Company Name: Wendy's International, Inc.
Public Availability Date: February 8, 2005
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 22, 2004
Via Federal Express
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth St., N.W.
Washington, D.C. 20549
Re: Securities Exchange Act of 1934/Rule 14a-8
Ladies and Gentlemen:
I am the Executive Vice President, General Counsel and Secretary of Wendy's
International, Inc. (the "Company"). I am submitting this letter on behalf of
the Company to request the concurrence of the staff of the Division of
Corporation Finance (the "Staff") that no enforcement action will be recommended
to the Securities and Exchange Commission (the "SEC") if the Company omits from
its proxy statement and form of proxy for its 2005 Annual Meeting of
Shareholders (the "Proxy Materials"), for the reasons outlined below, a
shareholder proposal (the "Proposal") received from People for the Ethical
Treatment of Animals (the "Proponent").
In accordance with Rule 14a-8(j) under Section 14(a) of the Securities Exchange
Act of 1934, as amended, enclosed are six (6) paper copies of this letter and
the Proposal. One copy of this letter, with copies of all enclosures, is being
sent simultaneously to the Proponent by overnight delivery.
The Company presently expects to file its definitive Proxy Materials with the
SEC on or about March 14, 2005.
SUMMARY OF THE COMPANY'S POSITION
In summary, the Company believes that it may exclude the Proposal from its Proxy
Materials pursuant to the following rules:
Rule 14a-8(i)(10), because the Company has substantially implemented the
Proposal;
Rule 14a-8(i)(7), because the Proposal relates to the Company's ordinary
business operations; and
Rule 14a-8(i)(4), because the Proposal relates to the redress of a personal
claim or grievance against the Company and is designed to result in a benefit to
the shareholder, or to further a personal interest, which is not shared by the
other shareholders at large.
THE PROPOSAL
The Proposal, dated November 4, 2004, requests that the Company's Board of
Directors issue a report to shareholders by October 2005 "on the feasibility of
Wendy's requiring its chicken suppliers to phase in controlled-atmosphere
killing within a reasonable timeframe, with a focus on the animal welfare and
economic benefits that this technology could eventually bring to all our
company's slaughter facilities." The Proposal's supporting statement notes that
other companies are "starting to explore" controlled atmosphere killing as a new
slaughter technique. The Company and its suppliers have "explored" and continue
to evaluate controlled atmosphere stunning as a new slaughtering technique;
however, based on the testing results and scientific data currently available,
the Company and its suppliers consider it pre-mature to implement the technique
at this time.
GROUNDS FOR EXCLUSION OF THE PROPOSAL
I. The Proposal may be excluded because the Company has substantially
implemented it.
Pursuant to Rule 14a-8(i)(10), a shareholder proposal may be properly excluded
from a company's proxy materials "if the company has already substantially
implemented the proposal." Thus, the relevant question for determining whether
the Proposal may be properly excluded pursuant to Rule 14a-8(i)(10) is whether
the Proposal has been "substantially implemented" by the Company. We believe
that we have satisfied the substantial implementation test of Rule 14a-8(i)(10)
for the reasons discussed below.
First, the Company has had a long-standing policy with respect to the humane
treatment of animals and of working with our suppliers to ensure humane animal
handling and care. The Company's animal welfare program fact sheet is available
on our website under corporate initiatives at www.wendys.com. The Company is
continually working with our suppliers to ensure that the newest slaughter
procedures are thoroughly tested and scientifically evaluated and, if
satisfactory to the Company and our suppliers, implemented by our suppliers.
Certain of the Company's suppliers have already evaluated, and continue to
evaluate, controlled atmosphere stunning. These evaluations considered a number
of factors, including: animal welfare; scientific research and studies;
production methods used commercially both in the U.S. and internationally; food
safety and product quality; the safety of humans involved in the slaughter
process; technical difficulties in operating equipment and procedures;
environmental factors and expected costs. Our suppliers currently believe that
the research is incomplete and inconclusive as to whether controlled atmosphere
stunning is a better and more humane method of stunning than conventional
stunning methods. Moreover, our suppliers believe that current methods of
controlled atmosphere stunning may produce unsatisfactory results with respect
to food safety and product quality issues.
Second, as noted above, the Company has an animal welfare program fact sheet
publicly available on our website. The Company's protocol requires trained,
experienced personnel to audit all approved suppliers for proper, safe and
humane handling of all animals. These inspections - conducted by third-party and
trained auditors - include a review of housing, transportation, holding
facilities and humane slaughter procedures. The Company has recently revised our
animal welfare program fact sheet (a copy enclosed herewith in its entirety) to
specifically discuss the factors our suppliers consider when evaluating new
slaughter procedures. As noted, this statement is publicly available on our
website to our shareholders and other investors.
