Company Name: Duke Energy Corp. (Massachusetts Laborers).
Public Availability Date: July 17, 2006
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX 1
INQUIRY LETTER
APPENDIX 2
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
June 23, 2006
HAND DELIVERY
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, DC 20549
Re: Omission of Shareholder Proposal Submitted to Duke Energy Corporation
Dear Sir or Madam:
Pursuant to Rule 14a-8(j)(1) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), Duke Energy Corporation, a Delaware
corporation (the "Company" or "Duke Energy"), requests confirmation that the
Staff of the Securities and Exchange Commission will not recommend any
enforcement action if Duke Energy omits from its proxy solicitation materials
("Proxy Material") for its 2006 Annual Meeting of Shareholders (the "2006 Annual
Meeting") a proposal (the "Proposal") submitted by the Massachusetts Laborers'
Pension Fund (the "Proponent").
Duke Energy is a diversified energy company with a portfolio of natural gas and
electric businesses, both regulated and unregulated, and an affiliated real
estate company. Duke Energy supplies, delivers and processes energy for
customers in the Americas.
Pursuant to Rule 14a-8(j)(2) under the Exchange Act, we submit six (6) copies of
this letter and the Proponent's resolution and supporting statement (as Exhibit
A) as well as the Earlier Proposal (as defined below) (as Exhibit B). By copy of
this letter, Duke Energy is notifying the Proponent of its intention to omit the
Proposal from its Proxy Material for the 2006 Annual Meeting.
The Proposal requests that Duke Energy's Board of Directors initiate the
appropriate process to amend the Company's articles 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.
Duke Energy believes that the Proposal properly may be excluded from its Proxy
Material pursuant to (i) Rule 14a-8(i)(11) because the Proposal substantially
duplicates the Earlier Proposal, which will be included in the Company's Proxy
Material for the 2006 Annual Meeting, as well as (ii) Rule 14a-8(i)(3) because
the Proposal violates Rule 14a-9.
Introduction
On June 22, 20061, the Proponent submitted the Proposal for inclusion in the
Proxy Material for the 2006 Annual Meeting. The Proposal requests that the
Company's Board of Directors "initiate the appropriate process to amend the
Company's articles 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."
The Proposal is substantially duplicative of a stockholder proposal received on
June 1, 2006, from the Sheet Metal Workers' National Pension Fund (the "Earlier
Proposal"), which Duke Energy intends to include in its Proxy Material for the
2006 Annual Meeting.
For your convenience, we have set forth below the resolution portion of each
Proposal.
Earlier Proposal (received on June 1, 2006)
Resolved: That the shareholders of Duke Energy ("Company") hereby request that
the Board of Directors initiate the appropriate process to amend the Company's
articles 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.
Proposal (received on June 22, 2006)
RESOLVED: That the shareholders of Duke Energy Corporation ("Company") hereby
request that the Board of Directors initiate the appropriate process to amend
the Company's articles 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.
Discussion
A. The Proposal is Excludable under Rule 14a-8(i)(11)
Rule 14a-8(i)(11) provides that a stockholder proposal may be excluded if it
"substantially duplicates another proposal previously submitted to the company
by another proponent that will be included in the company's proxy materials for
the same meeting." The Commission has stated that "the purpose of Rule
14a-8(i)(11) is to eliminate the possibility of shareholders having to consider
two or more substantially identical proposals submitted by proponents acting
independently of each other." Exchange Act Release No. 12999 (Nov. 22, 1976).
When two substantially duplicative proposals are received by a company, the
Staff has indicated that the company must include the first of the proposals in
its proxy materials, unless it may otherwise be excluded. See, e.g., Great Lakes
Chemical Corp. (avail. Mar. 2, 1998); Pacific Gas and Electric Co. (avail. Jan.
6, 1994); Atlantic Richfield Co. (avail. Jan. 11, 1982). Duke Energy received
the Earlier Proposal on June 1, 2006, approximately three weeks prior to
receiving the Proposal on June 22, 2006. Consequently, if Duke Energy includes
the Earlier Proposal in its Proxy Material for the 2006 Annual Meeting, then the
Proposal is properly omitted as substantially duplicative of the Earlier
Proposal.
