Company Name: MeadWestvaco Corp.
Public Availability Date: February 27, 2005
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX 1
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January 4, 2005
VIA FEDEX
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: MeadWestvaco Corporation
Omission of Stockholder Proposal of William Steiner
Ladies and Gentlemen:
I am filing this letter on behalf of our client, MeadWestvaco Corporation (the
"Company"), which has received a stockholder proposal and a supporting statement
(the "Proposal") submitted by William Steiner (the "Proponent"). The Proposal
has been submitted for inclusion in the proxy statement and form of proxy to be
distributed to the Company's stockholders in connection with the Company's 2005
annual meeting of stockholders (collectively, the "2005 Proxy Materials"). The
Company hereby notifies the Securities and Exchange Commission (the
"Commission") and the Proponent of the Company's intention to omit the Proposal
from its 2005 Proxy Materials pursuant to Rule 14a-8(j) promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
I. The Proposal.
On October 7, 2004, the Company received the Proposal, signed by William Steiner
on September 28, 2004. The Proponent designated John Chevedden (or Mr.
Chevedden's designee) as his agent for purposes of the Proposal. The Proposal
requests that the Company's bylaws be amended to prohibit any officer of the
Company from receiving annual compensation beyond a specified limit without
first obtaining majority stockholder approval within one year prior to the
payment of such compensation. A copy of the Proposal and the Proponent's cover
letter is attached as Exhibit A.
The Proponent was requested by the Company, in a letter dated October 11, 2004,
to submit proof of his eligibility as a beneficial holder of the voting
securities of the Company pursuant to Rule 14a-8(b)(1). On October 13th, the
Proponent complied with this written request via fax. The Company's October 11th
letter and the Proponent's proof of beneficial ownership are attached as Exhibit
B.
On November 30, 2004, the Company's Director of Investor Relations had a
telephone conversation with the Proponent discussing some of the Company's
questions with respect to the Proposal.
Pursuant to Rule 14a-8(j), the Company is submitting six (6) copies of this
letter and its attachments. A copy of this submission is being furnished
simultaneously to the Proponent and Mr. Chevedden informing them of the
Company's intention to omit the Proposal from the 2005 Proxy Materials. In
addition, pursuant to Rule 14a-8(j), this letter is being submitted to the staff
of the Division of Corporation Finance (the "Staff") not later than eighty (80)
calendar days before the Company files its definitive 2005 Proxy Materials with
the Commission.
The Company believes that the Proposal may properly be excluded from the 2005
Proxy Materials pursuant to Rule 14a-8(i)(3) because it is impermissibly vague,
in violation of Rule 14a-8(i)(3). Furthermore, in violation of Rule 14a-8(i)(6),
the Company is unable to implement the Proposal.
The Proposal recommends that the Company's bylaws be amended by adding the
following language as set forth in the Proposal:
"Section A.1. Executive Compensation. From the date of adoption of this section
no officer of the Corporation shall receive annual compensation in excess of the
limits established by the U.S. Internal Revenue Code for deductibility of
employee remuneration, without approval by a vote of the majority of the
stockholders within one year preceding the payment of such compensation. The
only exception would be interference with un-removable contractual obligations
prior to this proposal.
For purposes of the limit on executive compensation established by this Section,
the Corporation may exclude compensation that qualifies either as
"performance-based compensation" or as an "incentive stock option" within the
meaning of the Internal Revenue Code only if:
(a) in the case of performance-based compensation, the Corporation shall first
have disclosed to stockholders the specific performance goals and standards
adopted for any performance-based compensation plan, including any schedule of
earned values under any long-term or annual incentive plan; and
(b) in the case of incentive stock options, the Corporation shall record as an
expense on its financial statements the fair value of any stock options
granted."
On behalf of the Company, I therefore respectfully request that the Staff concur
in our view that the Proposal may be excluded from the 2005 Proxy Materials on
the bases set forth below.
II. Grounds for Exclusion.
A. The Proposal Is Vague and Indefinite and Thus May Be Excluded Under Rule
14a-8(i)(3).
Rule 14a-8(i)(3) permits the exclusion of a stockholder proposal if the proposal
or supporting statement is contrary to any of the Commission's proxy rules or
regulations "including Rule 14a-9, which prohibits materially false or
misleading statements in proxy soliciting materials." The Company believes that
the Proposal violates the Rule 14a-9 prohibition on materially false and
misleading statements because it is vague and indefinite.
Vague and indefinite stockholder proposals have been consistently excluded by
the Staff under Rule 14a-8(i)(3), because "neither the stockholders 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." Staff Legal Bulletin No. 4B (Sept. 15, 2004);
Philadelphia Electric Co. (avail. July 30, 1992). See also Proctor & Gamble Co.
(avail. Oct. 25, 2002). In addition, if a company and its stockholders might
interpret the proposal differently because a proposal is sufficiently vague and
indefinite, an exclusion is justified. See Fuqua Industries, Inc. (avail. Mar.
12, 1991) (proposal "may be misleading because any action ultimately taken by
the [c]ompany upon implementation of the proposal could be significantly
different from the actions envisioned by the shareholders voting on the
proposal").
Stockholder proposals concerning executive compensation have been frequently
excluded by the Staff on vagueness and indefiniteness grounds. See, e.g.,
Safescript Pharmacies, Inc. (avail. Feb. 27, 2004) (proposal requesting that
stock options be "expensed in accordance with FASB guidelines" where FASB
permits two methods of expensing stock-based compensation); Woodward Governor
Co. (avail. Nov. 26, 2003) (proposal requesting that "compensation" for
"executives in the upper management (that being plant managers to board
members), be based on stock growth"); Pfizer Inc. (avail. Feb. 18, 2003)
(proposal requesting that the company's board make all stock options granted to
management and the board of directors at no less than the "highest stock
price"); General Electric Co. (avail. Feb. 5, 2003) (proposal requesting board
to seek stockholder approval "for all compensation for Senior Executives and
Board members not to exceed more than 25 times the average wage of hourly
working employees"); General Electric Co. (avail. Jan. 23, 2003) (proposal
seeking "an individual cap on salaries and benefits of one million dollars for
General Electric officers and directors").
As explained in detail below, the Proposal is inherently vague and misleading in
the following respects: (1) it fails to define the "annual compensation" that it
purports to cover; (2) it fails to explain how to determine if "annual
compensation" exceeds the limits established by the Internal Revenue Code (the
"Code"); (3) it fails to make clear which employees' compensation it proposes to
subject to stockholder approval; (4) it fails to make clear when stockholder
approval should take place; and (5) the text of its bylaw provision contains
contradictory and vague statements as to how it applies to performance-based
compensation.
