Company Name: Wal-Mart Stores, Inc. (United Methodist)
Public Availability Date: February 17, 2004Document Sections:
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
APPENDIX 2
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
January 6, 2003 OVERNIGHT DELIVERY VIA FEDERAL EXPRESS
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Wal-Mart Stores, Inc.Notice of Intent to Omit Shareholder Proposal from
Proxy Materials Pursuant to Rule 14a-8 Promulgated under the Securities Exchange
Act of 1934, as amended, and Request for No-Action Ruling Ladies and Gentlemen:
Wal-Mart Stores, Inc., a Delaware corporation ("Wal-Mart" or the "Company")
files this letter under Rule 14a-8(j) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), to notify the Securities and Exchange
Commission (the "Commission") of Wal-Mart's intention to exclude a shareholder
proposal (the "Proposal") from the proxy materials for Wal-Mart's 2004 Annual
Meeting of Shareholders (the "2004 Proxy Materials"). The Proposal was submitted
by the General Board of Pension and Health Benefits of the United Methodist
Church and the Libra Fund, L.P. (collectively the "Proponent"). Wal-Mart asks
that the staff of the Division of Corporation Finance of the Commission (the
"Staff") not recommend to the Commission that any enforcement action be taken if
Wal-Mart excludes the Proposal from its 2004 Proxy Materials for the reasons
described below. A copy of the Proposal and related correspondence is attached
to this letter as Exhibit A. In accordance with Rule 14a-8(j), six copies of
this letter and its attachments are enclosed. Due to the volume of proxy materials that the Company must produce and
distribute to its shareholders, Wal-Mart plans to commence the printing of the
2004 Proxy Materials on or about March 26, 2004 so that it may commence mailing
the 2004 Proxy Materials by no later than March 31, 2004. Accordingly, we would
appreciate the Staff's prompt advice with respect to this matter.
The Proposal Wal-Mart received the Proposal from the General Board of Pension and Health
Benefits of the United Methodist Church on December 9, 2003, and from the Libra
Fund, L.P. on December 12, 2003. The Proposal requests that Wal-Mart's Board of
Directors "prepare at reasonable expense a sustainability report" and that "[a]
summary of the report should be provided to shareholders by October 2004."
Grounds for Exclusion Wal-Mart intends to omit the Proposal from its 2004 Proxy Materials pursuant to
Rule 14a-8(i) on the grounds that (a) the Proposal relates to Wal-Mart's
ordinary business operations, and (b) the Proposal is materially vague, false,
and misleading in violation of Rule 14a-9. The Proposal Relates to Wal-Mart's Ordinary Business Operations (Rule
14a-8(i)(7)) Rule 14a-8(i)(7) provides that a company may omit a proposal from its proxy
statement if the proposal "deals with a matter relating to the company's
ordinary business operations." The Proposal relates to Wal-Mart's ordinary
business operations because (1) it seeks disclosure by Wal-Mart of information
relating to ordinary business matters (employee compensation and payment of a
"sustainable living wage"), and (2) it appears to seek disclosure of the
requested information in Wal-Mart's annual report. The Staff has consistently concurred in the exclusion of proposals that require
companies to prepare special reports on particular aspects of their ordinary
business operations. In Exchange Act Release No. 34-20091 (Aug. 16, 1983), the
Commission stated that "the staff will consider whether the subject matter of
the special report ... involves a matter of ordinary business; where it does,
the proposal will be excludable under Rule 14a-8(i)(7)." For example, in a case
where a proponent requested that the company prepare a report outlining the
financial benefit the company received from specified types of government
incentive programs, the Staff found the proposal excludable under Rule
14a-8(i)(7) "as relating to its ordinary business operations (i.e., a source of
financing)" General Electric Company (avail. Feb. 15, 2000).
The Proposal's "Whereas" clauses, in which the Proponent attempts to explain the
types of information it is seeking, make clear that the Proposal is requesting
information relating to Wal-Mart's ordinary business in the form of information
on Wal-Mart's policies with respect to employee wages. The Proposal states: "We
believe corporate sustainability includes a commitment to healthy communities
and a healthy environment including paying a sustainable living wage to
employees in the United States and every country where our company operates.
Workers need to have the purchasing power to meet their basic needs." The
Proposal further states: "The sustainability of corporations, we believe, is
connected to the economic sustainability of their workers...."