We believe the Proposal has been substantially implemented by virtue of the
studies and evaluations already conducted by our suppliers and through
dissemination of the statement in our animal welfare program fact sheet. The
Staff has consistently taken the position that shareholder proposals have been
substantially implemented within the meaning of Rule 14a-8(i)(10) when the
company has policies, practices and procedures in place relating to the subject
matter of the proposal, or has implemented the essential objective of the
proposal. See, e.g., Xcel Energy, Inc. (February 17, 2004), PPG Industries, Inc.
(January 19, 2004) and Telular Corp. (December 5, 2003). When a company can
demonstrate that it has already adopted policies or taken actions to address a
shareholder proposal, the Staff has concurred that the proposal has been
"substantially implemented" and may be excluded as moot. See Nordstrom Inc.
(February 8, 1995) (proposal that company commit to code of conduct for its
overseas suppliers that was substantially covered by existing company guidelines
was excludable as moot). As discussed, the Company has substantially implemented
the Proposal, thereby rendering the Proposal moot.
In support of our assertion that we have satisfied the substantial
implementation test of Rule 14a-8(i)(10), the proposal in PPG Industries, Inc.
(January 19, 2004) is instructive. In the PPG Industries no-action letter, the
Staff concluded that the company could exclude a proposal on animal testing
under Rule 14a-8(i)(10) since the company had "publicly issued an animal welfare
policy committing the company to use alternatives to animal testing." We believe
the facts in PPG Industries are analogous to the facts in the present case. The
Proposal requests the Company to issue a report on the feasibility requiring its
chicken suppliers to phase in controlled-atmosphere killing within a reasonable
timeframe, with a focus on the animal welfare. Certain of our suppliers have
been and continue to evaluate this slaughtering technique; however, at present
the Company and its suppliers cannot conclude that controlled atmosphere
stunning is superior to conventional stunning methods with respect to economic
benefits or in the humane treatment of animals. Nevertheless, as more studies
are conducted and new procedures become available, the Company, together with
its suppliers, will continue to consider and discuss different slaughter
techniquesincluding controlled atmosphere stunning.
We note that in The Procter & Gamble Company (July 15, 2004) and Johnson &
Johnson (January 30, 2004) the Staff refused to allow certain animal testing
proposals to be excluded under Rule 14a-8(i)(10). However, as the proponent
noted in its rebuttal letter in The Procter & Gamble Company, that proposal
called for "discrete, tangible actions" and not just policy statements. The
facts in the case at hand are distinguishable from the Procter & Gamble and
Johnson & Johnson decisions because the Company and its suppliers have taken
discrete, tangible action in evaluating, and continuing to evaluate, controlled
atmosphere stunning as a new slaughter method; however, the evidence and studies
have not, thus far, been conclusive that such technique is preferable to
conventional stunning methods. As noted by the Proponent, the Company actively
works "with our suppliers to research, evaluate and implement advances in the
science of animal handling and care." However, we will not recommend
implementation of a new slaughter technique until both the Company and its
suppliers are satisfied that such technique offers recognizable
benefitseconomically and with regard to the humane treatment of animals.
The Company believes it is clear that the Proposal has been substantially
implemented, and, based on Rule 14a-8(i)(10), the Company intends to exclude the
Proposal from the Proxy Materials. The Company respectfully requests the Staff
to confirm that it will not recommend enforcement action if the Company omits
the Proposal from the Proxy Materials pursuant to Rule 14a-8(i)(10).
II. The Proposal may be excluded under Rule 14a-8(i)(7), because the Proposal
relates to the Company's ordinary business operations.
Rule 14a-8(i)(7) states that a shareholder proposal may be omitted from a
company's proxy materials if it deals with a matter relating to the company's
ordinary business operations. The Staff consistently permits the exclusion of
proposals seeking the preparation of reports on ordinary business matters. See,
e.g., Ford Motor Company (March 2, 2004) (proposal calling for report on global
warming was excludible "as relating to ordinary business operations (i.e., the
specific method of preparation and the specific information to be included in a
highly detailed report)" ruled excludable); AT&T Corp. (February 21, 2001)
(proposal requesting a report on the nature, presentation and content of cable
television programming ruled excludable); Wal-Mart Stores, Inc. (March 15, 1999)
(proposal requesting report on the company's actions to ensure it does not
purchase from suppliers who manufacture items using forced labor, convict labor
and child labor ruled excludable); and Nike, Inc. (July 10, 1997) (proposal
requesting that the board report on compliance with the company's code of
conduct by independent contractors in foreign countries related to sustainable
community wage levels ruled excludable).