Many of the ambiguities in the Proposal stem from its vague allusions to Code
Section 162(m). This Code Section provides that a public company may not deduct
more than $1 million of compensation to a covered executive in any one tax year.
There are several exceptions, including an exception for "performance-based
compensation" if, among other things: (1) the compensation is paid solely based
upon the achievement of one or more objectively determinable performance goals;
(2) a committee of outside directors establishes the performance goals and other
terms and conditions of the awards in a timely manner, and confirms the
satisfaction of the performance goals before payment of the compensation; and
(3) stockholders approve the material terms of the performance goals before the
compensation is paid. Stockholder approval is valid for five years or more,
depending upon the design of the arrangement.
1. The Proposal Fails to Make Clear What Compensation It Covers.
The Proposal is directed at "annual compensation in excess of the limits
established by the Code for deductibility of employee remuneration" (emphasis
added). The Proposal does not define "annual compensation," and the phrase has
at least two different possible meanings, one under the Commission's rules and
one under the Code. Thus, a term that is central to understanding the Proposal
is ambiguous.
"Annual compensation" is a required heading for three columns in the Summary
Compensation Table in Item 402 of Regulation S-K (Salary, Bonus and Other Annual
Compensation). Many stockholders, as a result of their familiarity with Item
402, may understand the Proposal to address only these three forms of
compensation. Yet, the proposed bylaw set forth in the Proposal also refers to
stock options and to long-term incentive compensation, neither of which is
included in "annual compensation" as defined in Item 402 of Regulation S-K.
Alternatively, it is possible that the phrase "annual compensation" as used in
the Proposal is intended to be interpreted in accordance with Code Section
162(m). Unfortunately, although the limitation of Code Section 162(m) is applied
annually (that is, based on the employer's tax year) the term "annual
compensation" is not used in Code Section 162(m),1 nor is it defined elsewhere
in the Code or any of the Code's implementing regulations. The exception set
forth in the Proposal for "incentive stock options within the meaning of the
Internal Revenue Code" for which the Company records an expense on its financial
statements provides an additional reason for questioning whether the phrase
"annual compensation" is intended to be defined by reference to Code Section
162(m): so long as the optionee does not make a "disqualifying disposition" of
the shares acquired by exercise of an "incentive stock option" within the
meaning of Code Section 422, the granting corporation loses its tax deduction by
reason of Code Section 421(a). Thus, Code Section 162(m) is not even potentially
applicable to incentive stock options, unless as a result of an action of the
optionee that is beyond the control of the granting corporation.
As noted above, the Code looks at employee remuneration based on the tax year in
which the Company would claim the deduction (absent the limitation of Code
Section 162(m)), which is in many cases not the same time as when the
compensation would be reported in the Company's proxy statement. For example, if
an executive officer of the Company elects to defer a portion of his or her
salary for 2005 until 2008, the entire salary, including the deferred amount,
will be shown in the Summary Compensation Table in the Company's proxy statement
for its annual meeting in 2006, which reports compensation for 2005; but the
Company's tax deduction for the deferred amount will not be available until 2008
(assuming the deduction is not then disallowed because of Code Section 162(m)).
A similar divergence between proxy reporting and tax reporting occurs with
restricted stock: restricted stock grants that vest over time are reported in
the "restricted stock award" column under "long-term compensation" (rather than
in the "annual compensation" column) in the granting company's summary
compensation table for the year in which the grant occurs, but the company's tax
deduction is normally claimed as and when the stock vests over the tax years
following the year of grant.2
Thus, a term that is central to understanding the Proposal is inherently
ambiguous, because the Proposal does not define the term and it cannot be
understood by reference to a relevant authority. As a result, stockholders
cannot understand what they are voting on and, if the Company were to implement
the Proposal, it would have no way of knowing whether it is applying the
Proposal in a manner consistent with the stockholders' understanding.
The Proposal's reference to "annual compensation" is similar to the reference in
a proposal submitted to PepsiCo, Inc. requesting that "the Top Salary be
`capped' at $1,000,000.00 to include bonus, perks, stock options, and this be
pro-rated each year." PepsiCo, Inc. (avail. Feb. 18, 2003). Pepsico received a
grant of no-action relief from the Staff under Rule 14a-8(i)(3) as PepsiCo
asserted that the reference to salary to be "capped" was a vague and indefinite
term since PepsiCo and its stockholders would not know whether it referred to
"an annual salary cap or an aggregate $1,000,000 lifetime salary limitation."
Id. See also Woodward Governor Co. (avail. Nov. 26, 2003) (supporting statements
provided contradictory interpretations of "compensation" by providing a fixed
formula for all compensation and also suggesting that only the option portions
of "compensation" were implicated). Accordingly, the Proposal's reference to
"annual compensation" renders the Proposal vague and indefinite.
2. The Proposal Fails to Explain How to Determine if Compensation Exceeds Code
Limits.
In addition to not making clear the scope of the term "annual compensation," the
Proposal does not explain how to determine if it exceeds the Code's limitations.
First, it does not explain which limitations imposed by the Code are applicable.
In addition to Code Section 162(m), as explained above, the following Code
Sections all limit deductions for various forms of compensation: 162(a)
(unreasonable compensation); 280G ("excess parachute payments"); 404 (inter
alia, contributions to qualified plans) and 421(a) (incentive stock options). We
infer from the Proposal's indirect allusions to Code Section 162(m) (such as the
use of the phrase "performance-based compensation," which is used only in Code
Section 162(m)) that the limits of Section 162(m) are the ones to which the
Proposal refers. However, as the discussion below will show, even if the
references in the Proposal are read this way, the relationship between the Code
limits and the Proposal is extremely unclear.
Assuming that Code Section 162(m) is the applicable standard, then "annual
compensation" would be analyzed based upon the amount of the tax deduction that
the Company would otherwise claim for a particular tax year. This means that
compensation would be associated with a particular year not based upon when it
was reported in the Company's proxy statement, nor even necessarily the year in
which the employee recognized the associated taxable income, but when the
Company's deduction was properly accrued under the Code. A corollary of this
reading is that the amount of the compensation would be the amount that the
Company would deduct (absent Code Section 162(m)). While this rule would be
clear, it would pose substantial problems in actual implementation. For example,
in the case of stock options; the Company does not claim its deduction until the
option is exercised, and the amount of the deduction is the excess of the value
of the purchased stock on the date of exercise over the exercise price paid for
it. Thus, under this interpretation of the Proposal, the determination of
whether stockholder approval was required could not be made until the options
were exercised, long after the grant was actually made.
