Company Name: Corrections Corp. of America (Recon.)
Public Availability Date: May 9, 2006
Document Sections:
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
March 23, 2006
Martin P. Dunn
Deputy Director
Division of Corporation Finance
Securities & Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Shareholder Proposal Submitted to Corrections Corporation of America
Via FAX 202-772-9349
Dear Mr. Dunn:
I am writing to you on behalf of the Province of St. Joseph of the Capuchin
Order and the Mercy Investment Program (referred to collectively hereinafter as
the "Proponents"), who have jointly submitted a shareholder proposal to
Corrections Corporation of America ("CCA" or the "Company") for consideration at
its 2006 meeting of shareholders. The shareholder proposal was submitted to the
Company on December 6, 2005 and on January 13, 2006, Bass, Berry & Sims, on
behalf of the Company, submitted a request to the Securities & Exchange
Commission for a no-action letter on the ground, inter alia, that it was
excludable under Rule 14a-8(i)(7).
On February 26, 2006, in opposition to the Company's no-action request, the
undersigned submitted to the Staff a letter setting forth the reasons why the
Company's no-action letter request should be denied. On March 15, 2006 (received
on March 21, 2006), the staff granted CCA a no-action letter on 14a-8(i)(7)
grounds. The Staff's letter stated that the "thrust and focus" of the proposal
was really "the ordinary business of general compensation".
We hereby request reconsideration of the Staff's grant of the no-action letter
and if reconsideration is denied that the matter be presented to the Commission
for its consideration.
In its letter of January 13, 2006, the Company made two arguments as to the
applicability of Rule 14a-8(i)(7) to the Proponents' shareholder proposal.
1.
The first such argument (first two full paragraphs on page 3 of the letter) was
that the proposal had been drafted two broadly, so that it encompassed "numerous
executives, officers and employees". In particular, reference is made to the use
of the phrases "executive compensation", "top executives" and "top officers".
We submit that there is absolutely no ambiguity in the use of these terms. In
the corporate governance arena, the term "executive compensation" is used
exclusively to mean the compensation of the principal executive officers. No
shareholder who receives a proxy statement would be in any doubt as to the
subject matter of a shareholder proposal that addresses "executive
compensation". Such a proposal would be understood by all to deal with the
compensation of the principal executive officers and, especially, the chief
executive officer.
If we turn from the commonly understood usage in the corporate governance world
of the term "executive compensation" to how that term is used by the Securities
& Exchange Commission, we find identical usage. Despite the Company's reference
to Rule 105's definition of "executive officer", the term at issue, namely
"executive compensation", has a well defined meaning in the Rules. Item 402 of
Regulation S-K is entitled "Executive Compensation". It requires no reporting of
"numerous executives, officers and employees", but rather of a defined group of
(usually five) persons.
Similarly, the Commission's proposed revision of Item 402 and related matters (Rel.
33-8655) is entitled, appropriately enough, "Executive Compensation and Related
Party Disclosure". The phrase "executive compensation" is used 78 times in the
Release (and that does not count similar phrases such as "executive and director
compensation", used, for example, in the opening sentence of the Summary on page
one of the Release).
In light of the uniform use of the term "executive compensation" by the legal
profession, by the corporate governance community and by the Commission itself,
it would be contrary to "plain English" to require that shareholder proponents
use instead some specific and unfamiliar formula of words, such as "senior
executive officers" (as suggested by the Company) or "principal executive
officers".
In light of the above, let us examine the specific language of the Proponents'
shareholder proposal.
The proposal uses the term "executive compensation" in the Resolve Clause, which
is the only part of the proposal that is actually operative. In addition, the
phrase "executive compensation" is used five times in the Whereas Clause. There
can be no ambiguity as to the group of persons being referred to by the
shareholder proposal. It is that group of officers whose compensation must be
disclosed under Item 402.
We fail to see how the phrases "top officers" or "top executives" detracts from
the specificity of the group being addressed. On the contrary, the use of those
terms merely reinforces the ineluctable conclusion that the Proponents'
shareholder proposal is addressed to the compensation of the company's "senior
executive officers", not to the general workforce.
2.
The Company's second argument (one paragraph, pages 3-4) that the Proponents'
shareholder proposal is addressed to the general workforce is based on the third
recommendation contained in the Supporting Statement. That recommendation is
that the compensation of top executives be determined in part by their
compliance with fair labor standards (a phrase from the Fair Labor Standards
Act). One sentence out of a great many that merely requests that employees be
"compensated justly" hardly converts a proposal that talks incessantly about
executive compensation and then about treatment of prisoners into a proposal
whose "thrust and focus" is compensation of the general workforce.