Even in situations where only part of the proposal relates to ordinary business
operations, the Staff has permitted exclusion of the entire
proposal-notwithstanding that a portion of "the proposal appears to address
matters outside the scope of ordinary business." E*Trade Group, Inc. (October
31, 2000). The Company recognizes that certain matters falling with the ordinary
business operation category which may otherwise be excluded will not be excluded
by the Staff because they raise significant policy, economic or other
implications; however, we do not believe issuing a report on imposing certain
requirements on our suppliers raises those policy implications.
Relationships with suppliers and vendors. The "retention of suppliers" is an
example of an ordinary business matter that is so "fundamental to management's
ability to run a company on a day-to-day basis" that it could not, as a
practical matter, be subject to direct stockholder oversight. Release 34-40018
(May 21, 1998). The Proposal requests a report calling for the feasibility of
requiring our suppliers to implement controlled atmosphere stunning. Presumably
if a supplier refused to implement such procedures, the Company would need to
terminate its relationship with that supplier-thus, the Proposal has the effect
of imposing on the Company the selection and retention of its suppliers.
Furthermore, the Staff has consistently taken the position that requests for
reports detailing the selection of vendors and suppliers are matters relating to
a company's ordinary course of business, and may be omitted pursuant to Rule
14a-8(i)(7). See Wal-Mart Stores, Inc. (March 15, 1999), Kmart Corporation
(March 12, 1999) and The Warnaco Group, Inc. (March 12, 1999) (proposals
requesting reports on the companies' actions to ensure they do not purchase from
suppliers who manufacture items using forced labor, convict labor and child
labor ruled excludable); and Kohl's Corp. (March 18, 1997) (proposal requesting
that board report on its standards imposed on vendors, subcontractors and buying
agents in countries where it sources goods ruled excludable).
Micromanaging. The Staff has previously concurred that proposals requiring
disclosure about day-to-day operations seek to micromanage the company and are
excludable under Rule 14a-8(i)(7). See Release 34-40018 (May 21, 1998) and
Wal-Mart Stores, Inc. (April 10, 1991) (permitting exclusion of a proposal
calling for disclosures regarding composition of minority-owned companies among
suppliers, equal employment opportunities and affirmative action under ordinary
business operations). Release 34-40018 also notes that proposals that seek "to
impose specific time-frames or methods for implementing complex policies" will
be excludable under 14a-8(i)(7). In our view, proposals that impose specific
time-frames for issuing "complex reports" should also be excludable under Rule
14a-8(i)(7). The Company believes that further research is required prior to a
decision being made about controlled atmosphere stunning and that there are a
number of complex factors that go into the decisions making process. Therefore,
the level of research and scientific study that would be required to be
performed in order for the Board of Directors to issue the report by the
arbitrary deadline of October 2005 established in the Proposal effectively works
to micromanage the Company's ordinary business operations.
We also believe that the Proposal does not raise any significant policy,
economic or other implications. While we note that the Staff refused to exclude
an animal testing proposal in Wyeth (February 2, 2004) under Rule 14a-8(i)(7),
the Staff did not indicate that it did so based on significant policy
considerations. Compare, Aon Corporation (February 19, 2004) and The Kroger Co.
(April 12, 2002) (Staff specifically stated in its decision letters that it
refused to exclude the proposals under Rule 14a-8(i)(7) because the subject
matter of the proposals raised "significant policy issues"). In addition, this
Proposal, unlike the Wyeth proposal relates to matters implicating the selection
and retention of suppliers. In Wyeth the proposal requested the companywithout
directly implicating the company's suppliersto issue a policy statement
publicly committing to use in vitro testing for certain product testing in lieu
of animal testing. The Company believes the report requested by the Proposal
implicates the type of micromanaging the Staff has found impermissible;
therefore, the Proposal should be excludable under Rule 14a-8(i)(7).
III. The Proposal may be excluded because it relates to the redress of a
personal claim or grievance against the Company and is designed to result in a
benefit to the shareholder, or to further a personal interest, which is not
shared by the other shareholders at large.
Rule 14a-8(i)(4) provides for the omission from a company's proxy materials of a
shareholder proposal if it relates to the redress of a personal claim or
grievance against the company or any other person, or if it is designed to
result in a benefit to the proponent or to further a personal interest, which
benefit or interest is not shared by any other shareholders at large. The
purpose of this rule, according to the SEC, is to prevent security holders from
abusing the shareholder proposal process in order to achieve personal ends that
are not necessarily in the common interest of the issuer's shareholders
generally. See Release No. 34-20091 (August 16, 1983).