An alternative reading of the Proposal would be that "annual compensation"
refers to "annual compensation" as defined in Item 402 of Regulation S-K, to be
taken into account when reported in the Summary Compensation Table and
quantified in the same manner as for these purposes. However, as noted above,
"annual compensation" under Item 402 does not include options or restricted
stock, whereas it seems clear that the Proposal is intended to cover options, at
a minimum.
Since neither of these possible readings fully explains how or when the Company
would determine whether "annual compensation" was or was not subject to
stockholder approval, the Proposal's stockholder approval provision is
sufficiently vague and indefinite to be excluded under Rule 14a-8(i)(3).
3. The Proposal Fails to Make Clear Which Employees' Compensation It Covers.
The Proposal says "no officer of the Corporation shall receive annual
compensation in excess of the limits established by the U.S. Internal Revenue
Code ..." However, the Proposal does not define the term "officer."
As discussed above, it seems likely that the limits referred to are those
imposed by Code Section 162(m), rather than the many other Code Sections that
limit or deny compensation deductions. However, Code Section 162(m) applies only
to those who are, on the last day of the Company's fiscal year, the chief
executive officer and the next four most highly paid executives (as determined
under the Commission's proxy rules with respect to annual compensation).3 Thus,
the Company will, at any given time, have a significant number of executives to
whom Code Section 162(m) does not apply but who are unambiguously "officers"
within any normal construction of the term (currently there are 16 such
officers). By definition, these officers cannot receive compensation in excess
of that permitted by Code Section 162(m). Thus, one possible reading of the
Proposal is that it is intended to refer only to "officers" who are subject to
Code Section 162(m). However, the wording of the Proposal makes this reading
uncertain at best, so that it is by no means clear that the Proposal is not
intended to apply to the Company's other officers as well.
Since stockholders and the Company have no way of determining whose "annual
compensation" would be subject to stockholder approval under the proposal, the
Proposal's stockholder approval provision is sufficiently vague and indefinite
to be excluded under Rule 14a-8(i)(3).
4. The Proposal Fails to Make Clear When Stockholder Approval Is To Be Obtained.
The bylaw text set forth in the Proposal would require the Company to ask its
stockholders to approve compensation in advance, if such compensation was over
the prescribed limit established by the Proposal. Specifically, approval must be
obtained "within one year preceding the payment of such compensation." Yet the
Proposal fails to explain when "payment" is considered to occur. This question
may seem relatively easy to answer, in the case of salary, annual bonuses and
similar items that would be reported in the "Salary," "Bonus" or "Other Annual
Compensation" columns of the Summary Compensation Table provided for in Item 402
of Regulation S-K. However, even for these items, ambiguities and practical
difficulties arise. If stockholders were to vote at the Company's annual meeting
in April 2005 to approve paying the Chief Executive Officer's salary at a
specified rate for 2006, would the vote fail to satisfy the requirement of the
Proposal as to salary paid in May 2006 through December 2006, because the vote
occurred more than a year before that portion of the salary was actually paid?
If the Chief Executive Officer elected to defer a portion of his salary until
termination of employment, would stockholder approval of that portion of his
salary have to be delayed until the period of one year ending when the Chief
Executive Officer retired, and what could the Company do if his employment were
to terminate unexpectedly, for example, as a result of his death?
The Proposal's vagueness on this question of timing becomes even more obvious
when stock options are considered. When is "payment" of a stock option
considered to take place? The Proposal does not make clear whether stockholder
approval is required within one year before the grant of an option, or within
one year before it is exercised. The former time may make more sense, as it is
predictable, but the latter is when the limits of Code Section 162(m) are
applicable (and when the employee is taxed).
The Proposal is also unclear as to whether the stockholder approval applies to
entire plans, or to individual compensation payments. The Proposal states that
"it is reasonable to require our company to fully disclose to shareholders both
the costs and the terms of its executive compensation plans, if the Board wishes
to pay executives more than the amounts that are generally deductible under
federal income taxes." Such a statement suggests that the Proposal's focus is
stockholder approval of certain types of compensation under the Company's
executive compensation plans rather than specific payments to specific officers.
Similarly, the Proposal's exception for performance-based compensation
(discussed in more detail below in Section 5) refers to stockholder approval of
plans. However, the proposed bylaw text refers to "a vote ... within one year
preceding the payment of such compensation" (emphasis added). If stockholders
approve a bonus plan that will be in effect for a period of five years (as
permitted by Code Section 162(m)), will the approval cover only those bonus
payments made within one year of the date of the vote, or also bonuses paid
under the approved terms during the full five-year term of the plan? The
approval will not occur within one year before each bonus payment, since by
definition those payments will occur over a period of at least five years, and
the approval will occur only once. The internal contradictions in the Proposal
and the supporting statement make it impossible to know the answer.
These defects make it unclear how the Company could comply with the Proposal by
obtaining the requisite stockholder approvals in a timely manner. See, e.g.,
General Electric Co. (avail. Feb. 5, 2003) (finding a proposal excludable as
vague and indefinite where the proposal failed to describe what the company's
stockholders would be asked to approve if the levels of executive compensation
exceeded the prescribed threshold). Therefore, the Proposal's stockholder
approval provision is sufficiently vague and indefinite to be excluded under
Rule 14a-8(i)(3).
5. The Proposal Contains Contradictory and Vague Statements About How It Applies
to Performance-Based Compensation.
As noted above, the Proposal would require stockholder approval prior to the
Company providing compensation to any officer "in excess of the limits
established by the Internal Revenue Code for deductibility of employee
remuneration." Assuming that the limits referred to are intended to be only
those under Code Section 162(m), and not the other Code Sections cited in
Section 2 above, the Proposal still fails to answer a basic question: does it
apply only to compensation that is in fact nondeductible under Code Section
162(m), or also to compensation that would be nondeductible under Code Section
162(m), but for the fact that it qualifies for an exemption?4
The first paragraph of the Proposal provides "no officer of the Corporation
shall receive annual compensation in excess of the limits established by the
U.S. Internal Revenue Code for deductibility of employee remuneration, without
approval by a vote of the majority of the stockholders within one year preceding
the payment of such compensation." As explained above, in spite of the
Proposal's reference to a $1 million benchmark, if the "performance-based
compensation" standards of Code Section 162(m) are satisfied, the
performance-based compensation is deductible regardless of whether other,
non-performance-based compensation taxable to the executive in a year exceeds $1
million. Thus, this bylaw language suggests that, if compensation is deductible
under Code Section 162(m), it is not affected by the Proposal. The first
paragraph also states that "the only exception" to its limitation is
"interference with un-removable contractual obligations prior to this proposal."