The Staff has consistently found shareholder proposals dealing with employee
compensation, including but not limited to those addressing a "sustainable
living wage," to be excludable under Rule 14a-8(i)(7). See, e.g., Wal-Mart
Stores, Inc. (avail. Mar. 15, 1999) (proposal requesting a report dealing with
several matters that are generally held by the Staff to be outside the scope of
ordinary business was excludable because paragraph 3 of the description of
matters to be included in the report related to "[p]olicies to implement wage
adjustments to ensure adequate purchasing power and a sustainable living wage");
see also K-Mart Corp. (avail. Mar. 12, 1999) and The Warnaco Group, Inc. (avail.
Mar. 12, 1999) (similar proposals were excludable on ordinary business grounds
because certain aspects of each proposal dealt with a sustainable living wage).
The second paragraph of the Proposal states that "[w]e believe sustainability
reporting should be included in our company's annual report." Although the
"Resolved" section of the Proposal, if read out of context, seems to request the
preparation of a special report and a summary thereof to be provided to
Wal-Mart's shareholders by October 2004, the above-quoted statement indicates
that the Proposal is actually seeking to have the requested report included in
Wal-Mart's annual report, with a summary to Wal-Mart's shareholders by October
2004. This interpretation explains the fact that the Proposal specifies a date
by which the summary of the report must be made available but does not specify a
date by which the actual report must be made available (because it is assumed
that Wal-Mart's annual report will be released each year by a date certain) and
also explains why the Proponent does not refer to the requested report as a
"special report," as similar proposals commonly refer to reports that are not
intended to be included in the company's periodic reports. The Staff has
concurred with companies' decisions to exclude proposals that request additional
disclosures in the companies' periodic reports. See, e.g., K-Mart Corp. (avail.
Feb. 24, 1999) ("We note in particular that the proposal, if implemented, would
specify additional disclosures in Kmart's annual report. Accordingly, we will
not recommend enforcement action to the Commission if Kmart omits the proposals
from its proxy materials in reliance on rule 14a-8(i)(7).").
Although the Proposal deals with some matters that the Staff has generally found
to be outside the scope of companies' ordinary business matters, the Staff has
found that shareholder proposals relating to both significant social issues and
ordinary business matters may be properly omitted from proxy materials pursuant
to Rule 14a-8(i)(7). See, e.g., Wal-Mart Stores, Inc. (avail. Mar. 15, 1999)
("although the proposal appears to address matters outside the scope of ordinary
business, paragraph 3 ... relates to ordinary business operations. Accordingly,
as it has not been the Division's practice to permit revisions under rule
14a-8(i)(7), we will not recommend enforcement action to the Commission if
Wal-Mart omits the proposal...."). Thus, Wal-Mart has concluded that it may omit
the Proposal from its 2004 Proxy Materials in accordance with Rule 14a-8(i)(7).
The Proposal is Vague, False, and Misleading (Rule 14a-8(i)(3) and Rule 14a-9)
Rule 14a-8(i)(3) permits a company to omit from its proxy materials a
shareholder proposal and any statement in support thereof "[i]f the proposal or
supporting statement is contrary to any of the Commission's proxy rules,
including §240.14a-9, which prohibits materially false or misleading statements
in proxy soliciting materials." Rule 14a-9 provides, in pertinent part, that:
"(a) No solicitation subject to this regulation shall be made by means of any
proxy statement, form of proxy, notice of meeting or other communication,
written or oral, containing any statement which, at the time and in the light of
the circumstances under which it is made, is false or misleading with respect to
any material fact, or which omits to state any material fact necessary in order
to make the statements therein not false or misleading...."
The Staff has previously determined that a shareholder proposal may be omitted
pursuant to Rules 14a-8(i)(3) and 14a-9 if it is "so inherently vague and
indefinite that neither the shareholders voting on the proposal, nor the Company
in implementing the proposal (if adopted), would be able to determine with any
reasonable certainty exactly what actions or measures the proposal requires."
Philadelphia Electric Company (avail. July 30, 1992). The Proposal is materially vague, false, and misleading because it is not clear
enough to inform Wal-Mart or its shareholders of what Wal-Mart would be required
to do if the Proposal were approved. According to the Proposal's "Supporting
Statement," which is the clearest portion of the Proposal in terms of explaining
what information is being sought, the Proposal seeks a report that includes:
"(1) the company's operating definition of sustainability. (2) a review of
current company policies and practices related to social, environmental and
economic sustainability. (3) a summary of long-term plans to integrate
sustainability objectives throughout company operations."