In the case at hand, the Proponent has been issuing communications, at such a
level as to exclude responsible direct interchange, against the Company (and
other restaurant companies) over the past several years that are intended to
damage the Wendy's brandwhich is contrary to the interests of shareholders at
large. The Proponent has established websites (i.e., www.wickedwendys.com,
www.kentuckyfriedcruelty.com, www.murderking.com and www.mccruelty.com) that
malign the image of several restaurant companies in order to further its social
agenda. Enclosed herewith as Exhibit A are samples of posters and other
materials that the Proponent has produced in waging what its website
characterizes as the Proponent's "campaign" against the Company. Enclosed
herewith as Exhibits B-E are letters to the Company's CEO (obtained from the
website, www.peta.org/feat/wendys) threatening the Company with one of the
Proponent's activist campaigns unless the Company accedes to the Proponent's
demands. As Exhibits B-E indicate, the Proponent "targets" various restaurant
companies in its activist cross-hairs until those companies capitulate to the
Proponent's demands. The Company views this Proposal in the context of, as part
of and the latest tactic in the Proponent's agenda targeting the Company.
The Staff has taken the position that the shareholder process may not be used as
a tactic to redress a personal grievance, even if a proposal is drafted in such
a manner that it could be read to relate to a matter of general interest. See,
e.g., US West, Inc. (December 2, 1998), Station Casinos, Inc. (October 15,
1997), International Business Machines (January 31, 1995) and Westinghouse
Electric Corporation (December 6, 1985). While animal welfare may be a matter of
general interest, the Proponent is seeking to use the shareholder process as one
of its tactics to redress a personal grievance or further a personal interest,
which benefit or interest is not shared by shareholders at large.
It is apparent to the Company that the Proponent owns shares of the Company
stock only so as to be able to submit shareholder proposals that advance its
political agenda. Another website sponsored by the Proponent seeks to counsel
investors not to invest in companies that exploit animals, including companies
in the food and beverage sector of the economy. See Exhibits F-G enclosed. The
Proponent's activist campaign against the Company, including demonstrations,
news releases and calls for boycotting the Company's restaurantswhich could
financially damage the Company and negatively impact its stock priceis not an
interest shared by the Company's other shareholders, who generally invest in the
Company's stock anticipating an increase in their financial investment.
Another area where the Proponent's interest diverges from the Company's other
shareholders at large is that the Proponent seeks to capitalize on the publicity
that comes from its activist campaigns. In general, all of the websites
sponsored by the Proponent solicit contributions from visitorsthereby seeking
to increase its war chest to fund additional activist campaigns. The Company
believes the Proponent is attempting to misuse the security holder proposal
process to retaliate against the Company, advance its political agenda and draw
publicity toward its causes. It is worth noting that the Proponent has submitted
a similar proposal to another restaurant company this proxy season that has
garnered the media's attention, which article has been posted on the Proponent's
website. See Exhibit H enclosed.
Based on the above, it is the Company's view that the Proponent has submitted
its Proposal to further its personal claim or grievance against the Company and
the Proposal is designed to result in a benefit to the Proponent and further its
own personal interest, which benefit or interest is not shared by shareholders
at large. The Company respectfully requests the Staff to confirm that it will
not recommend enforcement action if the Company omits the Proposal from the
Proxy Materials pursuant to Rule 14a-8(i)(4).
CONCLUSION
Based upon the foregoing, the Company respectfully requests that the Staff
confirm, at its earliest convenience, that it will not recommend any enforcement
action if the Company excludes the proposal from the Proxy Materials for its
2005 Annual Meeting of Shareholders in reliance on Rules 14a-8(i)(10), (7) and
(4). As noted above, the Company presently anticipates mailing its Proxy
Materials for the 2005 Annual Meeting of Shareholders on or about March 14, 2005
and to submit final materials for printing on or about March 9, 2005. We would
appreciate a response from the Staff in time for the Company to meet this
schedule. In order to facilitate delivery of the Staff's response to this
letter, the Staff's decision may be sent by facsimile to the Proponent at (757)
622-0457 and to the Company at (614) 764-3243.
If the Staff has any questions or comments regarding this filing, or if
additional information is required in support of the Company's position, please
communicate with the undersigned at (614) 764-3210.
Sincerely,
/s/
Leon M. McCorkle, Jr.