Yet, in the next paragraph, the Proposal states that "[f]or purposes of the
limit on executive compensation established by this Code Section, the
Corporation may exclude compensation that qualifies either as `performance-based
compensation' ... within the meaning of the Internal Revenue Code only if'
(emphasis added) the compensation satisfies certain criteria set forth in clause
(a), thus establishing a second exception. To further confuse matters, the
criteria for the second exception are in some respects more onerous, and in
other respects less onerous, than the criteria for the exception for
"performance-based compensation" under Code Section 162(m). Thus, it is possible
for compensation to satisfy the requirements for the Code Section 162(m)
exemption and not those for the Proposal's exemption, and vice versa.
The supporting statements in the Proposal fail to address these material
ambiguities. For example, in one paragraph, the statement acknowledges that the
$1 million limit on the deductibility of compensation is subject to an exception
for "performance-based compensation." However, the next paragraph states that a
company would be able to pay "`performance-based compensation' in excess of the
deductibility limit" only if the conditions set forth in the second paragraph of
the Proposal were satisfied. It is not clear to us whether the quoted reference
to "the deductibility limitation" refers to any compensation in excess of $1
million, or only compensation that does not satisfy the Code Section 162(m)
standard for deductibility. Similarly, it is not clear whether the quoted
references to "performance-based compensation" refer to the Code Section 162(m)
standard or the standard set forth in clause (a) of the second paragraph of the
Proposal.
Thus, the Proposal could be read in two different ways:
Compensation may be exempt from the Proposal's stockholder approval
requirement by either (1) being exempt as "performance-based compensation" under
Code Section 162(m) or (2) satisfying the requirements of clause (a) of the
Proposal's second paragraph; OR
Compensation may be exempt from the Proposal's stockholder approval
requirement only by both (1) being exempt as "performance-based compensation"
under Code Section 162(m) and (2) satisfying the requirements of clause (a) of
the Proposal's second paragraph.
These two different readings are likely to lead to materially different results
in practice. For example, consider an executive who earns an annual salary of $1
million and an annual bonus of $500,000. The salary clearly does not meet the
"performance-based compensation" criteria of either Code Section 162(m) or the
Proposal. However, the annual bonus may meet the requirements of Code Section
162(m) but not those of the Proposal.5 In such a case, the annual bonus would
not be affected under the first reading of the Proposal, but under the second
reading, the Proposal would prohibit payment of the bonus.
This is just one illustration of how the contradictions, ambiguities and
inconsistencies in the Proposal can lead to wildly different results, depending
upon various different, equally plausible interpretations. In considering how to
vote for the Proposal, different stockholders may apply different
interpretations. The Company, if it were to implement the Proposal, might not
apply the same interpretation as that intended by any particular stockholder, or
by stockholders in general. The Staff in prior no-action letters have indicated
that widely varying results would render a stockholder proposal vague and
indefinite under Rule 14a-8(i)(3). For example, in Otter Tail Corporation
(avail. January 12, 2004), the Staff concurred that a stockholder proposal
requesting that future executive salary and stock option plans be changed to
"limit" any benefits for either salary or stock options for five years could be
excluded under Rule 14a-8(i)(3) because the language of the proposal was so
vague that the stockholders would be unable to determine either the meaning of
the proposal or the consequences of its implementation. Just as the Otter Tail
proposal was vague because it provided no guidance on the referenced "limit,"
the Proposal is similarly vague because it contains conflicting statements as to
what compensation is subject to its limitations.
Thus, the Proposal is excludable under Rule 14a-8(i)(3) as misleading "because
any action(s) ultimately taken by [the company] upon implementation of the
proposal could be significantly different from the action(s) envisioned by
stockholders voting on the proposal." Occidental Petroleum Corp. (avail. Feb.
11, 1991). See also Dyer v. SEC, 287 F.2d 773, 781 (8th Cir. 1961) ("it appears
to us that the proposal as drafted and submitted to the company, is so vague and
indefinite as to make it impossible for either the Board of Directors or the
shareholders at large to comprehend precisely what the proposal would entail.").
B. The Proposal Must Be Excluded Under Rule 14a-8(i)(6) Because the Company
Lacks the Power to Implement the Proposal.
It is well-established that a company may exclude a stockholder proposal under
Rule 14a-8(i)(6) "[i]f the company would lack the power or authority to
implement the proposal." The Company believes that the Proposal is excludable
under Rule 14a-8(i)(6) because (1) it would require stockholder approval of an
amendment to the Company's Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") to provide for per-capita voting on the
compensation matters covered by the Proposal, and (2) for reasons discussed in
Section A above, the Proposal is so vague and indefinite as to make it
impossible, as a practical matter, for the Company to implement it.
The Proposal would require the Company to obtain approval of the "majority of
stockholders within one year preceding the payment of such compensation" in
order for any Company officer to "receive annual compensation in excess of the
limits established by the U.S. Internal Revenue Code for deductibility of
employee remuneration." A vote of the "majority of stockholders" is also known
as per-capita voting.6 Section 212(a) of the Delaware General Corporation Law
(the "DGCL") states "[u]nless otherwise provided in the certificate of
incorporation and subject to §213 of this title, each stockholder shall be
entitled to vote for each share of capital stock held by such stockholder ..."
Per-capita voting differs from the "one share, one vote" requirement in Section
212(a).7 Moreover, the Company's Certificate of Incorporation does not authorize
per-capita voting. See Exhibit C. Thus, the Company could not implement the
Proposal's per-capita voting requirement without first amending the Company's
Certificate of Incorporation to expressly authorize it. However, Section 242 of
the DGCL requires the Company to obtain stockholder approval before amending the
Company's Certificate of Incorporation. Since the Company cannot guarantee that
the Company's stockholders would approve any such amendment, we believe the
Proposal is excludable under Rule 14a-8(i)(6) as beyond the Company's power to
implement.
The Staff has concurred that similar proposals were excludable under Rule
14a-8(i)(6) where, for example, a company could not ensure that stockholders
would elect independent directors. See, e.g., H.J. Heinz Co. (avail. June 14,
2004) (proposal urging the Board to amend the bylaws to require that an
independent director who has not served as an officer of the company serve as
the Chairman of the Board excludable because "it does not appear to be within
the board's power to ensure that an individual meeting the specified criteria
would be elected as director and serve as chairman of the board."); General
Electric Co. (avail. Feb. 4, 2002) (proposal recommending that the board
increase independence and that the majority of directors on the board be
independent excludable under Rule 14a-8(i)(6)).