Based on these requests, Wal-Mart's shareholders would not have a clear idea of
what they were being asked to approve if the Proposal were included in the 2004
Proxy Materials. Furthermore, if the Proposal were approved, Wal-Mart would not
have a clear idea of how to implement the Proposal. The Proposal hinges on the
meaning of the word "sustainability," but leaves it to Wal-Mart to define this
word. The Proposal provides no clear, understandable guidance as to how
"sustainability" should be defined in order to create a report that would be
responsive to the Proposal. In the third paragraph of its "Whereas" section, the Proposal includes the
following vague statement of what types of factors are included in
"sustainability": "Encouraging long lasting social well being in communities
where they operate, interacting with different stakeholders (e.g. clients,
suppliers, employees, government, local communities and non-governmental
organizations) and responding to their specific and evolving needs thereby
securing a long term `license to operate,' superior customer and employee
loyalty and ultimately superior financial returns." The Proposal represents that
this statement could be found on the website www.sustainability-index.com in
March 2000. Wal-Mart has been unable to find this statement on the cited
website. A review of this website by Wal-Mart has yielded the following statement with
respect to the meaning of "sustainability": "Corporate Sustainability is a
business approach that creates long-term shareholder value by embracing
opportunities and managing risks deriving from economic, environmental and
social developments. Corporate sustainability leaders achieve long-term
shareholder value by gearing their strategies and management to harness the
market's potential for sustainability products and services while at the same
time successfully reducing and avoiding sustainability costs and risks." These
two sets of criteria are markedly different. The set of criteria stated in the
Proposal puts shareholder profit last in a list of vague goals and
considerations, while the statement Wal-Mart located on the cited website
appears to be geared more towards maximizing shareholder value. Wal-Mart is
unable to see how it is to develop a definition of "sustainability" based on
these vague and indefinite guidelines. Additionally, if the Proposal were
included in the 2004 Proxy Materials, it would not be clear to Wal-Mart's
shareholders what actions would be required to be taken by Wal-Mart in order to
implement the Proposal. The Staff has found several similarly vague proposals to be excludable under
Rule 14a-8(i)(3). For example, in Johnson & Johnson (avail. Feb. 7, 2003), the
proposal requested a report regarding the company's progress concerning "the
Glass Ceiling Commission's business recommendations." The company argued that
the proposal was vague and indefinite under Rule 14a-8(i)(3) due in part to the
fact that the proposal was "completely devoid of any description of the
substantive provisions of the `Glass Ceiling Report'" and it provided "no
background information to shareholders." The proponents responded that they
would add to the proposal's supporting statement a reference to a website where
the report could be found in order to cure any ambiguity. However, the Staff
concurred with the company that it could exclude the proposal under Rule
14a-8(i)(3) as vague and indefinite. The Staff made a similar finding in Kohl's Corp. (Mar. 13, 2001), where the
proposal called for the company to commit to the full implementation of "the
SA8000 Social Accountability Standards" from the Council of Economic Priorities.
The company argued that the proposal was vague, false, and misleading under Rule
14a-8(i)(3) partially because "the shareholders will not understand what they
are being asked to consider from the text of the proposal." The company further
argued that the proposal "fails to describe or summarize the many principles
embodied in SA8000 in enough depth to fully inform shareholders of what actions
it would require the company to take." The Proposal is very similar to those in Johnson & Johnson and Kohl's Corp. The
Proposal is completely devoid of any discussion of concrete, substantive
components of "sustainability" and provides no background information to the
shareholders with regard to the organization whose concepts it is supposedly
based upon (which organization is called "Dow Jones Sustainability Group" in the
Proposal but refers to itself as "Dow Jones Sustainability Indexes" in the
website cited in the Proposal). Wal-Mart's shareholders would not understand
what they were being asked to vote upon as there is no concrete description or
summary of what information is being requested in the Proposal. The Proposal
also does not capture the extent or complexity of the information that could be
required in a report that attempted to be responsive to the Proposal, or the
burden on Wal-Mart's human resources and the considerable expense involved in
preparing such a report. Because Wal-Mart's shareholders would not understand what they were being asked
to consider based on the text of the Proposal, and because Wal-Mart would not
know what actions to take to fulfill the Proposal's requests, the Proposal is
vague, indefinite, and misleading and Wal-Mart has concluded that it may be
excluded in accordance with Rule 14a-8(i)(3). While the Staff will sometimes
permit a proponent to revise its proposal if it contains "specific statements
that may be materially false or misleading or irrelevant to the subject matter
of the proposal" (see Section E.5. of Staff Legal Bulletin No. 14)("SLB 14"),
such revisions are permitted when a proposal contains "relatively minor defects
that are easily corrected" and the required revisions "are minor in nature and
do not alter the substance of the proposal" (see Section E.1. of SLB 14).