In granting requests for no-action relief under Rule 14a-8(i)(11), the Staff has
consistently taken the position that proposals that have the same "principal
thrust" or "principal focus" may be considered substantially duplicative for
purposes of Rule 14a-8(i)(11), even where such proposals differ in terms and
scope. In a directly analogous situation, the Staff granted Occidental Petroleum
Company's no-action letter request to omit a stockholder proposal relating to a
majority vote election standard for directors, where the second proposal
requested the board of directors to initiate a process to amend the company's
governance documents to provide that director nominees shall be elected by the
affirmative vote of the majority of votes cast at an annual shareholder meeting
and the first proposal requested that stockholders amend the company's
governance documents to provide that director nominees shall be elected by the
affirmative vote of the majority of the votes cast at an annual meeting of
shareholders. Further, although the supporting statement for the second proposal
differed from that of the first proposal, both included similar arguments in
support of a majority vote standard. See Occidental Petroleum Company (February
2, 2006). Another example of the Staff's stated position is Paychex, Inc. (July
18, 2005), in which the Staff concurred with the company's view that a second
stockholder proposal (requesting an amendment to the company's governance
documents to provide that directors shall be elected by the affirmative vote of
the majority of votes cast at an annual meeting) was substantially duplicative
of a previously submitted stockholder proposal requesting an amendment to the
company's bylaws to provide for the election of directors by a majority of the
votes cast at a meeting.
In the instant matter, both the Earlier Proposal and the Proposal have the same
"principal thrust" or "principal focus." As in Petroleum Occidental and Paychex,
the "principal thrust" or "principal focus" of each Proposal is adoption of a
majority vote standard for the election of the Company's directors. In addition,
the Proposals do not differ in terms and scope and the supporting statements are
virtually identical.
Consistent with the stated purpose of Rule 14a-8(i)(11), if the Company were
required to include both Proposals in its Proxy Material, the identical nature
of the Proposals would create the potential for confusion for its stockholders.
If a majority of the stockholders were to vote in favor of one of the Proposals,
but not the other, the Company's Board of Directors would not have a clear
understanding of the stockholders' intent with respect to the issue of majority
voting in the election of the Company's directors.
B. The Proposal is Excludable under Rule 14a-8(i)(3)
The Company may exclude the Proposal in its entirety under Rule 14a-8(i)(3)
because the Proposal contains numerous false or misleading statements. Pursuant
to Rule 14a-8(i)(3), a company may exclude a shareholder proposal if the
proposal or supporting statement would violate any of the Commission's proxy
rules, including Rule 14a-9, which prohibits materially false or misleading
statements in proxy soliciting materials. In addition, the Staff has allowed
companies to exclude shareholder proposals pursuant to Rule 14a-8(i)(3) that are
vague and indefinite. See Staff Legal Bulletin No. 14B (September 15, 2004) ("SLB
14B").
As discussed below, the Proposal contains numerous false or misleading
statements that will require detailed and extensive editing to comply with proxy
rules. Thus, in accordance with SLB 14B, we believe that the Company may exclude
the Proposal in its entirety. In the alternative, if the Staff is unable to
concur with our conclusion that the Proposal may be excluded in its entirety
because of the numerous false or misleading statements, we respectfully request
that the Staff recommend exclusion or revision of the statements discussed
below.
Specifically, the Company finds the following portions of the Proposal to be
objectionable:
Supporting StatementParagraph One, First Sentence;
Supporting StatementParagraph One, Second Sentence;
Supporting StatementParagraph Four, First Sentence; and
Supporting StatementParagraph Four, Second Sentence.
1. Supporting StatementParagraph One, First Sentence
The first sentence of the first paragraph of the supporting statement is
incorrect. The sentence states that the Company is incorporated in North
Carolina. The Company, however, is incorporated in Delaware. This inaccuracy in
the state of incorporation has continuing significance with respect to the
Proposal because the subject matter of the Proposal is directly impacted by
state law. In fact, the Proponent goes on to discuss North Carolina law and the
implications that such law has on the required election of directors. A
shareholder reading this proposal and supporting statement would be misled into
believing the requirements of North Carolina law are applicable to the Company
in this matter, which they are not, and therefore a shareholder may be misled
into believing the proposed resolution has a different impact or more
significance on the Company.