See also AT&T Corp. (avail. Mar. 10, 2002) (proposal requesting adoption of an
independent director bylaw, which would "apply to successor companies,"
excludable because "it does not appear to be within the board's power to ensure
that all successor companies adopt a bylaw like that requested by the
proposal"); Putnam High Income Bond Fund (avail. Apr. 6, 2001) (proposal
requesting a reduction in the investment advisory fee and capping fund
reimbursements to the adviser excludable because the fund did not have "the
unilateral power" to implement either requirement); The Southern Co. (avail.
Feb. 23, 1995) (proposal requesting that the board of directors take steps to
ensure ethical behavior by employees serving in the public sector excludable
under the predecessor to Rule 14a-8(i)(6)). Similarly, the Company lacks the
power or authority to implement the Proposal. Thus, the Proposal is excludable
under Rule 14a-8(i)(6).
Moreover, the Proposal is excludable pursuant to Rule 14a-8(i)(6) since it is
vague and ambiguous, with the result that a company "would lack the power to
implement" the Proposal. A company "lacks[s] the power or authority to
implement" a proposal when the proposal "is so vague and indefinite that [the
company] would be unable to determine what action should be taken." Int'l
Business Machines Corp. (avail. Jan. 14, 1992). As noted in Section A above, the
Proposal contains so many ambiguities that it would be impossible for the
Company to determine what actions should be taken under the Proposal.
Accordingly, the Proposal may be excluded from the 2005 Proxy Materials under
Rule 14a-8(i)(6).
III. Conclusion.
For the reasons set forth above, I respectfully request that the Staff concur in
the Company's view that it may exclude the Proposal from its 2005 Proxy
Materials. In the event the Staff permits the Proponent to make any revisions
necessary to bring the Proposal within the requirements of the proxy rules, I
respectfully request explicit confirmation from the Staff that any revised
Proposal will be required to satisfy the 500-word limitation set forth in Rule
14a-8(d). In order to avoid the issue arising at a time when the Company is
finalizing its proxy statement, I believe it is important to request this
confirmation in advance.
Should you disagree with the conclusions set forth in this letter, the Company
respectfully requests the opportunity to confer with you prior to the
determination of the Staff's final position. The Company hereby agrees to
promptly forward to the Proponent any Staff response to this no-action request
that the Staff transmits to the Company, but not to the Proponent, by facsimile.
Should you require additional information or if I can be of any further
assistance in this matter, please do not hesitate to call me at (212) 403-1228.
Please acknowledge receipt of this letter and its attachments by stamping the
enclosed copy of the first page of this letter and returning it in the
self-addressed stamped envelope provided for your convenience.
Sincerely,
/s/
Elliott V. Stein
Enclosures
cc: Mr. Wendell L. Willkie, II - Senior Vice President, General Counsel and
Secretary of MeadWestvaco Corporation
Mr. William Steiner
Mr. John Chevedden.
-----FOOTNOTES-----
1 Instead, Code Section 162(m) refers to "applicable employee remuneration,"
which is defined as "the aggregate amount allowable as a deduction under this
chapter for such taxable year (determined without regard to this subsection) for
remuneration for services performed by such employee (whether or not during the
taxable year)," but excluding certain commission-based remuneration and
"remuneration payable solely on account of the attainment of one or more
performance goals" that meets certain requirements, including shareholder
approval of the material terms thereof.
2 An exception occurs if the grantee elects, under Code Section 83(b), to be
taxed on grant, which causes the granting company's tax deduction to be
available in the year of grant (unless it is disallowed under Code Section
162(m)).
3 Code Section 162(m) differs from the Commission's rules on who is included in
the Summary Compensation Table, in that the Code Section applies only to
executives employed as of fiscal year-end.
4 This question is similar to the question posed in Section 3: does the Proposal
cover compensation that is fully deductible, but that would be nondeductible
under Code Section 162(m), if the officer to whom it is paid were subject to
Code Section 162(m)?
5 For example, the stockholders may have been told in the disclosure relating to
the Plan that the bonuses would be earned based upon the achievement of goals
based on EBITDA, to be determined by a committee of outside directors annually,
and that the range of bonuses would be determined by the committee annually, but
that in no event would any individual's annual bonus exceed $3 million. This
disclosure meets the requirements of Code Section 162(m), but appears not to
meet the Proposal's requirement of disclosure of "any schedule of earned values"
under the Plan. As another example, the stockholder approval may have occurred
more than one year before payment of the bonus. Code Section 162(m) would
consider the stockholder approval of this particular plan to be valid for five
years.
6 While it is unusual to require per-capita voting, the literal text of the
requested bylaw set forth in the Proposal requires precisely that (as opposed
to, for example, a majority of the votes cast or a majority of the shares
outstanding). If this is not what the Proponent intended, then the voting
requirement is vague and indefinite. In that situation, the Proposal is
excludable under Rule 14a-8(i)(3) because neither the Company's stockholders nor
the Company would be able to determine, with any reasonable certainty, what
constitutes "approval by a vote of the majority of the stockholders" if the
Proposal was implemented.
7 Per-capita voting is authorized under Delaware case law only where expressly
provided for under a company's certificate of incorporation. See Sagusa, Inc. v.
Magellan Petroleum Corporation, Court of Chancery of Delaware (Dec. 1, 1993),
aff'd, 650 A.2d 1306 (Del. Supr.), Unpublished Disposition (Sept. 28, 1994).
[INQUIRY LETTER]
January 14, 2005
6 Copies
7th Copy for Date-Stamp Return
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
MeadWestvaco Corporation (MWV)
Shareholder Position on Company No-Action Request
Rule 14a-8 Proposal: Executive Pay Topic
Shareholder: William Steiner
Ladies and Gentlemen:
Rule 14a-8(i)(6)
The attached November 24, 2004 "Oracle Press Release" quotes Oracle Chairman
Jeff Henley using "majority of the stockholders" interchangeably with majority
vote or one share, one vote: "Though a large majority of the stockholders have
already indicated their desire to sell, the current board appears intent on
obstructing the will of the stockholders," Henley said. "We plan to give them a
choice (emphasis added)." Oracle is a Delaware corporation.
To facilitate proposal acceptance this shareholder proposal was drafted based on
the text of the proposal in The MONY Group Inc. (February 18, 2003) which had
already been decided by the Office of Chief Counsel. The text of the Staff Reply
Letter follows:
[STAFF REPLY LETTER]
February 18, 2003
Response of the Office of Chief Counsel Division of Corporation Finance
Re: The MONY Group Inc.
