Company Name: Convergys Corp.
Public Availability Date: December 29, 2006
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
November 28, 2006
VIA OVERNIGHT DELIVERY
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Convergys CorporationShareholder Proposal Submitted by the United
Brotherhood of Carpenters Pension Fund
Ladies and Gentlemen:
This letter is to advise you that our client, Convergys Corporation
("Convergys"), intends to omit from the proxy statement and form of proxy for
its 2007 Annual Meeting of Shareholders (collectively, the "2007 Proxy
Materials") a shareholder proposal and related supporting statement (the
"Proposal") which it received from the United Brotherhood of Carpenters Pension
Fund (the "Fund"). Copies of (i) the Fund's letter to Convergys, dated October
26, 2006, which includes the Proposal, (ii) Convergys' letter to the Fund, dated
November 8, 2006, informing it of procedural deficiencies in the Proposal, (iii)
the Fund's second letter to Convergys dated November 8, 2006, which includes a
slight modification to the Proposal, and (iv) Convergys' letter to the Fund,
dated November 10, 2006, responding to the Fund's modified Proposal, are
enclosed with this letter as Exhibits 1, 2, 3 and 4.
Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), we have enclosed six copies of this letter and its
attachments. Also in accordance with Rule 14a-8(j), we are on this date mailing
a copy of this letter and its attachments to the Fund, informing it of
Convergys' intention to omit the Proposal from the 2007 Proxy Materials.
On behalf of Convergys, we hereby respectfully request that the staff of the
Division of Corporation Finance of the Securities and Exchange Commission (the
"SEC") concur in Convergys' opinion that the Proposal may be excluded from the
2007 Proxy Materials. We believe the Proposal is excludable under Rules
14a-8(c), 14a-8(f), 14a-8(i)(3) and 14a-9 for the following reasons:
The Proposal is in fact two separate proposals: a proposal to reincorporate
Convergys from Ohio to Delaware, and a proposal for the new Delaware company to
adopt a majority voting standard for the election of directors.
The Proposal contains false and misleading statements.
The Proposal
The original resolution included in the Proposal states:
Majority Vote Reincorporation Proposal
Resolved: That the shareholders of Convergys Corporation ("Company") hereby
request that the Board of Directors take the measures necessary to change the
Company's jurisdiction of incorporation from Ohio to Delaware so as to enable
the Company to establish a majority vote standard for election of directors.
After Convergys advised the Fund in accordance with Rule 14a-8(f)(1) that its
Proposal contained two separate proposals, the Fund attempted to remedy this
deficiency by eliminating the words "so as to enable the Company to establish a
majority vote standard for the election of directors." However, the reality of
what is being sought, and the rationale, are clearly and accurately reflected in
the title "Majority Vote Reincorporation Proposal" and in the related supporting
statement, a copy of which is included in Exhibit 3 and which is unchanged from
the original version included in Exhibit 1. The revised Proposal now reads:
Majority Vote Reincorporation Proposal
Resolved: That the shareholders of Convergys Corporation ("Company") hereby
request that the Board of Directors take the measures necessary to change the
Company's jurisdiction of incorporation from Ohio to Delaware.
Reasons for Omission
1. The Fund has submitted two proposals in violation of Rules 14a-8(c) and
14a-8(f).
The Fund's submission contains two separate proposals: a proposal to
reincorporate Convergys from Ohio to Delaware and a proposal for the
newly-reincorporated Delaware corporation to adopt a majority voting standard in
director elections. Indeed, the caption of the Fund's Proposal, "Majority Vote
Reincorporation Proposal" makes it very clear that the Fund's submission
involves two separate and distinct proposals.
The Fund's sole reason for submitting the Proposal is to pressure Convergys to
adopt a majority vote standard for the election of its directors. The Fund
recognizes, however, that Ohio corporations, such as Convergys, are not
currently permitted to elect directors other than through a plurality voting
system.1 In fact, in 2005, Goodyear Corporation received a shareholder proposal
requesting that Goodyear take steps to adopt a majority voting standard in
director elections. The SEC staff permitted Goodyear to exclude the proposal
from its 2006 proxy statement because majority voting for directors is not
allowed under Ohio law. Frustrated by this obstacle, the Fund is now attempting
to submit a majority voting proposal in the form of a "Majority Vote
Reincorporation Proposal." Although a creative effort to solve the Goodyear
problem, the Fund's proposal is excludable because its violates the one proposal
limitation in Rule 14a-8(c).