Executive Vice President,
General Counsel and Secretary
Enclosures
cc: People for the Ethical Treatment of Animals (PETA)
[INQUIRY LETTER]
November 4, 2004
Leon M. McCorkle Jr., EVP, General Counsel, and Secretary
Wendy's International, Inc.
1 Dave Thomas Blvd.
Dublin, OH 43017-0256
Dear Mr. McCorkle:
Attached to this letter is a shareholder proposal submitted for inclusion in the
proxy statement for the 2005 annual meeting. Also enclosed is a letter from
People for the Ethical Treatment of Animals' (PETA) brokerage firm, Morgan
Stanley, confirming ownership of 120 shares of Wendy's International, Inc.
common stock, most of which was acquired more than three years ago. PETA has
held these shares continuously for more than one year and intends to hold them
through and including the date of the 2005 annual shareholders meeting.
Please contact the undersigned if you need any further information. If Wendy's
International, Inc., will attempt to exclude any portion of this proposal under
Rule 14a-8, please advise me within 14 days of your receipt of this proposal. I
can be reached at 757-962-8253 or via e-mail at DanS@peta.org.
Sincerely,
/s/
Dan Shannon
Senior Campaign Coordinator
enclosures
[APPENDIX]
Shareholders' Resolution
This resolution is submitted by People for the Ethical Treatment of Animals (PETA),
which owns 120 shares of Wendy's stock.
In its online "Animal Welfare Program Fact Sheet," our company states, "[W]e
believe it is our obligation to ensure that each of our suppliers exceeds
government regulations by meeting Wendy's more exacting standards pertaining to
the humane treatment of animals," 1 However, the facilities that supply our
restaurants with animal products are still home to abuses that most decent
people would deem unacceptable. Our company has taken some laudable first steps
to address these issues, but there is much work to be done.
One area in which much improvement is needed is that of chicken slaughter.
Currently, chickens raised for Wendy's are hung upside-down by their
often-injured legs in painful metal shackles and run through an electrified stun
bath that often gives them painful shocks without rendering them insensible to
pain. Many are still fully conscious when their throats are slit or when they
are dunked into tanks of scalding-hot water for feather removal. Clearly, there
are major animal welfare concerns with this outdated process.
Other companies are starting to explore a new slaughter technology known as
controlled-atmosphere killing (CAK), which eliminates mostif not allof these
concerns. When using CAK, chickens are placed into a controlled environment
where the oxygen they are breathing is slowly replaced with an inert gas, such
as argon or nitrogen, putting the birds to sleep quickly and painlessly. CAK is
a USDA-approved method of slaughtering chickens and has been described by animal
welfare experts as "the most stress-free, humane method of killing poultry ever
developed." The technology also has positive worker and food safety
implications, and it has been shown that the resulting savings would recoup the
initial investment in a year and a half or less.
Wendy's "Animal Welfare Program Fact Sheet" also states, "To remain an industry
leader in the area of animal welfare, we actively work with our suppliers to
research, evaluate and implement advances in the science of animal handling and
care." 2 CAK is perhaps the single most important scientific advance in the
field of chicken slaughter, and our company acknowledges its responsibility to
fully explore advances that can improve animal welfare.
Resolved:
Shareholders request that the board of directors issue a report to shareholders
by October 2005, prepared at reasonable cost and omitting proprietary
information, on the feasibility of Wendy's requiring its chicken suppliers to
phase in controlled-atmosphere killing within a reasonable timeframe, with a
focus on the animal welfare and economic benefits that this technology could
eventually bring to all our company's slaughter facilities.
-----FOOTNOTES-----
1 http://www.wendys.com/w-6-3-1.shtml
2 http://www.wendys.com/w-6-3-1.shtml
[INQUIRY LETTER]
]January 20, 2005
BY ELECTRONIC MAIL: cfletters@sec.gov
Office of the Chief Counsel
Division of Corporation Finance
U.S Securities and Exchange Commission
450 Fifth St., N.W.
Washington, D.C. 20549
Re: Shareholder Proposal of People for the Ethical Treatment of Animals ("PETA")
for Inclusion in the 2005 Proxy Statement of Wendy's International, Inc.
Ladies and Gentlemen:
This letter is filed in response to a letter dated December 22, 2004, submitted
to the SEC by Wendy's International, Inc. ("Wendy's" or "the Company"). The
Company seeks to exclude PETA's shareholder proposal from its proxy statement
for the 2005 annual meeting based on Rule 14a-8(i)(10) as substantially
implemented; Rule 14a-8(i)(7) as ordinary business; and Rule 14a-8(i)(4) as
redress of a personal grievance.