However, "when a proposal and supporting statement will require detailed and
extensive editing in order to bring them into compliance with the proxy rules,"
as would be the case with the Proposal, the Staff has stated that it "may find
it appropriate for companies to exclude the entire proposal, supporting
statement, or both, as materially false or misleading" (see Section E.1. of SLB
14). Conclusion Based on the foregoing representations, Wal-Mart hereby requests that the Staff
confirm that it will not recommend any enforcement action if the Proposal is
excluded from Wal-Mart's 2004 Proxy Materials. Should you disagree with the
conclusions set forth herein, we would appreciate the opportunity to confer with
you prior to the issuance of the Staff's response. Moreover, Wal-Mart reserves
the right to submit to the Staff additional bases upon which the Proposal may
properly be excluded from the 2004 Proxy Materials. By copy of this letter, the Proponent is being notified of Wal-Mart's intention
to omit the Proposal from its 2004 Proxy Materials. Please acknowledge receipt of this letter by date-stamping the accompanying
acknowledgment copy and returning it to the undersigned in the self-addressed
postage pre-paid envelope provided. Please call Samuel A. Guess, Assistant
General Counsel, at (479) 277-3302 or the undersigned at (479) 277-2345 if you
require additional information or wish to discuss this submission further.
Thank you for your consideration.
Respectfully Submitted, /s/
Jeffrey J. Gearhart Enclosures [APPENDIX]
cc: Vidette Bullock Mixon, General Board of Pensions and Health Benefits of the
United Methodist Church
1201 Davis Street
Evanston, IL 60201-4118 Farha-Joyce Haboucha, Libra Fund, L.P.
Rockefeller & Co., Inc.
30 Rockefeller Plaza
New York, NY 10112 Teresa Heckenmuller, Glenmary Home Missioners
P.O. Box 465618
Cincinnati, OH 45246-5618 Nora M. Nash, Sisters of St. Francis of Philadelphia
609 South Convent Road
Aston, PA 19014-1207 Robert Walker, Ethical Funds Inc.
800-1111 West Georgia Street
Vancouver, BC V6E 4T6 Sister Susan Mika, Benedictine Sisters
P.O. Box 28037
San Antonio, TX 78228 Heather H. Williamson, Board of Pensions of the Evangelical Lutheran Church in
America
800 Marquette Ave., Suite 1050
Minneapolis, MN 55402-2892 Neil C. Stallings, Progressive Asset Management, Inc.
1730 Franklin Street, Suite 201
Oakland, CA 94612 Donna Meyer, Ph.D., Christus Health
2600 North Loop West
Houston, TX 77092 Howard G. Rifkin, Connecticut Retirement Plans and Trust Fund
55 Elm Street
Hartford, CT 06106-1773 Sister Annette M. Sinagra, Adrian Dominican Sisters
1257 East Siena Heights Drive
Adrian, Michigan 49221-1793 Sister Linda Jansen, School Sisters of Notre Dame
320 East Ripa Avenue
St. Louis, MO 63125-2897 Theodore F. Zimmer, The Catholic Funds
1100 West Wells Street
Milwaukee, WI 53233 Sister Mary Ann Tierney, St. Paul's Benevolent
526 Monastery Place
Union City, NJ 07087 Susan Jordan, School Sisters of Notre Dame Cooperative Investment Fund
336 East Ripa Avenue
St. Louis, MO 63125-2800 Amy Muska O'Brian, United Church Foundation
475 Riverside Drive, Suite 1020
New York, NY 10115 Mary Brigid Clingman, Sisters of the Order of St. Dominic of Grand Rapids
2025 E. Fulton Street
Grand Rapids, MI 49503-3895 Robert A. Lincoln, Unitarian Universalistic Service Committee
130 Prospect Street
Cambridge, MA 02139-1845 Rev. William Somplatsky-Jarman, Presbyterian Church (USA)
100 Witherspoon Street
Louisville, KY 40202-1396 Sister Marietta Schindler, Benedictine Sisters of Mt. Angel
840 South Main Street
Mt. Angel, Oregon 97362-9527 Sister Jordan Dahm, Sisters of St. Francis
Mount St. Francis
3390 Windsor Avenue
Dubuque, IA 52001-1311 Tim Moller, Sisters of Charity
5900 Delhi Road
Mount St. Joseph, OH 45051 Sister Antonette Keiser, Congregation of Divine Providence
P.O. Box 37345
San Antonio, TX 78237-0345 Mary Ellen McDonagh, Sisters of Charity of the Blessed Virgin Mary