The SEC has agreed with issuers that substantially distinct items may not be
considered as a single proposal. Reincorporation and the method of election of
directors are two separate and unrelated concepts, calling for two distinct and
unrelated business decisions: the first requiring a change in Convergys' state
of incorporation from Ohio to Delaware and the second requiring Convergys,
following its reincorporation in Delaware, to adopt a majority voting standard.
A corporation's choice of its state of incorporation and the method by which its
shareholders elect the corporation's directors are very different matters for
consideration by a corporation and its shareholders. A corporation's decision
whether to reincorporate under the laws of a different jurisdiction involves
consideration by both the board of directors and the shareholders of a multitude
of issues, including the impact of state tax laws, differences in shareholder
rights under the two state corporation laws, the effect of the reincorporation
on agreements and licenses, the impact on benefits received by the corporation
from being incorporated under the laws of the state where it is headquartered,
and the attendant costs to reincorporate, including potential tax ramifications
of reincorporation. The corporation laws of Ohio and Delaware have numerous
important differences, many of which impact the rights of shareholders. For
example, unlike in Delaware, shareholders of an Ohio corporation have the right
to vote on share acquisitions that could result in a change in corporate
control. Therefore, reincorporation is a much broader, multi-faceted concept
than director election. It includes many significant changes in the governing
law applicable to Convergys, of which the adoption of majority voting for the
election of directors would be, at most, an indirect consequence. The Fund's
Proposal simply ignores these many complexities of a reincorporation decision in
order to achieve a shareholder referendum on majority voting.
The multitude of issues presented to shareholders by a reincorporation proposal
is reflected in the customary proxy statement disclosure of a reincorporation
transaction in which the company must disclose in detail the reasons for
reincorporation, the advantages and disadvantages of reincorporation and a
comparison of the laws of the current jurisdiction versus the proposed new
jurisdiction. Although state corporation laws applicable to the voting standards
in the election of directors may be one of many factors that are considered,
reincorporation involves much larger considerations than just director election
standards. Reincorporation cannot be regarded as merely the first step in a
two-step process to achieve a different method for electing directors.
Although reincorporation involves a myriad of issues and considerations, the
Fund's statement in support of its Proposal focuses solely on what it believes
are the benefits of majority voting in director elections. Apparently, the Fund
believes that the achievement of a majority voting standard is of such vital
importance that all of the other issues presented by a reincorporation can be
disregarded. In fact, the supporting statement closes with a request for
shareholder "support for this important director election reform." The fact of
the matter is that only the second of the Fund's two proposals involves a
"director election reform." Reincorporation, which is virtually ignored in the
supporting statement, is a critical corporate decision which has nothing to do
with director election reform.
By bundling two separate matters into a single "majority voting reincorporation
proposal," the Fund would prevent shareholders from voicing their views on each
of the two separate proposals. The SEC has long recognized the importance of
allowing shareholders to vote separately on each matter rather than forcing them
to cast a single vote on group of related proposals. Rule 14a-4(a)(1), for
example, requires that the form of proxy "identify clearly and impartially each
separate matter intended to be acted upon, whether or not related to or
conditioned on the approval of other matters, and whether proposed by the
registrant or by security holders."
As the Proposal is currently drafted, shareholders who support majority voting
in the election of directors, but who conclude that the achievement of majority
voting does not justify a change in Convergys' state of incorporation, do not
have the opportunity to express their position on each of the separate issues.
Shareholders who might not support reincorporation may be misled into voting for
the Proposal because of its emphasis on majority voting and its disregard for
the other issues surrounding reincorporation. Further, shareholders could be
misled into believing that reincorporation necessarily equates to the
implementation of majority voting, when in reality Convergys could reincorporate
and never adopt a majority voting standard. Rule 14a-4(a) "prohibits electoral
tying arrangements that restrict shareholder voting choices on matters put
before shareholders for approval." See Release No. 34-31326 (October 16, 1992).
The exact situation the SEC has frowned upon is precisely what is involved here.
The SEC staff has permitted the exclusion of shareholder proposals that involve
multiple transactions, where each transaction, although related to the same
general topic, is a separate and distinct item of business - even where the
items are couched as one proposal. See Torotel, Inc. (November 1, 2006) (a
proposal requesting to amend the by-laws to reduce the number of directors, to
declassify the board, to permit shareholders to amend the by-laws, and related
matters constituted multiple proposals); HealthSouth Corporation (January 27,
2006) (a proposal to amend the by-laws to require that shareholders holding a
majority of voting shares may change the number of directors constituting the
whole board of directors and may fill any vacancy in the board of directors
constituted multiple proposals); Centra Software (January 23, 2003) (a proposal
relating to separate meetings for independent directors and the chairman of the
board not serving as an officer or employee of the company constituted multiple
proposals); Fotoball USA, Inc. (April 3, 2001) (a single submission to appoint a
special committee to find a buyer, require that the chairman be an independent
director, and form a shareholders' advisory committee constituted multiple
proposals); Enova Corp. (February 9, 1998) (a proposal recommending that the
directors take all steps necessary to amend the company's governing documents to
elect the entire board annually and to appoint an independent lead director
involved more than one proposal); and Allstate Corp. (January 29, 1997) (a
proposal to institute cumulative voting for directors and to avoid specified
actions that could impair the effectiveness of cumulative voting constituted
multiple proposals).
