Rule 14a-8(i)(7) permits exclusion of a shareholder proposal "[i]f the proposal
deals with a matter relating to the company's ordinary business operations." In
several no-action letters, the Staff has permitted exclusion of proposals
relating to shareholder associations on the basis that these proposals dealt
with matters relating to the conduct of a company's ordinary business. For
example, in Boston Edison Company (Jan. 6, 1984), a proposal regarding the
establishment of a shareholder association was excluded on the basis that the
proposal involved the company's ordinary business operations. This no-action
letter was issued under Rule 14a-8(c)(7), the predecessor to Rule 14a-8(i)(7).
In the adopting release for Rule 14a-8(c)(7), the Commission stated that
proposals could be omitted under the ordinary business exclusion even where the
proposal has requested the issuer to prepare reports on aspects of its business
or to form a special committee to study a segment of its business. Release No.
34-20091 (Aug. 16, 1983). See also The Southern Company (Feb. 8, 1984) and
Dominion Resources, Inc. (Jan. 30, 1985), each permitting the exclusion of a
proposal recommending that the board of directors investigate the establishment
of a shareholders' association. The Proposal is analogous to proposals described above in that the Proposal
requests Visteon to implement a study and report on the results of the study
with respect to stockholder voting. This relates to Visteon's ordinary business.
Accordingly, we believe that the Proposal can be excluded from the 2004 Proxy
Materials on the basis of Rule 14a-8(i)(7). III. NO-ACTION LETTER REQUEST
For the reasons stated above, we hereby respectfully ask the Staff to confirm to
us that it will not recommend enforcement action against Visteon to the
Commission should Visteon omit the Proposal from its 2004 Proxy Materials.
Should the Staff determine preliminarily not to take a no-action position, we
hereby respectfully request that we be notified and that we be given a chance to
discuss the matter by telephone before a final determination is issued.
Enclosed, pursuant to Rule 14a-8(j)(2), are six copies of the Proposal and five
additional copies of this letter. As required by Rule 14a-8(j)(1), a copy of
this letter also is being sent to Mr. Latham. Please call Patrick Daugherty of this firm at 313.442.6495 or, in his absence,
Yvette M. VanRiper at 313.442.6402, should you have any questions concerning
this request. Very truly yours, FOLEY & LARDNER
By /s/ Patrick Daugherty
Enclosures cc: Peter M. Ziparo, Esq. (Visteon Corporation) [APPENDIX 1]
November 26, 2003 BY FEDEX AND FAX TO:
Company Secretary
Visteon Corporation
5500 Auto Club Drive
Dearborn, Michigan 48126
USA
Phone (800) 847-8366
Fax (313) 755-2702 Dear Sir:
Enclosed is a shareowner proposal with supporting statement, which I hereby
submit for inclusion in the Visteon Corporation year-2004 statement.
As confirmed in the enclosed letter from my broker, I have owned 2000 shares of
Visteon Corporation stock for at least one year through today. I intend to
maintain this ownership through the date of the next annual shareowners'
meeting. The stock price has been above $5 for the past year, so this easily
exceeds the $2000 minimum requirement for submitting a shareowner proposal.
For timely receipt because I may be traveling, please contact me by fax or email
with any correspondence regarding this proposal. Thank you. For your records
however, my postal address is 177 Telegraph Road #302, Bellingham, WA 98226.
Sincerely, /s/
Mark Latham [APPENDIX 2]
VOTING LEVERAGE PROPOSAL WHEREAS shareowners should have the right to vote any way they want (except for
buying and selling votes); WHEREAS many individual shareowners lack the time and expertise to make the best
voting decisions themselves, yet prefer not to always follow directors'
recommendations, because of possible conflicts of interest;
WHEREAS several institutional investors now publish their voting decisions more
than one week before each company's voting deadline; THEREFORE BE IT RESOLVED that Visteon Corporation shareowners request the Board
of Directors to study and report on the feasibility of enabling shareowners to
conveniently imitate an institutional investor's voting decisions, on all
matters put to shareowner vote except director elections. (Director elections
are excluded here to satisfy SEC rule 14a-8(i)(8).). So for example, besides
being offered a convenient choice of voting the entire proxy as the Board
recommends, perhaps shareowners could be offered a similarly convenient choice
of voting the entire proxy (except director elections) the same way Domini
Social Investments votes its shares. Supporting Statement:
Institutional investors that publish their voting decisions on the worldwide web
include: - CalPERS (California Public Employees' Retirement System) at
www.calpers-governance.org/alert/proxy - Calvert Group at www.calvert.com/planning_2627.html
- Domini Social Investments at www.domini.com/shareholder-advocacy/Proxy-Voting
- MMA Praxis Mutual Funds at www.mmapraxis.com/corporate/proxy_voting_set.html
- Ontario Teachers' Pension Plan at
www.otpp.com/web/proxyvot.nsf/proxyvotes?openform - Pax World Fund at www.paxfund.com/proxyvote4.htm
In particular, Domini Social Investments published its voting decisions for last
year's Visteon Corporation proxy. One of the main reasons for having shareowner voting at all is that there would
be conflicts of interest inherent in leaving all decisions to the Board. Simply
following the Board's voting recommendations does little to counterbalance such
conflicts. Introducing competing sources of convenient guidance for individual
shareowners could help make voting more independent of the Board.