The resolution at issue reads as follows:
Resolved:
Shareholders request that the board of directors issue a report to shareholders
by October 2005, prepared at reasonable cost and omitting proprietary
information, on the feasibility of Wendy's requiring its chicken suppliers to
phase in controlled-atmosphere killing within a reasonable timeframe, with a
focus on the animal welfare and economic benefits that this technology could
eventually bring to all our company's slaughter facilities.
For the reasons that follow, PETA respectfully disagrees with the Company's
position that the proposal should be omitted and urges the Staff to rule
accordingly.
Rule 14a-8(i)(10): Substantially Implemented
The operative words in the proposal are "issue a report to shareholders"... "on
the feasibility ... controlled-atmosphere killing ..." While the Company is long
on words about substantial implementation, it is short on hard facts. Parse the
printed word and all Wendy's can point to is a general Animal Welfare Program
posted on its Website.
As if anticipating this shareholder proposal, Wendy's has recently inserted a
section in its Animal Welfare Program under the heading "Chicken Supplier
Requirement" (sic) captioned "Slaughtering Methods." In that section the Company
informs us that it meets with its "chicken suppliers to evaluate their various
methods for the humane slaughtering of chicken." The Company lists all the
factors its suppliers consider including animal welfare, scientific research and
studies, production methods, food safety and quality, worker safety in the
slaughter process, and the like.
Wendy's goes on to announce that "[c]ontrolled atmosphere stunning is one method
that has been studied, although the research involving that method is incomplete
and inconclusive." If you blinked, you missed what constitutes Wendy's
substantial implementation argument. There is no indication that either the
Company or its suppliers have "studied" controlled atmosphere "stunning." Apart
from the fact that the Company seems unable to correctly identify the method,
that statement is a classic example of spin.1
In seeking to omit the Proposal based on the grounds that it has been
implemented, the Company states that "we will not recommend implementation of a
new slaughter technique until both the Company and its suppliers are satisfied
that the technique offers recognizable benefitseconomically and with regard to
the humane treatment of animals." However, PETA has not asked that the Company
implement controlled-atmosphere killing, simply that it investigate this method,
taking into account the current research and the actions of competitors in the
food industry.
The Company's statements about controlled atmosphere killing (also referred to
as "CAK") reveal insufficient and incorrect information about the process. That
lack of information shows that the Company cannot have implemented the Proposal,
since it requests an up-to-date and accurate report on this slaughter method.
Wendy's acknowledgment that assessing the feasibility of implementing
controlled-atmosphere killing is "incomplete" and "inconclusive" makes the
point.2
Additional statements further illustrate Wendy's incomplete understand of the
CAK method. For instance, the Company states that some suppliers have raised
concerns about whether controlled atmosphere killing is more humane than
conventional methods and whether it jeopardizes food safety and quality. These
statements reveal that the Company is out of touch with current science. Leading
food scientists, including Dr. Temple Grandin, a member of the Company's own
animal welfare board, agree without reservation that controlled-atmosphere
killing is the most humane method of slaughter and that it in no way compromises
food safety. This slaughter method is already being used by some of the
suppliers of industry-giant McDonald's. The controlled atmosphere killing method
is widely recognized by scientists to pose absolutely no risk to consumers and
to be the most humane method of poultry slaughter.
On paper, Wendy's "Animal Welfare Program" is a model of responsible corporate
policy with respect to animal welfare issues, and indeed, the company has made
some laudable advances in certain areas. The Company touts its priorities as
"handling animals in a humane manner, and preventing neglect or abuse." The
Company agrees that "handling animals properly helps ensure the integrity of our
food." Wendy's goes on to stress its commitment to continuous improvement
announcing that "[t]o remain an industry leader in the area of animal welfare,
we actively work with our suppliers to research, evaluate and implement advances
in the science of animal handling and care."
If Wendy's had in fact "studied" controlled atmosphere killing, then reporting
to shareholders on the feasibility of requiring suppliers to phase in the new
technology, would be the natural progression, and indeed the next most logical
step. Reporting to shareholders on CAK would confirm that Wendy's commitment to
lead, rather than follow, and to evaluate and implement best practices, are more
than empty words. Instead of fighting our proposal, Wendy's would, as McDonald's
has, embrace it.
Finally, if Wendy's is in fact in possession of studies and evaluations on
controlled atmosphere killing, then the Company should disclose that information
to its shareholders. It should disclose that information because open
communication with shareholders on issues of concern, is consistent with good
corporate governance and stewardship.