Further, the SEC has specifically permitted exclusion of proposals where, as
here, they address two distinct items of business that are part of a two-step
transaction, and one action follows and is contingent upon the other. See Exxon
Mobil Corporation (available March 19, 2002) (a proposal containing proposals
that called for increasing the size of the board and then filling the additional
board seats with nominees from more diverse backgrounds than reflected by the
current board was excludable) and Bob Evans Farms, Inc. (available May 31, 2001)
(a proposal to appoint a trustee to replace the current board and who would then
oversee the exploration of alternatives to enhance the value of the company was
excludable). The SEC's has appropriately excluded these two step proposals,
consistent with the anti-bundling prohibition of Rule 14a-4, because they
restrict the voting choices of shareholders by not permitting them to vote on
each step. In the Proposal, the goal is majority voting, which is the second
step of a complex transaction. The first step is reincorporation, which should
be presented and voted on by Convergys' shareholders in its own right, not in
the shadow of majority voting.
In certain limited circumstances, the SEC staff has permitted the inclusion in
the proxy statement of proposals that involve components of a single or unifying
goal or concept. See Computer Horizons Corp. (April 1, 1993) (a proposal
recommending that the board modify or terminate each plan, contract or
arrangement which would significantly disadvantage potential buyers of the
company, including certain plans and contracts specified in the proposal,
constituted one proposal because the matters were components of the single
concept of eliminating anti-takeover defenses); Lockheed Corp. (March 11, 1994)
(proposal requesting suspension of management incentive compensation plan and
reinstatement of employees at specified compensation levels constituted one
proposal because they were components to the single goal of reinstating members
of the company's workforce and preventing future layoffs).
However, these letters permitting inclusion are inapplicable to the Proposal
because the Proposal clearly has two separate and distinct goals - one of
reincorporation and the other of majority voting in director elections. They are
not components of a single unifying goal, but instead are each goals in their
own right. In fact, because they are distinct items of business, these two
matters are routinely presented to shareholders on their own accord, as has
recently been shown by the considerable number of majority voting shareholder
proposals. Because majority voting cannot be presented separately due to Ohio
law limitations, the Fund has attempted to circumvent the rules and have the
shareholders vote on both reincorporation and majority voting at once. By
presenting a reincorporation resolution but discussing only majority voting, the
Fund is seeking to have both transactions voted on at once, which is expressly
prohibited by Rule 14a-8(c).
As required by Rule 14a-8(f))(1), Convergys advised the fund, by letter dated
November 8, 2006 (included as Exhibit 2), that the Proposal was, in fact two
separate proposals in violation of Rule 14a-8(c). By letter dated November 8,
2006 (included as Exhibit 3), the Fund modified the Proposal, as indicated
above, by deleting the words "so as to enable the Company to establish a
majority vote standard for the election of directors." No changes were made to
the supporting statement. Convergys informed the Fund by letter on November 10,
2006 (included as Exhibit 4) that it had failed to address the deficiencies in
its initial proposal. Even after its effort to correct the Proposal, the Fund is
still seeking shareholder support for two substantially distinct items of
business. The language of the supporting statement and the Proposal's title
demonstrate very clearly that the reincorporation transaction that is the
subject of the Fund's proposed shareholder resolution is only a first-step which
must be accomplished so that the Fund's second and separate proposal, majority
voting, can be achieved.
2. The Proposal is false and misleading in violation of Rules 14a-9 and
14a-8(i)(3).
Although, as described above, we believe that the Fund's submission can be
omitted from the 2007 Proxy Materials because of the Fund's failure to abide by
the one proposal limitation of Rule 14a-8(c), the Proposal may also be excluded
under Rule 14a-8(i)(3) because it contains numerous false and misleading
statements and impugns the character, integrity and capability of Convergys'
current directors without support in violation of Rule 14a-9.