The conflicts of interest among managers, directors and shareowners are
described in Robert Monks' and Nell Minow's 1996 book Watching the Watchers,
along with shareowners' "free rider" and "rational ignorance" problems.
The potential benefits of this proposal are discussed in the article "Vote Your
Stock" on the web at www.corpmon.com/publications.htm. [INQUIRY LETTER]
January 22, 2004 Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Shareowner Proposal of Mark Latham to Visteon Corporation
Ladies and Gentlemen: I am writing in response to the January 7, 2004 letter (the "Visteon Letter")
submitted to the Commission by Mr. Patrick Daugherty on behalf of Visteon
Corporation ("Visteon" or the "Company"), which expresses Visteon management's
intention to omit from the Company's proxy statement for the 2004 annual meeting
a shareowner proposal (the "Proposal" or my "Proposal") submitted by me. The
Proposal would request the Company's board of directors to study and report on
the feasibility of enabling shareowners to conveniently imitate an institutional
investor's voting decisions. I recognize the importance of timeliness in this process of determining the
contents of Visteon's proxy, which must be mailed well in advance of the
scheduled 2004 annual meeting. However I was traveling recently, and the Visteon
Letter was only sent to my mailing address on paper, not electronically as I had
requested. This delayed my response. The Visteon Letter cites Rules 14a-8(i)(3) ('false or misleading'), 14a-8(i)(10)
('substantially implemented'), 14a-8(i)(6) ('company lacks the power or
authority'), 14a-8(i)(3) ('contrary to proxy rules'), 14a-8(i)(2) ('violates
state law') and 14a-8(i)(7) ('ordinary business') as bases for its request for
relief from enforcement action. Reasons are given below why I believe the
Proposal may not be properly omitted under Rule 14a-8. A. Rule 14a-8(i)(3)`false or misleading'
Regarding "[S]hareowners should have the right to vote any way they want.": One
"way" of voting is to check a convenient box (or click a web button) that votes
the entire proxy as the directors recommend. Another "way" of voting could be to
check a convenient box (or click a web button) that votes the entire proxy the
way the Calvert Group votes it shares. The former is available; the latter is
not. The Proposal makes clear that it is addressing degrees of convenience when
distinguishing "ways" of voting. Shareowners' "free rider" and "rational ignorance" problems are precisely the
reasons why degree of convenience matters so much in proxy ballot design. As the
Proposal's supporting statement states, these problems and directors' well-known
general conflicts of interest are described in Monks' and Minow's 1996 book.
Neither I nor my Proposal imply that the Visteon board in particular is
intentionally misleading shareowners. Misleading statements are made by some
boards at some times, and it is difficult for me and other shareowners to know
when this is happening and when it is not. Good corporate governance mechanisms
are a kind of insurance against the general risk of deception.
The issue of including website references in a proposal has been addressed and
permitted in similar cases such as Gillette (February 1, 2001).
The Visteon Letter claims that "Mr. Latham... implies that each institutional
investor listed in his proposal publishes voting decisions with respect to
Visteon." Yet my Proposal's supporting statement explicitly distinguishes the
one listed institution that did so last year: "In particular, Domini Social
Investments published its voting decisions for last year's Visteon Corporation
proxy." The Visteon Letter argues that "the board if directors would be unable to
determine... to whom the report would be made". In the Proposal, Visteon
shareowners would be asking the board for a study and report. Obviously this
report would be made to the shareowners. The Proposal specifies its meaning of "convenient" by analogy to the currently
offered convenience of voting the entire proxy as the board recommends.
I agree with the point raised in the Visteon Letter that there are many possible
means of enabling shareowners to conveniently imitate an institutional
investor's voting, and many possible institutional investors to imitate. That is
why the Proposal requests a feasibility study rather than directly requesting
implementation. The board can consider various possible means.