In sum, it is apparent that Wendy's has not substantially implemented the
proposal. Accordingly, the Staff should decline to concur with the Company's
view that the proposal has been implementednot even slightly, much less
substantially.
Rule 14a-8(i)(7): Ordinary Business Operations
Wendy's argues that the proposal involves: i) the conduct of its "ordinary
business operations"; ii) "the selection and retention of its suppliers" 3; and
iii) "micromanaging" the Company.
The Staff has repeatedly found that proposals "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." Exchange Act Release No. 34-40018 (May 21, 1998).
Similarly, the Staff has refused to uphold the ordinary business operations
exclusion when the proposal falls within a range of issues with "significant
policy, economic or other implications." Exchange Act Release No. 34-12999 (Nov.
22, 1976).
Most significantly on this point, the Staff in The Gillette Co. (avail. Jan. 4
1996) ruled that Gillette could not omit a proposal requesting that the company
issue a report on its efforts to eliminate all animal testing by a date certain.
The Staff found that the resolution was not excludable under the predecessor to
the current Rule 14a-8(i)(7). That ruling has applicability to the matter at
hand.
The proposal under review involves both significant policy and economic
considerations. The economic considerations stem from the fact that closed
atmosphere killing has been recognized by experts in the field of animal science
as economically sound and scientifically advanced technology.
Wendy's has, without reservation, acknowledged that issues surrounding animal
welfare are among it "priorities." Those priorities, in the Company's own words,
include "handling animals in a humane manner, and preventing neglect or
abuse,"... "handling animals properly"... "remain[ing] an industry leader in the
area of animal welfare..." Not surprisingly, Wendy's priorities reflect public
sentiment at large concerning the treatment of farm animals. Eighty-two percent
of Americans support effective laws for the protection of farmed animals.
(Gallup Poll and Zogby Report).4 All of those "priorities" are part of our
shareholder resolution.
Furthermore, the social issues of controlled atmosphere killing are broader
still and implicate an improved working environment and enhanced food safety, in
addition to being the most humane method of killing poultry ever developed.
Slaughterhouse workers are less likely to experience the panoply of injuries
associated with the hanging, electrical stunning, and cutting method of
slaughter. Before slaughter, these terror-stricken animals are struggling to
escape their captors. The results are frequent injuries to both the birds and
the handlers who must hang each individual chicken, one-by-one, upside down in
leg shackles, so they can proceed to the electrical stunning bath prior to
having their throats slit. The controlled atmosphere killing method reduces the
potential for injury to workers, reduces bruising of the birds, eliminates the
number of workers needed in the slaughterhouse, and advances humane treatment
for animals.
Therefore, the Staff should decline to concur with the Company's view that the
proposal is excludable under the ordinary business operations exclusion.
14a-8(i)(4): Redress of a Personal Grievance
Wendy's last argument for omitting PETA's proposal is that it relates to redress
of a personal grievance. A "personal grievance" in its ordinary, common sense
nuance, relates to a claim or complaint held or felt by a "person." Accordingly
to attribute a personal grievance to a non-profit organization with over 800,000
members, might involve a challenge were the assertion not so spurious.
Shareholder resolutions are a matter of shareholders' prerogative. If animal
welfare issues were not of concern to a sufficiently large portion of
shareholders, Wendy's would probably not have adopted its Animal Welfare
Program. The Gallop poll and Zogby report underscore the fact that the humane
treatment of farmed animals is not an issue confined to the activist fringe.
Moreover, the Company is incorrect in implying that keeping up with the
competition (McDonald's) and remaining an "industry leader" in animal welfare is
outside of shareholders' interests. Competitors in the food industry, most
notably McDonald's, have taken action to investigate the feasibility of
implementing controlled-atmosphere killing at their suppliers' slaughterhouses,
and have implemented the technology in some plants. Providing shareholders with
a report on the feasibility of controlled atmosphere killing is in keeping with
that aim. Keeping abreast of the competition and staying true to the Company's
stated policies on animal welfare issues, are always in shareholders' best
interests.
One of PETA's missions is to encourage the corporate giants in the food industry
to make meaningful decisions and choices in the area of animal welfare. PETA's
shareholder resolution is in harmony with its missionpursuing and achieving by
all legal means the ethical treatment of animals. If Wendy's definition of a
personal grievance is accepted, any disagreement, controversy, or dispute can be
conveniently converted to a personal grievance.