Incoming letter dated December 26, 2002
The proposal would amend MONY's by-laws to limit any officer from receiving
annual compensation in excess of the limits established by the U.S. Internal
Revenue Code for deductibility of employee enumeration, without approval by a
majority of the stockholders within one year preceding the payment of such
compensation.
We are unable to concur in your view that MONY may exclude the proposal under
rule 14a-8(b). Accordingly, we do not believe that MONY may omit the proposal
from its proxy materials in reliance on rule 14a-8(b).
We are unable to conclude that MONY has met its burden of establishing that the
proposal would violate applicable state law. Accordingly, we do not believe that
MONY may omit the proposal from its proxy materials in reliance on rules
14a-8(i)(2) and 14a-8(i)(6).
Sincerely,
/s/
Alex Shukhman
Attorney-Advisor
We believe that the MONY precedent should be upheld and that the company no
action request not be concurred with.
Additionally there are a number of defects in the company no action request such
as:
Contrary to the purported company analogy there is no text in this proposal
similar to a "Top Salary" being "capped."
The company does not claim that shareholders are unfamiliar with the concept of
"annual compensation" in spite of the fact that companies have devised a vast
number of complex formulas to calculate "annual compensation."
Obfuscation of Pay Issue
The following quote is in regard to the company claim that its position should
be favored because of the complex structure of executive compensation.
"One of the great, as-yet-unsolved problems in the country today is executive
compensation and how it its determined."
SEC Chairman William Donaldson, 2003
This quote is from "Pay without Performance, the Unfulfilled Promise of
Executive Compensation," 2004, by Lucian Bebchuk, Professor of Law and Jesse
Fried, Professor of Law. The quote is at the beginning of Chapter 15, Improving
Executive Compensation.
The following headline, sub-headline and text is from the January 9, 2005 issue
of the Los Angeles Times:
"SEC Chief Bent On Reform
"* William H. Donaldson says he is taking aim at executive pay and fund trading
abuses in 2005.
"Despite friction with business lobbyists, it appears that the SEC chairman will
continue as Washington's top cop for the investment world, pursuing an
aggressive 2005 agenda that will take aim at issues including executive pay and
the mechanics of stock trading. In an interview, Donaldson ..."
Reference:
http://www.latimes.com/business/la-fi-sec9jan09,0,6106173.story?coll=la-home-business
According to "Pay without Performance, the Unfulfilled Promise of Executive
Compensation," 2004, by Lucian Bebchuk, Professor of Law and Jesse Fried,
Professor of Law, page 21:
"Indeed it its worth noting that although star athletes are highly paid, some
more than the average S&P 500 CEO, their compensation arrangements lack the
features of executive pay arrangements that managerial influence produces. After
the compensation packages of star athletes are negotiated, clubs have little
reason to try to camouflage the amount of pay and to channel pay through
arrangements designed to make the pay less visible. While athletes are paid
generously during the period of their contracts, clubs generally do not provide
them with a large amount of compensation in the form of postretirement perks and
payments. Clubs also generally do not provide athletes with complex
deferred-compensation arrangements that serve to obscure total pay. And when
clubs get rid of players, they do not provide athletes with large gratuitous
payments in addition to the players' contractually entitled payouts. As we shall
see, however, these are all common practices in the area of executive
compensation."
Also according to "Pay without Performance, the Unfulfilled Promise of Executive
Compensation," page 67:
"That gives you an idea of the nature of the disclosures [in the executive
compensation section]: it was legalistic, turgid, and opaque; the numbers were
buried somewhere in the fourteen pages. Someone once gave a series of
institutional investor analysts a proxy statement and asked them to compute the
compensation received by the executive covered in the proxy statement. No two
analysts came up with the same number. The numbers that were calculated varied
widely."
I believe this proposal is consistent with SLB No. 14A, particularly with the
following text: * We do not agree with the view of companies that they may
exclude proposals that concern only senior executive and director compensation
in reliance on rule 14a-8(i)(7).5
The Commission has previously taken the position that proposals relating to
ordinary business matters "but focusing on sufficiently significant social
policy issues ... generally would not be considered to be excludable, because
the proposals would transcend the day-to-day business matters and raise policy
issues so significant that it would be appropriate for a shareholder vote." 6
The Division has noted many times that the presence of widespread public debate
regarding an issue is among the factors to be considered in determining whether
proposals concerning that issue "transcend the day-to-day business matters." 7
We believe that the public debate regarding shareholder approval of equity
compensation plans has become significant in recent months. Consequently, in
view of the widespread public debate regarding shareholder approval of equity
compensation plans and consistent with our historical analysis of the "ordinary
business" exclusion, we are modifying our treatment of proposals relating to
this topic.8
I believe this proposal raises public policy issues so significant that it would
be appropriate for a shareholder vote. Furthermore the company has not shown
that shareholders would not understand the principle of this proposalto subject
high levels of executive pay to shareholder vote.
The company is implicitly arguing that since companies fail to make executive
pay as transparent and quantifiable as that of other highly paid employees, such
as star athletes, that companies should be able to exploit their obfuscation of
pay and use it as a grounds to exclude shareholder proposals on executive pay.
The no action process makes it abundantly clear that companies have access to
corporation law experts who claim to be capable of making sense of text that
would be obscure to the small shareholders.
Contrary to the company argument, rule 14a-8(i)(6) does not contain the word
"guarantee." Significantly the company fails to claim that the company is
completely powerless to implement the proposal. The company more than likely has
the power to implement the proposal in terms of obtaining the required number of
votesespecially if the company sponsors the proposal in its proxy materials,
recommends a yes-vote and solicits shares that are slow in casting ballots.
The company argument is incomplete because it does not even address the fact
that the company clearly has the power to seek the required shareholder vote at
more than one annual meeting. The company does not claim that the proposal has a
time limit.
The company gives no past example of its purported powerlessness in obtaining
shareholder votes for its own ballot items. The company failed to name a single
company ballot item in the past decade on which the required shareholder vote
was not obtained for the company's own ballot items.
The company does not address its power to amend its certificate of incorporation
and the great persuasive power the company has by recommending shareholders
approve a company ballot item.
There is an analogy to professional football in regard to the company's power to
implement. All NFL football teams have the power to make a touchdown. That does
not mean that a team can "guarantee" that it will make a touchdown in a given
game. And the fact that no team can guarantee that it will make a touchdown
during a given game does not mean that any NFL team lacks the power to make a
touchdown.
Rule 14a-8(i)(6)
The company does not address whether "majority of the stockholders" is commonly
used by the management of companies and corporate governance academia
interchangeably to mean majority vote or one share, one vote.