B. Rule 14a-8(i)(10)`substantially implemented'
The layout of a ballot can substantially affect the way people vote. In
particular, many individual shareowners have little expertise in proxy voting
matters, so that their voting is substantially affected by the choice (or lack
of choice) of professional advice conveniently available to them. There is a
substantial difference between the degree of convenience of director's
recommendations in the proxy (the first and largest button shown in proxies at
www.proxyvote.com) and institutional investor websites of which most shareowners
are unaware. No Visteon board report to shareowners has specifically addressed
the feasibility of offering this convenient choice, so the Proposal has not been
substantially implemented. C. Rule 14a-8(i)(6)`company lacks the power or authority'
As discussed above, the Proposal is specific enough that the board can perform
the study requested. The Proposal does not request the board to revise state and federal law. The
requested feasibility study and report could, however, identify and recommend to
legislators changes in the law, if any were necessary to permit such a
convenient voting mechanism. D. Rule 14a-8(i)(3)`contrary to proxy rules'
The Proposal does not ask Visteon to revise its proxy card. The Proposal asks
the Visteon board to perform a study and report. Such a request does not violate
proxy rules. Furthermore regarding the discretionary authority rule, the board study might
find a way to provide convenient voting imitation without violating proxy rules,
for example by enabling imitation only of institutions that post their voting
decisions in advance of the voting deadline, so that shareowners can imitate
those decisions without granting discretion to anyone. Regarding the proxy card format rule, the Visteon Letter gives no basis for its
claim that "Rule 14a-4 simply does not permit additional voting choices beyond
those set forth in the Rule." The Visteon Letter only quotes a passage from the
Rule stating that "[m]eans shall be provided in the form of proxy whereby
[etc.]" which requires something but does not prohibit anything. There is
nothing in the Rule that would prohibit all possible ways to allow convenient
voting imitation. And in any case, the Rule certainly does not prohibit a study
and report. Regarding proxy solicitation: If the enabled imitation is only of institutions
that post their voting decisions in advance of the voting deadline, it could let
shareowners conveniently copy those decisions without having those institutions
act as their proxy. Thus the voting form would not be soliciting proxy authority
for those institutions. The board study could investigate the issues raised in the Visteon Letter, and
may find ways to resolve the problems raised therein. If it finds that such
problems can not be resolved, it would report accordingly. The report could
recommend changes to the proxy rules. It could recommend using the worldwide web
to let shareowners know specifically how any institution to be imitated is
planning to vote. Regarding Rule 14a-9: The Proposal does not suggest "that the interests of all
stockholders, be they individuals or institutions, are alike." Similarly, the
mere fact that directors give the same recommendations to all shareowners does
not suggest that the interests of all shareowners are alike or identical to the
interests of directors. E. Rule 14a-8(i)(2)`violates state law'
Delaware law allows directors to perform studies and make reports to
shareowners, which is all the Proposal requests. Furthermore, as described in part E above, enabling convenient imitation need
not entail having institutional investors act as proxies. F. Rule 14a-8(i)(7)`ordinary business'
The design of the proxy form distributed by the board and the convenience of
different voting options can affect the way shareowners vote. It is therefore a
corporate governance issue of importance to shareowners in ensuring that their
interests are conveyed in the voting results, rather than merely an "ordinary
business" issue. Conclusion Based on the foregoing, I request that the Commission staff not concur with the
views expressed in the Visteon Letter regarding exclusion of the Proposal from
the Visteon proxy statement. For timely receipt because I may be traveling,
please contact me by email or fax with any correspondence regarding this
submission. Thank you. For your records however, my postal address is 177
Telegraph Road #302, Bellingham, WA 98226, USA. (I recently moved from San
Francisco.) Very truly yours, /s/
Mark Latham cc: Mr. Patrick Daugherty (Foley & Lardner)
[STAFF REPLY LETTER]
February 19, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: Visteon Corporation Incoming letter dated January 7, 2004
The proposal requests that the board of directors study and report on the
feasibility of enabling shareholders to "conveniently imitate" an institutional
investor's voting decision other than with respect to director elections.
We are unable to concur in your view that Visteon may exclude the proposal under
rule 14a-8(i)(2). Accordingly, we do not believe that Visteon may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(2).
We are unable to concur in your view that Visteon 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 factual support for the sentence that begins "Whereas many individual
shareowners ..." and ends "... conflicts of interest";
recast the section that begins "One of the main reasons ..." and ends "...
more independent of the Board" as the proponent's opinion.
Accordingly, unless the proponent provides Visteon 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 Visteon omits only these 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 Visteon may exclude the proposal under
rule 14a-8(i)(6). Accordingly, we do not believe that Visteon may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(6).
We are unable to concur in your view that Visteon may exclude the proposal under
rule 14a-8(i)(7). Accordingly, we do not believe that Visteon may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(7).
We are unable to concur in your view that Visteon may exclude the proposal under
rule 14a-8(i)(10). Accordingly, we do not believe that Visteon may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(10).
Sincerely, /s/
John J. Mahon
Attorney-Advisor |