The "Resolved" clause of the Proposal requests that the Board of Directors take
the measures necessary to change Convergys' state of incorporation from Ohio to
Delaware. It is misleading to present such a resolution when the supporting
statement explains that reincorporation is merely a means to achieving the real
goal, which is to "take action to establish a majority vote standard for the
election of directors." The Fund's problem, of course, is that to state
accurately the real purpose of the Proposal in the "Resolved" clause highlights
the fact that the Fund's submission is really two distinct proposals as
previously discussed. Providing a correct statement of the Fund's true proposal
would result in a proposal that is an improper subject for shareholder action
under Ohio law.
Paragraph three of the supporting statement asserts that "a nominee for the
board can be elected with as little as a single affirmative vote" under a
plurality vote standard. The implication of this statement is that Convergys'
directors have been elected without strong shareholder support, which is false
and misleading. In reality, at every annual meeting of shareholders since
Convergys went public, the nominees for election as director have received at
least 94% of the votes cast.
The Fund claims in the fourth paragraph of the supporting statement that "... a
majority voting standard in board elections would ... improve the performance of
individual directors and the entire board." The clear implication of this
statement is that the performance of Convergys' directors is in need of
improvement. The statement is without any factual support and falsely impugns
the abilities of Convergys' directors. See AT&T Wireless Services (February 11,
2004) (the SEC considered as misleading a similarly unduly suggestive and
baseless sentence: "... the Commonsense executive compensation principles seek
to focus senior executives, not on quarterly performance numbers, but on
long-term corporate value growth, which should benefit all the important
constituents of the Company"). Convergys has regularly been rated well above
average in its industry group by independent corporate governance rating firms.
The same fourth paragraph contains other misleading statements. The Fund makes
the statement that a majority vote standard would "enhance director
accountability, strengthen the director nomination process, and improve the
operations of our company." Once again, without factual support, the Fund
impugns the character, integrity and reputation of Convergys' directors by
implying that there is a need for "enhanced" director accountability. No one to
date has provided evidence or even suggested that the directors are not fully
accountable to the shareholders. Furthermore, the supporting statement provides
no explanation or factual basis for why a majority voting standard would
strengthen Convergys' director nomination process or how or why it would improve
the operations of Convergys. These assertions are made as if they were
statements of fact rather than being merely opinions of the Fund and are
therefore misleading.
In paragraph five of the supporting statement, the Fund asserts that Intel,
Dell, Motorola, Texas Instruments, Safeway, Home Depot, Gannett and Supervalu
have all adopted a majority vote standard in their bylaws "in response to strong
shareholder support for such a standard." Based upon our review of these
companies' public filings with the Securities and Exchange Commission and other
publicly available information, we believe that this statement is false and
misleading in the following respects:
It asserts there was "strong shareholder support" at these companies, when in
fact shareholders at least half of the mentioned companies actually rejected
proposals to adopt majority vote standards in director elections. Furthermore,
we have found no evidence that Intel ever received a shareholder proposal before
it took action to amend its bylaws to adopt a majority voting procedure.2
It asserts that the boards of these companies acted "in response to"
shareholder support, when in fact the board of only one company stated publicly
it was acting specifically to address shareholder concerns.3
Furthermore, the comparison to the aforementioned companies is irrelevant and
thus misleading. The listing of these companies suggests that there is some
relationship between them and Convergys such that the issues facing these
companies would be somehow relevant to Convergys. This is not true. The
mentioned companies neither operate in the same business nor have any other
similarities that would make a comparison of these companies to Convergys
relevant or appropriate. Additionally, none of these companies reincorporated in
order to adopt a majority voting standard.
Finally, the Proposal is itself misleading because it only calls for
reincorporation of Convergys in Delaware. The supporting statement, on the other
hand, demonstrates the Proposal's actual intent, that being the adoption by
Convergys of a majority voting standard in the election of directors. Even if
the Proposal were adopted and Convergys changed its state of incorporation to
Delaware, it would not necessarily follow that Convergys would adopt a majority
voting standardthat should be the subject of a second proposal, which the Fund
is attempting to wrap into this proposal. The Fund's presentation is certain to
confuse shareholders, who will be led to believe by the Fund that the Proposal,
if adopted by the shareholders and carried out by Convergys, would necessarily
result in majority voting in the election of directors. Reincorporation does not
guarantee this result.
Conclusion
Based upon the foregoing, Convergys respectfully requests that the staff confirm
that it will not recommend enforcement action against Convergys if the Proposal
is omitted from the Proxy Materials in reliance on Rule 14a-8(c), Rule 14a-8(f)
and Rule 14a-9. Convergys also believes any amendment of the Proposal that
successfully resolved its false and misleading statements would be so materially
different from the original proposal as to constitute a new proposal not
submitted by the deadline for inclusion in the 2007 Proxy Materials. See Rule
14a-8(e)(2). As set forth in Convergys' 2006 proxy statement and form of proxy,
the last date to submit shareholder proposals for Convergys' 2007 Annual Meeting
of Shareholders was November 11, 2006.