In this connection, we reiterate the following two paragraphs that appeared in
our letter of February 26, 2006:
The AOL Time Warner letter is also instructive in another way. The shareholder
proposal at issue in that case asked for a comparison of executive compensation
and the pay of the company's lowest paid workers. The reference to lowest paid
workers did not make the proposal one pertaining to compensation of the general
workforce. Similarly, in the instant case, the suggestion that treating
employees "justly" should be included in the responsibilities of the CEO should
not cause the proposal to be deemed to pertain to the compensation of the
general workforce. In this connection, we note that with respect to shareholder
proposals where the compensation of the general workforce is explicitly
mentioned as one factor among many in a shareholder proposal addressing more
general matters, the Staff has not deemed that mention as sufficient to render
the proposal as one dealing with the general workforce. Most notably, two years
ago the Staff rejected a registrant's contention that a "sustainability"
proposal was excludable because it contained the following paragraph in the
Whereas Clause:
We believe corporate sustainability includes a commitment to healthy communities
and a healthy environment including paying a sustainable living wage to
employees in the United States and every country where our company operates.
Workers need to have the purchasing power to meet their basic needs.
Wal-Mart Stores, Inc. (February 17, 2004); Johnson Controls, Inc, (November 15,
2002) (Accord, when proposal used identical language.)
In this connection, we note that the Staff has often upheld shareholder
proposals when the reference to wages is not central to the request in the
Resolve clause. KMart Corporation (March 16, 2001) (ILO principles) (1st and 7th
paragraphs of whereas clause refers to sustainable living wage); Nordstrom, Inc
(March 31, 2001) (contract suppliers) (6th whereas clause refers to wage
adjustments); The Warnaco Group, Inc. (March 14, 2001) (vendor standards) (1st
whereas clause refers to concern about low wages; 3rd clause refers to living
wage; 5th clause refers both to sustainable living wage and calls for wage
adjustments); Kohl's Corporation (March 21, 2000) (vendor contracts) (5th clause
calls for wage adjustments). The no-action letter reply in McDonald's
Corporation (March 16, 2001) (principles for doing business in China) goes even
further, and permits a reference to wages that meet a worker's basic needs, even
though that is part of the substantive part of the resolution, rather than an
argument in support of the resolution. Most recently, in a proposal to establish
a supplier code of conduct based on International Labor Organization
Conventions, the inclusion of a specific reference to the convention on
collective bargaining did not caused the proposal to be treated as one
pertaining to the compensation of the general workforce. Costco Wholesale
Corporation (September 29, 2004).
We submit that in each of these various Staff no-action letter denials there was
greater emphasis on the compensation of the general workforce than there is in
the Proponents' shareholder proposal. If the "thrust and focus" of the proposals
in those letters was not general workforce compensation, we fail to see how it
could be in the instant case.
It is perfectly true that a shareholder proposal might be submitted under the
rubric of "executive compensation" when the context (the "thrust and focus")
clearly suggests that the proposal is really about the compensation of the
general workforce. However, there is no such context bere. In the long Whereas
Clause there is no mention whatsoever of compensation for the general workforce
(but at least seven mentions of executive compensation and top offices).
Similarly, the Resolve Clause talks exclusively about executive compensation and
makes no reference to the general workforce. Finally, in the Supporting
Statement, although there is a general reference to fair compensation, the
thrust of the recommendation is not about employees, but rather about prisoners.
In this connection, we note that in the whereas clause there is a long
discussion of (paragraph four) of how prisoners are treated, but no mention of
how employees are treated.
In short, there is no evidence that the "thrust and focus" of the proposal is
the compensation of the general workforce. There is absolutely no "focus" on
general compensation matters.
We therefore request that the Staff reconsider the grant of the March 15
no-action letter to CCA and deny CCA's no-action letter request of January 13,
2006.
In the event that upon reconsideration of the earlier Staff decision the Staff
adheres to that earlier decision, please request the Commission to review the
Staff determination.
We would appreciate your telephoning the undersigned at 941-349-6164673 with
respect to any questions in connection with this matter or if the staff wishes
any further information. Faxes can be received thru at the same number.
Sincerely yours,
/s/
Paul M. Neuhause
cc: Howard H, Lamar, III
Mark Vilardo
Rev. John Celichowski
Sister Valerie Heinonen
Sister Patricia Wolf
[STAFF REPLY LETTER]
May 9, 2006
Paul M. Neuhauser
5770 Midnight Pass Road
Sarasota, Florida 34242
Re: Corrections Corporation of America Incoming letter dated March 23, 2006
Dear Mr. Neuhauser:
This is in response to your letter dated March 23, 2006 concerning the
shareholder proposal submitted to Corrections Corporation of America by Mercy
Investment Program and Province of St. Joseph of the Capuchin Order. On March
15, 2006, we issued our response expressing our informal view that Corrections
Corporation of America could exclude the proposal for its upcoming annual
meeting. You have asked us to reconsider our position.
After reviewing the information contained in your letter, we find no basis to
reconsider our position.
You also requested that the Commission review the Division of Corporation
Finance's March 15, 2006 no-action letter. Under Part 202.1(d) of Section 17 of
the Code of Federal Regulations, the Division may present a request for
Commission review of a Division no-action response relating to rule 14a-8 if it
concludes that the request involves "matters of substantial importance and where
the issues are novel or highly comples." We have applied this standard to your
request and determined not to present your request to the Commission.
Sincerely,
/s/
Martin P. Dunn
Deputy Director
cc: Howard H. Lamar III
Bass, Berry & Sims PLC
AmSouth Center
315 Deaderick Street, Suite 2700
Nashville, Tennessee 37238-3001
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