Shareholder resolutions filed by activist investorsand approved by the SEChave
entered the mainstream.5 Shareholder resolutions over the past several years
have addressed social and policy issues as varied as:
tobacco (sponsored by the Sisters of Mercy of Americas, NYC Funds, Minnesota
Board of Investment, St. Joseph of Capuchin, State of Connecticut, and United
Church Foundation)
environment (Sierra Club, Trillium Asset Management, Community of the Sisters
of St. Dominic of Caldwell, Rainforest Action Network, Catholic Healthcare West,
and United Methodist Church)
sexual orientation (NYC Funds, NYCERS, and Sisters of Mercy)
human rights (Amnesty International USA)
genetically modified foods (IBEW)
Those organizations, like PETA, exercise their rights as shareholders to
encourage their corporations to discuss openly and move to improve corporate
stewardship in their respective spheres of interest. The right to engage in
differing points of view is not only the bedrock of a free society, it is one of
the primary reasons the Commission enacted regulations safeguarding the right to
bring shareholder resolutions.
Consequently, the Staff should decline to concur with the Company's view that
the proposal seeks redress for a personal grievance.
The Deadline Required by Rule 14a-8(j)(1)
The Company admits on the first page of its December 22, 2004 no-action letter
that it "expects to file its definitive Proxy Material with the SEC on or about
March 14, 2005." Rule 14a-8(j)(1) imposes certain deadlines on the Company in
connection with attempting to omit a shareholder resolution. The Rule requires
in relevant part that:
If the company intends to exclude a proposal from its proxy materials, it must
file its reasons with the Commission no later than 80 calendar days before it
files its definitive proxy statement and form of proxy with the Commission.
From December 23, 2004 (the presumed date of receipt by the Commission) to March
14, 2005 is 81 days. Accordingly, the Staff should monitor whether Wendy's proxy
materials are filed earlier than March 14, 2005, since an earlier filing would
render the no-action petition untimely.
Conclusion
For the foregoing reasons, PETA requests that the Staff recommend enforcement
action if the proposal is omitted from the Company's proxy materials for the
2005 annual meeting. Alternatively, should the Staff disagree with the
conclusions expressed herein, we would request the opportunity to confer with a
member of the staff before issuance of the SEC's response.
I can be reached directly by telephone at 703-319-2196, or by mail at 8506
Harvest Oak Drive; Vienna, VA 22182.
We thank the Staff for its consideration of this response.
Very truly yours,
/s/
Susan L. Hall
SLH/pc
cc: Leon M. McCorkle, Jr. (by e-mail)
-----FOOTNOTES-----
1 The controlled atmosphere killing method involves painless and humane
euthanasia without being hung up-side-down while fully conscious, without being
subjected to electrical stunning, and without having their throats cut open.
2 http://www.wendys.com/w-6-3-1.shtml#5
3 Wendy's suggestion that implementation of the Resolution would have "the
effect of imposing on the Company the selection and retention of its suppliers"
is plain nonsense. The Resolution calls for a report on the feasibility of using
the CAK method of slaughter. Period.
4 The horrible treatment of chickens prior to slaughter was vividly depicted in
undercover footage obtained by PETA at a contract slaughterhouse to Pilgrim's
Pride. The documentary evidence showed chickens being stomped, kicked like
footballs, thrown against the wall, torn and ripped apart while still live. The
mainstream press (the NY Times and the Wall St. Journal), network television
(ABC, NBC, and CBS), and media around the world aired the videotape showing
these atrocities. In the words of CBS anchor Dan Rather, "...there's no
mistaking what it depicts: cruelty to animals, chickens horribly mistreated
before they're slaughtered for a fast-food chain."
5 The Interfaith Center for Corporate Responsibility was formed in the 1970s for
the express purpose of using shareholder resolutions as a way of communicating
its views on matters of social justice.
[STAFF REPLY LETTER]
February 8, 2005
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Wendy's International, Inc. Incoming letter dated December 22, 2004
The proposal requests that the board issue a report to shareholders on the
feasibility of Wendy's requiring its chicken suppliers to phase in
controlled-atmosphere killing within a reasonable timeframe.
We are unable to concur in your view that Wendy's may exclude the proposal under
rule 14a-8(i)(4). Accordingly, we do not believe that Wendy's may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(4).
We are unable to concur in your view that Wendy's may exclude the proposal under
rule 14a-8(i)(7). Accordingly, we do not believe that Wendy's may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(7).
We are unable to concur in your view that Wendy's may exclude the proposal under
rule 14a-8(i)(10). Accordingly, we do not believe that Wendy's may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(10).
Sincerely,
/s/
Kurt K. Murao
Attorney-Advisor
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