205 W. Monroe
Chicago, IL 60606 Seamus P. Finn, Missionary Oblates of Mary Immaculate
391 Michigan Avenue, NE
Washington, DC 20017 Sister Linda Hayes, Dominican Sisters of Springfield, IL
Sacred Heart Convent
1237 West Monroe
Springfield, IL 62704 Sister Claire Regan, Sisters of Charity of Saint Vincent de Paul
Mount St. Vincent-on-Hudson
6301 Riverside Avenue
Bronx, NY 10471-1093 S. Stella Storch, Congregation of Sisters of St. Agnes
320 County Road K
Fond Du Lac, WI 54935 Sister M. Jane Harrington, Sisters of St. Joseph Charitable Fund
P.O. Box 4440
Parkersburg, WV 26104-4440 Sister Betty Kenny, Academy of Our Lady of Lourdes
1001 14thStreet NW, Suite 100
Assisi Heights
Rochester, MN 55901-2525 Sister Judith Lindell, Nuns of the Third Order of St. Dominic
3600 Broadway
Great Bend, KS 67530 Sister Helena Sause, Dominican Sisters, St. Mary of the Spring
2320 Airport Drive
Columbus, OH 43219-2098 Irene Senn, Sisters of St. Francis of Assisi
3221 South Lake Drive
St. Francis, WI 53235-3799 [INQUIRY LETTER]
December 9, 2003 Mr. Thomas D. Hyde
Secretary
Wal-Mart Stores, Incorporated
702 SW 8thStreet
Bentonville, AR 72716 Dear Mr. Hyde:
Libra Fund, L.P. (the "Fund" or "we") is a socially responsive investment
partnership that is the beneficial owner of 30,930 shares of Wal-Mart common
stock. This stock was acquired more than one year ago. We believe it is vital for Wal-Mart Stores, Incorporated ("Wal-Mart") to publish
a sustainability report because being responsive to stakeholder expectations
will become an increasing responsibility of managing large multinational
corporations. We perceive that the larger the company the more urgent the need
for management to understand the complex relationship between the company's
business strategy, its impact on society and the needs of society. The Sunday,
December 7, 2003 issue of the New York Times asked the question: "Wal-Mart Is It
Good For America?" This is not just a rhetorical question but one that Wal-Mart
will have to answer in the future community by community. The manner in which
Wal-Mart responds to this question has financial implications for its
shareholders. It's the Fund's position that Wal-Mart, as the largest company in
the world, should publicly disclose how it is giving consideration to these
issues to its shareholders. Please accept this letter as notification of the Fund's, acting on behalf of its
partners, intention to present the enclosed resolution with the General Board of
Pension and Health Benefits of The United Methodist Church, for consideration
and action by the stockholders at the Wal-Mart 2004 Annual Meeting. We also
request that the resolution and the Fund's support of it be noted on the proxy
statement in accordance with Rule 14-A-8 of the General Rules and Regulations of
the Securities and Exchange Act of 1934. The Fund intends to fulfill all requirements of the Securities Exchange Act of
1934 Rule 14a-8 ("Rule 14a-8"), including holding the requisite amount of equity
through the date of the 2004 meeting. We will also submit a certification from
the Fund's custodian, J.P. Morgan Chase Bank, of its holding of 30,930 shares of
Wal-Mart common stock in fulfillment of the share amount and time requirements
of Rule 14a-8. Again, we look forward to continued dialogue with management in the hope that we
may reach a mutual agreement making this shareholder proposal unnecessary.
Please notify the Fund, as well as Vidette Bullock Mixon of the General Board of
Pension and Health Benefits of The United Methodist Church, in all communication
on this matter. Sincerely, LIBRA FUND, L.P.
By: Rockefeller & Co., Inc., General Partner
/s/ By: Farha-Joyce Haboucha, Authorized Signatory Senior Portfolio Manager &
Director of Socially Responsive Investments cc: Vidette Bullock Mixon [APPENDIX 2]
Sustainability Report to ShareholdersWal-Mart Stores, Inc.