2. Supporting StatementParagraph One, Second Sentence
The second sentence of the first paragraph of the supporting statement is
misleading. This sentence cites a provision of the North Carolina Business
Corporation Act regarding election of directors. As discussed above, the Company
is incorporated in Delaware, not North Carolina, and therefore North Carolina
law is inapplicable in this matter. A discussion of the provisions of North
Carolina law can only serve to confuse and possibly mislead shareholders. For
example, the North Carolina statute provides that the proposed change in the
voting standard of director elections would have to be accomplished through an
amendment to the Company's articles of incorporation. However, because the
Company is incorporated in Delaware, not North Carolina, this is not true with
respect to Duke Energy. A Delaware company could effectuate such a change in
voting standards other than through amendment to the articles of incorporation.
3. Supporting StatementParagraph Four, First Sentence
The first sentence of the fourth paragraph of the supporting statement is
misleading. It states that "[t]he majority vote proposal received high levels of
support last year, winning majority support at Advanced Micro Devices, Freeport
McMoRan, Marathon Oil, Marsh and McClennan, Office Depot, Raytheon, and others."
The statement is misleading for two reasons. First, it suggests that this
proposal was presented at the Company and received a high level of support.
Setting aside the fact that it does not clarify what is meant by "high levels,"
this proposal was not voted on at the Company and therefore the reference and
implication is misleading. In addition, the listing of companies where the
proposal received a majority support suggests that there is some relationship
between Duke Energy and these companies such that the issues facing these
companies and the related shareholder sentiment is somehow relevant to the
Company. This is not true. Duke Energy has no relevant business relationship
with any of these companies and their business initiatives and shareholder
actions have no relevance to the Company's processes and policies. To suggest
that these voting results are relevant to our shareholders' deliberations is
misleading.
4. Supporting StatementParagraph Four, Second Sentence
The second sentence of the fourth paragraph of the supporting statement
"Leading proxy advisory firms recommended voting in favor of the proposal" is
misleading. Proxy advisory firms base their recommendations on a variety of
factors and assumptions. A recommendation on how to vote on a particular
proposal is generally not made in a vacuum and is not a "one size fits all."
Although the statement may be true, and we don't even know whether the statement
is true or not because the Proponent has not identified the specific proxy
advisory firms being referenced or indicated for which companies it is basing
such statement, a recommendation to vote in favor of a proposal at one company
has no bearing on how a proxy advisory firm may recommend voting on the same
proposal at another company. In fact, leading proxy advisory firms have
recommended voting against this same proposal in a number of instances. Without
providing a detailed explanation of each company's relevant governance policies
and how the proxy advisory firm voted with respect to the particular combination
of policies and how such comparison relates to Duke Energy's governance
policies, a reference to recommendations at other companies is meaningless, and
a reference to a favorable recommendation is misleading.
In light of the foregoing, we believe that the false or misleading statements
contained in the Proposal justify the Company's exclusion under Rule
14a-8(i)(3).
Conclusion
Based on the foregoing, Duke Energy respectfully requests that the Staff advise
that it will not recommend any enforcement action if the Company excludes the
Proposal from its Proxy Material for the 2006 Annual Meeting.
* * *
In the event that the Staff disagrees with the conclusions reached in this
letter, we would appreciate the opportunity to confer with you before the
issuance of a response. In such case, or if you have any questions or desire any
further information, please contact the undersigned at (513) 287-3108.
Sincerely yours,
/s/
David S. Maltz
Associate General Counsel
cc: Ms. Jennifer O'Dell
-----FOOTNOTES-----
1 We note that the Proponent's letter is dated June 9, 2006. However, the
Company did not receive the Proposal until it was submitted on June 22, 2006 via
facsimile. Nonetheless, even if the Proposal had been received on June 9, 2006,
it still would have been submitted after the earlier proposal, which was
received on June 1, 2006.
[INQUIRY LETTER]
June 9, 2006
Julia S. Janson
Vice President, Corporate Secretary,
Chief Ethics and Compliance Officer
Duke Energy Corporation
526 South Church Street
Charlotte, NC 28202
Dear Ms. Janson:
On behalf of the Massachusetts Laborers' Pension Fund ("Fund"), and in
conjunction with the Sheet Metal Workers National Pension Fund, I hereby submit
the enclosed shareholder proposal ("Proposal") for inclusion in the Duke Energy
Corporation ("Company") proxy statement to be circulated to Company shareholders
in conjunction with the next annual meeting of shareholders. The Proposal is
submitted under Rule 14(a)-8 (Proposals of Security Holders) of the U.S.