Additional text at the beginning of the proposal makes it clear in calling for
"shareholder approval." "Shareholder approval" is consistent with one share, one
vote:
"This proposal would require that our company not pay any executive compensation
in excess of the amount the Internal Revenue Code permits to be deducted as an
expense for federal income tax purposes, without first securing shareholder
approval."
The attached November 24, 2004 "Oracle Press Release" quotes Oracle Chairman
Jeff Henley using "majority of the stockholders" interchangeably with majority
vote or one share, one vote: "Though a large majority of the stockholders have
already indicated their desire to sell, the current board appears intent on
obstructing the will of the stockholders," Henley said. "We plan to give them a
choice (emphasis added)." Oracle is a Delaware corporation.
In the alternative SLB No. 14 allows shareholders under limited circumstances to
revise their proposals and we would be glad to do so:
5. When do our responses afford shareholders an opportunity to revise their
proposals and supporting statements?
We may, under limited circumstances, permit shareholders to revise their
proposals and supporting statements.
For these reasons it is respectfully requested that concurrence not be granted
to the company and that the MONY precedent should be upheld.
Since the company has had the first word in the no action process it is
respectfully requested that the proponent have the opportunity for the last word
in the no action process. Since this no action request was dated January 4,
2005, and it is presumed to be submitted on time, it is respectfully requested
that the shareholder party have until the end of January to provide additional
information.
Sincerely,
/s/
John Chevedden
cc:
William Steiner
Wendell L. Willkie, II
[APPENDIX1]
3Subject Non-Deductible Executive Compensation to Shareholder Vote
RESOLVED, shareholders recommend that our Corporation's by-laws be amended by
adding the following new Section:
"Section A.1. Executive Compensation. From the date of adoption of this section
no officer of the Corporation shall receive annual compensation in excess of the
limits established by the U.S. Internal Revenue Code for deductibility of
employee remuneration, without approval by a vote of the majority of the
stockholders within one year preceding the payment of such compensation. The
only exception would be interference with un-removable contractual obligations
prior to this proposal.
For purposes of the limit on executive compensation established by this Section,
the Corporation may exclude compensation that qualifies either as
"performance-based compensation" or as an "incentive stock option" within the
meaning of the Internal Revenue Code only if:
(a) in the case of performance-based compensation, the Corporation shall first
have disclosed to stockholders the specific performance goals and standards
adopted for any performance-based compensation plan, including any schedule of
earned values under any long-term or annual incentive plan; and
(b) in the case of incentive stock options, the Corporation shall record as an
expense on its financial statements the fair value of any stock options
granted."
This proposal was submitted by William Steiner, 112 Abbottsford Gate, Piermont,
NY 10968.
This proposal would require that our company not pay any executive compensation
in excess of the amount the Internal Revenue Code permits to be deducted as an
expense for federal income tax purposes, without first securing shareholder
approval.
Currently, the Code provides that publicly held corporations generally may not
deduct more than $1 million in annual compensation for any of the company's five
highest-paid executives. The Code provides an exception for certain kinds of
"performance-based compensation."
Under this proposal our company would be able to pay "performance-based
compensation" in excess of the deductibility limit, so long as the company has
disclosed to shareholders the performance goals and standards the Board has
adopted under these plans. This proposal also provides an exception for
incentive stock options, if the Board has recorded the expense of such options
in its financial statements.
A proposal similar to this was submitted by Amanda Kahn-Kirby to MONY Group and
received a 38% yes-vote as a more challenging binding proposal at the MONY 2003
annual meeting. The 38% yes-vote was more impressive because:
1) This was the first time this proposal was ever voted.
2) The proponent did not even solicit shareholder votes.
I think it is reasonable to require our company to fully disclose to
shareholders both the costs and the terms of its executive compensation plans,
if the Board wishes to pay executives more than the amounts that are generally
deductible under federal income taxes.
Subject Non-Deductible Executive Compensation to Shareholder Vote Yes on 3
Notes:
This proposal is believed to conform with Staff Legal Bulletin No. 14B (CF),
September 15, 2004.
The name and address of the proponent are part of the argument in favor of the
proposal. A published name and address confirms that the proposal is submitted
by a proponent who has the conviction to be named in the proxyjust as
management is named in the proxy.
The above format is the format submitted and intended for publication.
The company is requested to assign a proposal number (represented by "3" above)
based on the chronological order in which proposals are submitted. The requested
designation of "3" or higher number allows for ratification of auditors to be
item 2.
Please note that the title of the proposal is part of the argument in favor of
the proposal.
In the interest of clarity and to avoid confusion the title of this and each
other ballot item is requested to be consistent throughout the proxy materials.
Please advise if there is any typographical question.
Verification of stock ownership will be forwarded.
[INQUIRY LETTER]
January 19, 2005
VIA FEDEX
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: MeadWestvaco Corporation Supplemental Letter Regarding Omission of
Stockholder Proposal of William Steiner
Ladies and Gentlemen:
I am filing this supplemental letter on behalf of our client, MeadWestvaco
Corporation (the "Company"). On January 4, 2005, I submitted a no-action request
stating that the Company intends to omit a stockholder proposal and a supporting
statement (the "Proposal") received from William Steiner, naming John Chevedden
as his designated representative (the "Proponent"), from the Company's proxy
statement and form of proxy to be distributed to the Company's stockholders in
connection with the Company's 2005 annual meeting of stockholders. The January
4th letter, a copy of which is attached hereto as Exhibit A and which includes
the text of the Proposal, indicated to the staff of the Division of Corporation
Finance (the "Staff") our position that the Proposal may be excluded under Rule
14a-8(i)(3) because it is impermissibly vague and under Rule 14a-8(i)(6) because
the Company is unable to implement the Proposal.
I am writing now to supplement the January 4th letter and inform the Staff there
is an additional basis for exclusion, under Rule 14a-8(i)(2), because, if
implemented, the Proposal would cause the Company to violate state law. Please
find enclosed an opinion from the Company's special Delaware counsel, Potter
Anderson & Corroon LLP, which concurs in this conclusion as well as the
conclusion expressed in the January 4th letter that the Proposal contravenes
Rule 14a-8(i)(6) because it is beyond the Company's power to implement. See
Exhibit B.
Rule 14a-8(i)(2) allows a company to exclude a proposal if implementation of the
proposal would cause the company to violate any state, federal or foreign law to
which the company is subject. The Company is incorporated under the laws of the
State of Delaware. The Proposal, as discussed in the January 4th letter, would
require the Company to obtain approval of the "majority of stockholders within
one year preceding the payment of such compensation" in order for any officer of
the Company to "receive annual compensation in excess of the limits established
by the U.S. Internal Revenue Code for deductibility of employee remuneration"
(emphasis added). The requirement that approval be obtained from a vote of the
"majority of stockholders" is also known as per capita voting.