Whereas, we believe that Wal-Mart as the world's largest company aspires to be a
good employer, a trusted corporate citizen and a valued member of communities
where it does business. To sustain these commendable goals in a global economy,
we believe, requires adoption and implementation of practices designed to
protect human rights, worker rights, land and the environment. It is our
expectation that Wal-Mart will be a leader in social and environmental, as well
as economic performance. Companies are beginning to publish sustainability reports and are taking a
long-term approach to creating shareholder value through embracing opportunities
and managing risks derived from economic, environmental and social developments.
We believe sustainability reporting should be included in our company's annual
report. According to Dow Jones Sustainability Group, sustainability includes:
"Encouraging long lasting social well being in communities where they operate,
interacting with different stakeholders (e.g. clients, suppliers, employees,
government, local communities and non-governmental organizations) and responding
to their specific and evolving needs thereby securing a long term `license to
operate,' superior customer and employee loyalty and ultimately superior
financial returns." (www.sustainability-index.com; March 2000)
As shareholders, we are troubled about the number of lawsuits filed against our
company related to labor violations and sex discrimination and the negative
press that this has attracted. (Business Week, 10/6/03) We are also concerned
about the number of negative articles in the press, such as the recent publicity
surrounding some contractors cleaning Wal-Mart stores, the number of issues that
are the subject of these articles and the fact that these articles are in the
serious business press, including The Wall Street Journal and the Financial
Times. We need assurances that the Board of Directors and top management are
undertaking a serious examination of the company's overall strategy and its
impact on various stakeholders including the environment thus preserving the
company's reputation and its license to operate. We believe corporate sustainability includes a commitment to healthy communities
and a healthy environment including paying a sustainable living wage to
employees in the United States and every country where our company operates.
Workers need to have the purchasing power to meet their basic needs.
The sustainability of corporations, we believe, is connected to the economic
sustainability of their workers and the communities where corporations operate
and sell products and the environmental viability of the planet. Effective
corporate policies can benefit both communities and corporations.
Resolved: shareholders request the Board of Directors to prepare at reasonable
expense a sustainability report. A summary of the report should be provided to
shareholders by October 2004. Supporting Statement
We believe the report should include:
1. The company's operating definition of sustainability.
2. A review of current company policies and practices related to social,
environmental and economic sustainability. 3. A summary of long-term plans to integrate sustainability objectives
throughout company operations. [INQUIRY LETTER]
February 10, 2004 Securities & Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Att: Grace Lee, Esq.
Office of the Chief Counsel
Division of Corporation Finance
Re: Shareholder Proposal Submitted to Wal-Mart Stores, Inc.
Via fax Dear Sir/Madam:
I have been asked by the General Board of Pension and Health Benefits of the
United Methodist Church, the Libra Fund, L.P., the Board of Pensions of the
Presbyterian Church (USA), the Presbyterian Church (USA) Foundation, the United
Church Foundation, the Board of Pensions of the Evangelical Lutheran Church in
America, the Unitarian Universalist Service Committee, Ethical Funds, Inc.,
Progressive Asset Management (on behalf of one of their clients), The Catholic
Equity Fund, Christus Health, the Adrian Dominican Sisters, the Dominican
Sisters of St. Mary of the Springs, the Sisters of the Order of St. Dominic of
Grand Rapids (MI), the Dominican Sisters of Springfield (IL), the Nuns of the
Third Order of St. Dominic, the Sisters of Charity of Cincinnati, the Sisters of
Charity of the Blessed Virgin Mary, the Sisters of Charity of Saint Vincent de
Paul, the Sisters of St. Francis of Philadelphia, the Sisters of St. Francis of
Dubuque (IA), the Sisters of St. Francis of Rochester (MN), the Sisters of St.
Francis of Assisi, the School Sisters of Notre Dame (St. Louis), the School
Sisters of Notre Dame Cooperative Investment Fund, the Benedictine Sisters of
Mt. Angel (OR), the Benedictine Sisters of San Antonio (TX), the Sisters of St.