Convergys anticipates that its 2007 Annual Meeting will be held on April 17,
2007, and that the Proxy Materials will be filed with the SEC on or about March
16, 2007. Accordingly, Convergys would greatly appreciate the staff's timely
response to this request.
If the staff is inclined to disagree with Convergys' conclusions or requests or
if any additional information is desired in support of Convergys' position, we
would appreciate the opportunity to confer with the staff prior to the issuance
of its formal response. In such a case, please call the undersigned at (513)
723-4091.
Very truly yours,
/s/
Roger E. Lautzenhiser
cc: W.H. Hawkins II, Esq.
Mr. Edward J. Durkin
-----FOOTNOTES-----
1 The election of an Ohio corporation's directors is governed by Section 1701.55
of the Ohio Revised Code, which provides that in all elections of directors, the
candidates receiving the greatest number of votes shall be elected. The Fund has
confirmed to Convergys that it recently agreed to withdraw proposals similar to
the Proposal that were submitted to other Ohio corporations in exchange for an
unwritten undertaking by these companies to support an amendment to Section
1701.55 to allow an directors to be elected other than by a plurality of the
vote. We understand that the statutory language to effectuate such a change has
been drafted by the Ohio State Bar Association Corporation Law Committee and is
likely to be introduced to the Ohio General Assembly.
2 Of the eight companies cited by the Fund, six had shareholder proposals
advocating majority vote standards for director elections, yet the shareholders
at four of those six companies rejected majority vote standards at their annual
meetings. Only Home Depot's and Supervalu's shareholders actually adopted
proposals to amend the company's bylaws to provide a majority vote standard for
director elections. See The Home Depot, Inc., Quarterly Report on Form 10-Q
filed on Jun. 1, 2006 (File No. 001-08207); SUPERVALU, Inc., Quarterly Report on
Form 10-Q filed on Jul. 28, 2005 (File No. 001-05418). Similar shareholder
proposals at Dell, Motorola, Safeway and Gannett were resoundingly defeated. At
Dell, Inc., more than 57% of the votes voted at Dell's 2005 annual meeting
rejected a majority vote standard for director elections. See Dell, Inc.,
Quarterly Report on Form 10-Q filed on Sept. 1, 2005 (File No. 000-17017). At
Motorola, Inc., more than 53% of the votes voted at Motorola's 2005 annual
meeting rejected a majority vote standard for director elections. See Motorola,
Inc., Quarterly Report on Form 10-Q filed on May 11, 2005 (File No. 001-07221).
At Safeway, Inc., more than 53% of the votes voted at Safeway's 2005 annual
meeting rejected a majority vote standard for director elections. See Safeway,
Inc., Quarterly Report on Form 10-Q filed on July 28, 2005 (File No. 001-00041).
At Gannett Co., Inc., more than 51% of the votes voted at Gannett's 2005 annual
meeting rejected a majority vote standard for director elections. See Gannett
Co., Inc., Quarterly Report on Form 10-Q filed on Aug. 1, 2005 (File No.
001-06961). At both Intel Corporation and Texas Instruments Inc., the alleged
"strong shareholder support" neither manifested in a sustained shareholder
proposal nor was actually measured in a shareholder vote.
3 Although the boards of Dell, Intel, Motorola, Safeway and Gannett subsequently
amended their company's bylaws to provide for a majority voting standard, only
Motorola's board suggested that it was acting in response to shareholder support
for such a measure. See Motorola, Inc., Current Report on Form 8-K filed on Mar.
1, 2006 (File No. 001-07221) ("The Board's actions are part of Motorola's
ongoing review of corporate governance best practices and reflect the Board's
commitment to addressing stockholder concerns"); cf. Safeway, Inc., Current
Report on Form 8-K filed on Mar. 15, 2006 (File No. 001-00041); Gannett Co.,
Inc., Annual Report on Form 10-K filed on Feb. 24, 2006 (File No. 001-06961);
Texas Instruments Inc. Current Report on Form 8-K filed on Feb. 17, 2006 (File
No. 001-03901); Dell, Inc., Current Report on Form 8-K filed on Feb. 2, 2006
(File No. 000-17017); Intel Corp. Current Report on Form 8-K filed on Jan. 19,
2006 (File No. 000-06217).