Securities and Exchange Commission's proxy regulations.
The Fund is the beneficial owner of approximately 8,668 shares of the Company's
common stock, which have been held continuously for more than a year prior to
this date of submission. The Proposal is submitted in order to promote a
governance system at the Company that enables the Board and senior management to
manage the Company for the long-term. Maximizing the Company's wealth generating
capacity over the long-term will best serve the interests of the Company
shareholders and other important constituents of the Company.
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
Jennifer O'Dell, Assistant Director of Corporate Affairs at (202) 942-2359.
Copies of correspondence or a request for a "no-action" letter should be
forwarded to Ms. O'Dell at the following address: Laborers' International Union
of North America Corporate Governance Project, 905 16thStreet, NW,
Washington, DC 20006.
Sincerely,
/s/
Thomas P. V. Masiello
Administrator
TPVM/gdo
Enclosure
cc: Jennifer O'Dell
[APPENDIX1]
Director Election Majority Vote Standard Proposal
RESOLVED:
That the shareholders of Duke Energy Corporation ("Company") hereby request that
the Board of Directors initiate the appropriate process to amend the Company's
articles 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.
SUPPORTING STATEMENT:
Our Company is incorporated in North Carolina North Carolina law provides that
directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present unless otherwise
provided in the articles of incorporation. (See Ch. 55 North Carolina Business
Corporation Act, section 55-7-28 (a), Voting for directors; cumulative voting).
Our Company presently uses the plurality vote standard to elect directors. This
proposal requests that the Board initiate a change in the Company's director
election vote standard to provide that nominees for the board of directors must
receive a majority of the vote cast in order to be elected or re-elected to the
Board.
We believe that a majority vote standard in director elections would give
shareholders a meaningful role in the director election process. Under the
Company's current standard, a nominee in a director election can be elected with
as little as a single affirmative vote, even if a substantial majority of the
votes cast are "withheld" from that nominee. The majority vote standard would
require that a director receive a majority of the vote cast in order to be
elected to the Board.
The majority vote proposal received high levels of support last year, winning
majority support at Advanced Micro Devices, Freeport McMoRan, Marathon Oil,
Marsh and McClennan, Office Depot, Raytheon, and others. Leading proxy advisory
firms recommended voting in favor of the proposal.
Some companies have adopted board governance policies requiring director
nominees that fail to receive majority support from shareholders to tender their
resignations to the board. We believe that these policies are inadequate for
they are based on continued use of the plurality standard and would allow
director nominees to be elected despite only minimal shareholder support. We
contend that changing the legal standard to a majority vote is a superior,
solution that merits shareholder support.
Our proposal is not intended to limit the judgment of the Board in crafting the
requested governance change. For instance, the Board should address the status
of incumbent director nominees who fail to receive a majority vote under a
majority vote standard and whether a plurality vote standard may be appropriate
in director elections when the number of director nominees exceeds the available
board seats.
We urge your support for this important director election reform.
[INQUIRY LETTER]
June 1, 2006
Julia S. Janson
VP, Corp. Secretary, Chief Ethics & Compliance Officer
Duke Energy Corporation
526 South Church Street
Charlotte, NC 28202
Re: Director Election Majority Vote Standard Proposal
Dear Julia S. Janson:
On behalf of the Sheet Metal Workers' National Pension Fund ("Fund"), I hereby
submit the enclosed shareholder proposal ("Proposal") for inclusion in the Duke
Energy Corporation ("Company") proxy statement to be circulated to Company
shareholders in conjunction with the next annual meeting of shareholders. Our
Fund is co-filing this proposal with the Massachusetts Laborers Pension Fund.
The Proposal relates to an amendment to the Company's governance documents to
provide that director nominees shall be elected by the affirmative vote of the
majority of votes cast at an annual meeting of shareholders. 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 38,472 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 and other Sheet Metal Worker pension funds are
long-term holders of the Company's common stock. The Proposal is submitted to
initiate a change to the director election vote standard to provide that in
director elections a majority vote standard will be used in lieu of the
Company's current plurality vote standard.