Joseph Charitable Fund, the Congregation of the Sisters of St. Agnes, The
Passionist Community, the Congregation of Divine Providence, The Home Missioners
of America, the Missionary Oblates of Mary Immaculate and the Maryknoll Fathers
and Brothers (who are collectively referred to hereinafter as the "Proponents"),
each of which is a beneficial owner of shares of common stock of Wal-Mart
Stores, Inc. (hereinafter referred to either as "WalMart" or the "Company"), and
who have submitted, together with the Connecticut Retirement Plans and Trust
Fund, a shareholder proposal to WalMart, to respond to the letter dated January
6, 2004, sent to the Securities & Exchange Commission by the Company, in which
WalMart contends that the Proponents' shareholder proposal may be excluded from
the Company's year 2004 proxy statement by virtue of Rules 14a-8(i)(3) and
14a-8(i)(7). We note that the sponsors of the shareholder proposal own approximately
4,300,000 shares of common stock of WalMart, with a current market value of
approximately one quarter BILLION dollars. I have reviewed the Proponents' shareholder proposal, as well as the aforesaid
letter sent by the Company, and based upon the foregoing, as well as upon a
review of Rule 14a-8, it is my opinion that the Proponents' shareholder proposal
must be included in WalMart's year 2004 proxy statement and that it is not
excludable by virtue of either of the cited rules. The proposal calls for the Company to prepare a sustainability report.
RULE 14a-8(i)(7) In the words of Yogi Berra: "Its daja vu all over again". A (i)(7) argument with
respect to a similar proposal was made by the registrant in Johnson Controls,
Inc. (November 14, 2002) and was rejected by the Staff. WalMart has failed to
point out any reasons, facts or change of circumstances in society at large that
would justify a reexamination of the decision in Johnson Controls (a decision
unmentioned by the Company). See Rel 34-40018 (May 21, 1998). ("From time to
time, in light of experience dealing with proposals in specific subject areas,
and reflecting changing societal views, the Division adjusts its view with
respect to "social policy" proposals involving ordinary business. Over the
years, the Division has reversed its position on the excludability of a number
of types of proposals, including plant closings, the manufacture of tobacco
products, executive compensation, and golden parachutes.")
We point out that the shareholder proposal in Johnson Controls was virtually
identical to the Proponents' shareholder proposal. For example, the supporting
statement in each proposal is devoted exclusively to a description of what each
proponent believes "the report should contain". This wording is identical in
each proposal. Although there is a slight word change in the resolve clause
itself, the change is wholly immaterial. Although several of the whereas clauses
are different, that is because the Proponents have tailored them to the
activities of WalMart. In any event, these whereas clauses are not relevant on
the question of whether the proposal can be excluded under the rubric of
"ordinary business". WalMart argues that the proposal is directed at the wages of ordinary workers, a
no-no as far as the Staff is concerned. However, similar language appeared in
the proposal at issue in Johnson Controls. Indeed, the two paragraphs referring
to wages in the whereas clauses in Johnson Controls spoke exclusively about
wages. In the instant case, on the other hand, not only is there less discussion
of wages in the first of these paragraphs, but, unlike Johnson Controls, these
paragraphs include not only wages as a relevant factor for sustainability, but
also specifically mention the environment as well. In this connection, we note that the Staff has often upheld shareholder
proposals when the reference to wages is not a part of the request in the
Resolve clause (or incorporated into the resolve clause by specifying the
content of a report). Johnson Controls (sustainability); KMart Corporation
(March 16, 2001) (ILO principles) (1\st/ and 7thparagraphs of whereas clause
refers to sustainable living wage); Nordstrom, Inc (March 31, 2001) (contract
suppliers) (6thwhereas clause refers to wage adjustments); The Warnaco Group,
Inc. (March 14, 2001) (vendor standards) (1\st/ whereas clause refers to concern
about low wages; 3\rd/ clause refers to living wage; 5thclause refers both to
sustainable living wage and calls for wage adjustments); Kohl's Corporation
(March 21,2000) (vendor contracts) (5thclause calls for wage adjustments).