[INQUIRY LETTER]
October 26, 2006
[SENT VIA MAIL AND FACSIMILE 513-723-2448]
W.H. Hawkins II
Corporate Secretary
Convergys Corporation
201 E. Fourth Street
P.O. Box 1638
Cincinnati, Ohio 45201-1638
Dear Mr. Hawkins:
On behalf of the United Brotherhood of Carpenters Pension Fund ("Fund"), I
hereby submit the enclosed shareholder proposal ("Proposal") for inclusion in
the Convergys Corporation ("Company") proxy statement to be circulated to
Company shareholders in conjunction with the next annual meeting of
shareholders. The Proposal relates to the issue of jurisdictional
reincorporation. The Proposal is submitted under Rule 14(a)-8 (Proposals of
Security Holders) of the U.S. Securities and Exchange Commission proxy
regulations.
The Fund is the beneficial owner of approximately 2,300 shares of the Company's
common stock that have been held continuously for more than a year prior to this
date of submission. The Fund intends to hold the shares through the date of the
Company's next annual meeting of shareholders. The record holder of the stock
will provide the appropriate verification of the Fund's beneficial ownership by
separate letter. Either the undersigned or a designated representative will
present the Proposal for consideration at the annual meeting of shareholders.
If you have any questions or wish to discuss the Proposal, please contact Ed
Durkin, at (202) 546-6206 ext. 221 or at edurkin@carpenters.org. Copies of any
correspondence related to the proposal should be forwarded to Mr. Durkin at
United Brotherhood of Carpenters, Corporate Affairs Department, 101 Constitution
Avenue, NW, Washington D.C. 20001 or faxed to (202) 543-4871.
Sincerely,
/s/
Douglas J. McCarron
Fund Chairman
cc. Edward J. Durkin
Enclosure
[APPENDIX]
Majority Vote Reincorporation Proposal
Resoived: That the shareholders of Convergys Corporation ("Company") hereby
request that the Board of Directors take the measures necessary to change the
Company's jurisdiction of incorporation from Ohio to Delaware, so as to enable
the Company to establish a majority vote standard for the election of directors.
Supporting Statement: Our Company is incorporated in Ohio. Ohio law mandates a
plurality vote standard for the election of directors. Specifically, the law
states that "at all elections of directors, the candidates receiving the
greatest number of votes shall be elected." (Ohio Revised Code, 1701.55 (B)).
This proposal requests that the Board reincorporate the Company under Delaware
state corporate law, which provides that a company's certificate of
incorporation or bylaws may specify the number of votes that shall be necessary
for the transaction of any business, including the election of directors. (DGCL,
Title 8, Chapter 1, Subchapter Vll, Section 216). Reincorporation would allow
the Company's board of directors and its shareholders to take actions to
establish a majority vote standard for the election of directors. Under Delaware
law, the Company's board would have the power to change the bylaws or initiate a
change to the certificate of incorporation to provide that director nominees
shall be elected by the affirmative vote of the majority of votes cast at an
annual meeting of shareholders. Likewise, shareholders on their own initiative
would be able to propose and vote on a bylaw provision to establish a majority
vote standard in director elections.
Our Company's Board and shareholders should have the flexibility to choose the
election standard that best serves the interests of the Company and its
shareholders. Under the plurality vote standard, a nominee for the board can be
elected with as little as a single affirmative vote, even if a substantial
majority of the votes cast are "withheld" from the nominee. A majority vote
standard would require that a nominee receive a majority of the votes cast in
order to be elected. The standard is particularly well-suited for the vast
majority of director elections in which only board nominated candidates are on
the ballot.
We believe that a majority vote standard in board elections would establish a
challenging vote standard for board nominees and improve the performance of
individual directors and the entire board. It would provide shareholders a
meaningful role in the director election process, enhance director
accountability, strengthen the director nomination process, and improve the
operations of our company.
In response to strong shareholder support for a majority vote standard in
director elections, an increasing number of companies, including Intel, Dell,
Motorola, Texas Instruments, Safeway, Home Depot, Gannett, and Supervalu, have
adopted a majority vote standard in company bylaws. We encourage our Company to
take the important first step in joining these companies by reincorporating in
Delaware, so as to provide the Board and shareholders the right to adopt a
majority vote standard.
We urge your support for this important director election reform.
[INQUIRY LETTER]
November 8, 2006
SENT VIA OVERNIGHT DELIVERY AND FACSIMILE
Douglas J. McCarron
Fund Chairman
United Brotherhood of Carpenters Pension Fund
101 Constitution Avenue, N.W.
Washington, D.C. 20001
Re: Shareholder Proposal Pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")
Dear Mr. McCarron:
Convergys Corporation (the "Company") is in receipt of your letter dated October
26, 2006, requesting inclusion of a shareholder proposal in the Company's proxy
materials for its 2007 annual meeting of shareholders, Rule 14a-8 under the
Exchange Act, a copy of which is enclosed with this letter for your reference,
provides for eligibility and procedural requirements for shareholders wishing to
include a proposal in the Company's proxy materials. As discussed below, you
have not met these requirements. Pursuant to Rule 14a-8(f) under the Exchange
Act, we hereby notify you of the deficiencies of your submission.