As explained in the attached opinion provided by Potter Anderson & Corroon LLP,
alteration of the "one share, one vote" standard set forth in Section 212(a) of
the Delaware General Corporation Law is valid and enforceable only if set forth
in a Delaware corporation's certificate of incorporation. The Certificate of
Incorporation of the Company does not authorize per capita voting (and, in fact,
echoes the one share, one vote rule of Section 212(a)). Accordingly, as set
forth in the legal opinion, the Proposal requires a voting standard that, if
implemented, would cause the Company to violate Delaware law. See
Hewlett-Packard Company (avail. Jan. 6, 2005) (proposal recommending that HP
amend its bylaws so that no officer may receive annual compensation in excess of
the limits established by the U.S. Internal Revenue Code for deductibility of
employee renumeration, without approval by a vote of "the majority of the
stockholders," would cause HP to violate state law and is therefore excludable).
I also note that, although the Proposal, as revised, "recommends" that the
Company adopt the proposed bylaw amendment, even a precatory proposal is
excludable if the action called for by the proposal would violate state, federal
or foreign law. See, e.g., Gencorp Inc. (avail. Dec. 20, 2004) (concurring that
a proposal requesting amendment of the company's governing instruments to
require implementation of all shareowner proposals receiving a majority vote is
excludable under Rule 14a-8(i)(2)). See also Badger Paper Mills, Inc. (avail.
Mar. 15, 2000); Pennzoil Corporation (avail. Mar. 22, 1993).
In conclusion, the Proposal is excludable under Rule 14a-8(i)(2) because
implementation of the Proposal would cause a violation of Delaware law by the
Company. Moreover, the attached legal opinion confirms that the Company does not
have the power and authority to implement the Proposal, thus supporting the
Company's conclusion that the Proposal is also excludable under Rule 14a-8(i)(6)
as discussed in the January 4th letter.
* * *
Pursuant to Rule 14a-8(j), I am submitting six (6) copies of this supplemental
letter and its attachments. A copy of this submission is being furnished
simultaneously to the Proponent. The Company hereby agrees to promptly forward
to the Proponent any Staff response to this no-action request that the Staff
transmits by facsimile to the Company, but not to the Proponent. Should you
require additional information or if I can be of any further assistance in this
matter, please do not hesitate to call me at (212) 403-1228.
Please acknowledge receipt of this letter and its attachments by stamping the
enclosed copy of the first page of this letter and returning it in the
self-addressed stamped envelope provided for your convenience.
Sincerely,
/s/
Elliott V. Stein
Enclosures
cc: Mr. Wendell L. Willkie, II - Senior Vice President, General Counsel and
Secretary of MeadWestvaco Corporation
Mr. William Steiner
Mr. John Chevedden
[INQUIRY LETTER]
January 21, 2005
6 Copies
7th Copy for Date-Stamp Return
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
MeadWestvaco Corporation (MWV)
Shareholder Position on Company No-Action Request
Rule 14a-8 Proposal: Executive Pay Topic
Shareholder: William Steiner
Ladies and Gentlemen:
The company has stated, although it has not emphasized the point, that it would
be possible for the company, a Delaware company, to adopt per capita voting.
Thus this proposal would properly apply to any future time the company would
have per capita voting.
Hence the second opinion in the worst case could only limit the application of
the proposal. Additionally the company does not claim that the current board has
the power to bind future boards from adopting per capita voting.
Rule 14a-8(i)(6)
The attached November 24, 2004 "Oracle Press Release" quotes Oracle Chairman
Jeff Henley using "majority of the stockholders" interchangeably with majority
vote or one share, one vote: "Though a large majority of the stockholders have
already indicated their desire to sell, the current board appears intent on
obstructing the will of the stockholders," Henley said. "We plan to give them a
choice (emphasis added)." Oracle is a Delaware corporation.
Additionally the intuitive interchangeably of "majority of the stockholders"
with majority vote or one share, one vote is supported by the fact that one
company received this proposal in August 2004 and did not question this point
until January 2005 - a full two months after its initial no action request.
Sincerely,
/s/
John Chevedden
cc:
William Steiner
Wendell L. Willkie, II
[INQUIRY LETTER]
January 28, 2005
6 Copies
7th Copy for Date-Stamp Return
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
MeadWestvaco Corporation (MWV)
Shareholder Position on Company No-Action Request
Rule 14a-8 Proposal: Executive Pay Topic
Shareholder: William Steiner
Ladies and Gentlemen:
In a separate no action request another company claims "the majority of the
stockholders" text of this proposal could have 3 meanings. One of these meanings
includes "approval by a majority of the shares outstanding..." which does not
seem to be per capita voting.
If our company insists on choosing the least workable meaning from 3 meanings
for "the majority of stockholders," which it has no need to do, then our company
could then concurrently adopt per capita voting under state law.
In Schering-Plough Corporation (January 18, 2005) the Staff appears to have not
concurred with a company argument that a company could not do two things
concurrently - implement a proposal for a bylaw to destagger the board and
concurrently amend its articles of incorporation to be consistent with the bylaw
change.
The second opinion is thus believed to be incomplete. It does not argue that it
would be impossible to concurrently amend the company's certificate of
incorporation for per capita voting.
Sincerely,
/s/
John Chevedden
cc:
William Steiner
Wendell L. Willkie, II
[STAFF REPLY LETTER]
February 27, 2005
Response of the Office of Chief Counsel Division of Corporation Finance
Re: MeadWestvaco Corporation
Incoming letter dated January 4, 2005
The proposal recommends that MeadWestvaco amend its bylaws so that no officer
may receive annual compensation in excess of the limits established by the U.S.
Internal Revenue Code for deductibility of employee remuneration, without
approval by a vote of "the majority of the stockholders," subject to the
conditions and exceptions contained in the proposal.
There appears to be some basis for your view that MeadWestvaco may exclude the
proposal under rule 14a-8(i)(2). We note that in the opinion of your counsel,
implementation of the proposal would cause MeadWestvaco to violate state law.
Accordingly, we will not recommend enforcement action to the Commission if
MeadWestvaco omits the proposal from its proxy materials in reliance on rule
14a-8(i)(2). In reaching this position, we have not found it necessary to
address the alternative bases for omission upon which MeadWestvaco relies.
Sincerely,
/s/
Heather L. Maples
Special Counsel
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