(The no-action letter reply in McDonald's Corporation (March 16, 2001)
(principles for doing business in China) goes even further, and permits a
reference to wages that meet a worker's basic needs, even though that is part of
the substantive part of the resolution, rather than an argument in support of
the resolution.) The reason why the Staff has not excluded proposals when the only reference to
wages is in the whereas clauses, as opposed to proposals requesting a report
that deals directly with wages, is really quite simple. The paragraphs in the
whereas clause of the instant proposal are statements of the Proponents'
beliefs, and explicitly stated as such. To the extent that the Proponents have
expressed their opinions on wages, we would deem it highly inappropriate for the
Commission, as an arm of the government, to exercise a prior restraint on their
speech by saying (absent fraud) which opinions they can express and which
opinions they cannot express. Yet that would be the precise effect of a Staff
ruling that the Proponents may not say, in the fifth and sixth whereas clauses,
that they believe that a living wage is a part of the long term sustainability
of the Company. These whereas clauses, unlike the Supporting Statements in the
Wal-Mart, K-Mart and Warnaco no action letters cited by the Company, do not
request the Company to report on wage adjustments. In those three 1999 no-action
letters, the proponents had requested a report on "sweatshops" and had also
included in the supporting statement a list of five items that they requested be
included in that report. The Staff concluded that the five items, which spelled
out what the report should contain, should be incorporated by reference into the
resolve clause. In the case of the Proponents' shareholder proposal, however,
there is nothing to incorporate by reference. The firth and sixth whereas
clauses are merely statements of opinion by the Proponents. The Proponents'
whereas clauses, unlike the Supporting Statement in the three 1999 proposals,
does not request the Company to report on wage adjustments. It merely states the
Proponents' belief that wages should be adequate as part of the overall notion
of sustainability. The Proponent's statement of its belief cannot possibly be a
violation of Rule 14a-8(i)(7). Since the references to wages is a statement of
belief rather than an explanation of what the report should contain, the
Commission should not assume the role of censor, as it would if it required the
Proponents to omit all reference to its beliefs in order to qualify the proposal
under Rule 14a-8(i)(7). For the foregoing reasons, the Proponents' shareholder proposal is not subject
to exclusion by virtue of Rule 14a-8(i)(7). RUE 14a-8(i)(3)
Once again, it is d|pi|qej|pi|wa vu all over again. This exact same vagueness
argument was made by the registrant in Johnson Controls. And was quite properly
rejected by the Staff. No reason appears why the Staff should reach any
different conclusion with respect to the Proponents' shareholder proposal.
The Company also complains that the quotation (explicitly dated) in the third
whereas clause can no longer be found on that web site. That is true, with the
caveat that there is an updated version on the website that is identical in
concept to the Proponents' whereas clause statement and is also identical in
much of its language. This updated version may be found at
http://www.sustainability-indexes.com/djsi pdf/DJSI brochure.pdf. (To assist the
Staff, since the web site has no internal search engine, the quotation may be
found by going to the sustainability-indexes web site and clicking on
"publications" in the upper right hand corner, and then on the lowest item on
the pull-down menu, entitled "information brochure", and then going to page
three of the brochure, which is the first substantive page. A copy of page three
of the brochure is attached to this letter as Exhibit A.) The updated version
reads as follows: Sustainability leaders encourage long lasting social well being in communities
where they operate, engage in an active dialog with different stakeholders and
respond to their specific and evolving needs thereby securing a long term
"license to operate", as well as superior customer and employee loyalty.
Since the updated version has all of the same themes, and a very large
percentage of the wording is identical to the original version, we do not
believe that it would violate Rule 14a-9 if the version as submitted, which is
explicitly dated, were to appear in the proxy statement. If the Staff were to
disagree, the Proponents would be willing to cure any perceived problem, such as
by replacing the year 2000 version with the present version or adding a
parenthetical stating that an updated version can be found on the web site set
forth above. For the foregoing reasons, the Proponents' shareholder proposal cannot be
excluded by virtue of Rule 14a-8(i)(3). In conclusion, we request the Staff to inform the Company that the SEC proxy
rules require denial of the Company's no action request. We would appreciate
your telephoning the undersigned at 941-349-6164 with respect to any questions
in connection with this matter or if the Staff wishes any further information.
Faxes can be received at the same number. Please also note that the undersigned
may be reached by mail or express delivery at the letterhead address (or via the
email address). Very truly yours, /s/
Paul M. Neuhauser
Attorney at Law cc: Jeffrey J. Gearhart
All Proponents
Sister Pat Wolf
[STAFF REPLY LETTER]
February 17, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: Wal-Mart Stores, Inc. Incoming letter dated January 6, 2004
The proposal requests that the board report on the social and environmental
issues related to sustainability. We are unable to concur in your view that Wal-Mart may omit the entire proposal
under rule 14a-8(i)(3). There appears to be some basis for your view that
portions of the supporting statement may be materially false or misleading under
rule 14a-9. In our view, the proponents must provide an accurate citation to a
specific source for the discussion that begins "according to Dow Jones..." and
ends "... March 2000." Accordingly, unless the proponents provide Wal-Mart 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 Wal-Mart omits only this portion 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 Wal-Mart may exclude the proposal
under rule 14a-8(i)(7). Accordingly, we do not believe that Wal-Mart may omit
the proposal from its proxy materials in reliance on rule 14a-8(i)(7).
Sincerely, /s/
John Mahon
Attorney-Advisor
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