Failure to Submit Adequate Documentation to Establish Eligibility to Submit a
Proposal
Rule 14a-8(b) under the Exchange Act sets forth the eligibility requirements to
submit a proposal. To be eligible to submit a shareholder proposal for inclusion
in the Company's proxy materials, a shareholder must have continuousty held at
least $2,000 in market value, or 1%, of the company's securities for at least
one year by the date the shareholder submits its proposal. A shareholder who is
not a record holder must submit to the company a written statement from the
record holder of such securities verifying that, at the time the shareholder
proposal was submitted, the submitting shareholder had continuously held the
securities for at least one year.
Your letter to the Company states that the record holder of your shares of the
Company's common stock will provide the appropriate verification of the Fund's
beneficial ownership by separate letter. On November 3, 2006, the Company
received a letter from AmalgaTrust Company Inc. in which it stated that (i) it
serves as corporate co-trustee and custodian for the United Brotherhood of
Carpenters Pension Fund (the "Fund") and is the record holder of 2,300 shares of
Company common stock held for the benefit of the Fund and (ii) that the Fund has
been the beneficial owner of at least 1% or $2,000 in market value of the
Company's common stock continuously for at least one year prior to the date of
the Fund's submission of the shareholder proposal to the Company.
The Company has been advised by its registrar and transfer agent that
AmalgaTrust Company Inc. was not a holder of record of Company common stock on
October 26, 2006, and has not been a record holder during the past year.
In accordance with Rule 14a-8(f), the Company hereby notifies you that you have
failed to prove your eligibility to submit a shareholder proposal under Rule
14a-8(b).
Your Submission Contains Two Separate Proposals in violation of Rule 14a-8(c)
Rule 14a-8(c) under the Exchange Act provides that each shareholder may submit
no more than one proposal for a particular shareholders' meeting. Your
submission contains at least two separate proposals:
(1) to reincorporate the Company in the State of Delaware, and
(2) to establish a majority vote standard for the election of directors.
The Company also informs you that your submission contains false and misleading
statements in violation of Rule 14a-9 under the Exchange Act. In addition, your
submission is replete with statements and assertions for which you provide no
factual support.
The Company requests that you prove your eligibility and revise your submission
so that it complies with Rule 14a-8. You have 14 calendar days from the date you
receive this letter to correct the deficiencies in your submission. In order to
satisfy the eligibility requirements of Rule 14a-8(b), proof of ownership must
be in the form of a written statement from the record holder of the shares
verifying that you have continuously held shares of the Company for at least one
year and the statement must be dated as of the date you submitted your proposal.
In order to satisfy the requirements of Rule 14a-8(c), your submission must
contain only one proposal. Your response must be postmarked, or transmitted
electronically. If you do not meet the eligibility requirements in a timely
manner, fail to respond or fail to adequately correct your submission, the
Company will exclude your submission from its proxy materials.
Please be advised that this letter in no way waives the Company's right to take
further steps to exclude what you have proposed from the proxy materials for the
2007 annual meeting.
Sincerely,
/s/
cc: Mr. Edward J. Durkin
[STAFF REPLY LETTER]
November 8, 2006
[SENT VIA FACSIMILE 513-723-2448]
William H. Hawkins II
Senior Vice President,
General Counsel and Secretary
Convergys Corporation
201 East Fourth Street
P.O. Box 1638
Cincinnati, Ohio 45202
Dear Mr. Hawkins:
Thank you for your letter of November 8, 2006, concerming the Majority Vote
Reincorporation Proposal submitted by the United Brotherhood of Carpenters
Pension Fund ("Fund"). While we could debate the technical issue of whether the
shareholder proposal presents one or two issues, I don't think that would be a
productive use of anyone's time and I appreciate the opportunity to revise the
text of the proposal. Enclosed is a revised version of the proposal in which the
phrase "so as to enable the Company to establish a majority vote standard for
the election of directors" has been eliminated at the end of the resolved
portion of the proposal.
I would welcome the opportunity to discuss with you the issue of a majority vote
standard in the election of directors.
Sincerely,
/s/
Edward J. Durkin
cc. Douglas J. McCarron, Fund Chairman Enclosure
[APPENDIX]
Majority Vote Reincorporation Proposal
Resolved: That the shareholders of Convergys Corporation ("Company") hereby
equest that the Board of Directors take the measures necessary to change the
Company's jurisdiction of incorporation from Ohio to Delaware.
Supporting Statement: Our Company is incorporated in Ohio. Ohio law mandates a
plurality vote standard for the election of directors. Specifically, the law
states that "at all elections of directors, the candidates receiving the
greatest number of votes shall be elected." (Ohio Revised Code, 1701.55 (B)).
This proposal requests that the Board reincorporate the Company under Delaware
state corporate law, which provides that a company's certificate of
incorporation or bylaws may specify the number of votes that shall be necessary
for the transaction of any business, including the election of directors. (DGCL,
Title 8, Chapter 1, Subchapter VII, Section 216). Reincorporation would allow
the Company's board of directors and its shareholders to take actions to
establish a majority vote standard for the election of directors. Under Delaware
law, the Company's board would have the power to change the bylaws or initiate a
change to the certificate of incorporation to provide that director nominees
shall be elected by the affirmative vote of the majority of votes cast at an
annual meeting of shareholders. Likewise, shareholders on their own initiative
would be able to propose and vote on a bylaw provision to establish a majority
vote standard in director elections.
Our Company's Board and shareholders should have the flexibility to choose the
election standard that best serves the Interests of the Company and its
shareholders. Under the plurality vote standard, a nominee for the board can be
elected with as little as a single affirmative vote, even if a substantial
majority of the votes cast are "withheld" from the nominee. A majority vote
standard would require that a nominee receive a majority of the votes cast in
order to be elected. The standard is particularly well-suited for the vast
majority of director elections in which only board nominated candidates are on
the ballot.
We believe that a majority vote standard in board elections would establish a
challenging vote standard for board nominees and improve the performance of
individual directors and the entire board. It would provide shareholders a
meaningful role in the director election process, enhance director
accountability, strengthen the director nomination process, and improve the
operations of our company.
In response to strong shareholder support for a majority vote standard in
director elections, an increasing number of companies, including Intel, Deli,
Motorola, Wal-Mart, Texas Instruments, Safeway, Home Depot, Gannett, and
Supervalu, have adopted a majority vote standard in company bylaws. We encourage
our Company to take the important first step in joining these companies by
reincorporating in Delaware, so as to provide the Board and shareholders the
right to adopt a majority vote standard.
We urge your support for this important director election reform.
[INQUIRY LETTER]
November 10, 2006
SENT VIA OVERNIGHT DELIVERY AND FACSIMILE
Mr. Douglas J. McCarron
Fund Chairman
United Brotherhood of Carpenters Pension Fund
101 Constitution Avenue, N.W.
Washington, D.C. 20001
Re: Shareholder Proposal Pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")
Dear Mr. McCarron:
Convergys Corporation (the "Company") is in receipt of your letter dated
November 8, 2006 and a revised version of your shareholder proposal initially
submitted to the Company on October 26, 2006. The Company hereby informs you
that your revised submission fails to address the deficiencies contained in your
initial proposal, of which the Company notified you by letter dated November 8,
2006. Specifically, you have failed to prove your eligibility to submit a
shareholder proposal as required by Rule 14a-8(b) under the Exchange Act.
Furthermore, your revised submission still contains false and misleading
statements in violation of Rule 14a-9 under the Exchange Act, and purported
statements of fact for which there is no support. Finally, your revision of the
initial proposal does not change the fact that your submission presents to two
separate proposals, in violation of Rule 14a-8(c).
The company informs you that it intends to make a submission to the Securities
and Exchange Commission pursuant to Rules 14a-8(f) and 14a-8(j) under the
Exchange Act, so as to exclude your proposal from the Company's proxy materials.
The Company will provide you with a copy of its submission.
Sincerely,
/s/
Cc: Edward J. Durkin
[STAFF REPLY LETTER]
December 29, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Convergys Corporation Incoming letter dated November 28, 2006
The proposal requests that the board of directors take the measures necessary to
change the company's jurisdiction of incorporation from Ohio to Delaware.
We are unable to concur in your view that Convergys may exclude the proposal
under rule 14a-8(c). Accordingly, we do not believe that Convergys may omit the
proposal from its proxy materials in reliance on rule 14a-8(c).
We are unable to concur in your view that Convergys may exclude the proposal
under rule 14a-8(i)(3). Accordingly, we do not believe that Convergys may omit
the proposal from its proxy materials in reliance on rule 14a-8(i)(3).
Sincerely,
/s/
Ted Yu
Special Counsel
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