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 me at
(703) 739-7000. Copies of correspondence or a request for a "no-action" letter
should likewise be directed to me at Sheet Metal Workers' National Pension Fund,
601 N. Fairfax Street, Suite 500, Alexandria, VA 22314. Copies should also be
forwarded to Mr. Craig Rosenberg, ProxyVote Plus, Two Northfield Plaza,
Northfield, IL 60093.
Sincerely,
/s/
Matthew Hernandez
Corporate Governance Advisor
Enclosure
cc: Craig Rosenberg
[APPENDIX2]
Director Election Majority Vote Standard Proposal
Resolved: That the shareholders of Duke Energy ("Company") hereby request that
the Board of Directors initiate the appropriate process to amend the Company's
articles 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.
Supporting Statement: Our Company is incorporated in North Carolina. North
Carolina law provides that directors are elected by a plurality of the votes
cast by the shares entitled to vote in the election at a meeting at which a
quorum is present unless otherwise provided in the articles of incorporation.
(See Ch. 55 North Carolina Business Corporation Act, section 55-7-28 (a), Voting
for directors; cumulative voting).
Our Company presently uses the plurality vote standard to elect directors. This
proposal requests that the Board initiate a change in the Company's director
election vote standard to provide that nominees for the board of directors must
receive a majority of the vote cast in order to be elected or re-elected to the
Board.
We believe that a majority vote standard in director elections would give
shareholders a meaningful role in the director election process. Under the
Company's current standard, a nominee in a director election can be elected with
as little as a single affirmative vote, even if a substantial majority of the
votes cast are "withheld" from that nominee. The majority vote standard would
require that a director receive a majority of the vote cast in order to be
elected to the Board.
The majority vote proposal received high levels of support last year, winning
majority support at Advanced Micro Devices. Freeport McMoran, Marathon Oil,
Marsh and McClennan, Office Depot, Raytheon, and others. Leading proxy advisory
firms recommended voting in favor of the proposal.
Some companies have adopted board governance policies requiring director
nominees that fail to receive majority support from shareholders to tender their
resignations to the board. We believe that these policies are inadequate for
they are based on continued use of the plurality standard and would allow
director nominees to be elected despite only minimal shareholder support. We
contend that changing the legal standard to a majority vote is a superior
solution that merits shareholder support.
Our proposal is not intended to limit the judgment of the Board in crafting the
requested governance change. For instance, the Board should address the status
of incumbent director nominees who fail to receive a majority vote under a
majority vote standard and whether a plurality vote standard may be appropriate
in director elections when the number of director nominees exceeds the available
board seats.
We urge your support for this important director election reform.
[INQUIRY LETTER]
July 14, 2006
VIA FACSIMILE
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, DC 20549
Re: Withdrawal of No-Action Request Concerning Omission of Shareholder Proposal
Ladies and Gentlemen:
On June 23, 2006, Duke Energy Corporation submitted a no-action request
("No-Action Request") to the Division of Corporation Finance of the Securities
and Exchange Commission stating that Duke Energy Corporation intended to omit
from its proxy solicitation materials for its 2006 Annual Meeting of
Shareholders a proposal (the "Proposal") submitted by the Massachusetts
Laborers' Pension Fund (the "Proponent"). The Proponent has since notified us
that it has withdrawn its Proposal. A copy of the letter from the Proponent is
attached hereto as Exhibit A. Accordingly, Duke Energy Corporation withdraws the
No-Action Request at this time.
If you have any questions or desire any further information, please contact the
undersigned at (513) 287-3108.
Sincerely yours,
David S. Maltz
Associate General Counsel
cc: Ms. Jennifer O'Dell
[INQUIRY LETTER]
July 7, 2006
Via facsimile
513-287-3810
Julia S. Janson
VP, Corp. Secretary, Chief Ethics & Compliance Officer
Duke Energy Corporation
139 East Fourth Street, 29 ATII
PO Box 960
Cincinatti, OH 45201
Dear Ms. Janson:
I hereby withdraw the shareholder resolution filed by the Massachusetts
Laborers' Pension Fund and in conjunction with the Sheet Metal Workers National
Pension Fund. to be included in the Company's 2006 Proxy Statement.
Should you have any further questions about this proposal, please contact
Jennifer O'Dell, Assistant Director of the Laborers' Office of Corporate Affairs
at (202) 942- 2359.
Sincerely,
/s/
Thomas P.V. Masiello
Fund Administrator
TPVM/gdo
cc: Jennifer O'Dell
[STAFF REPLY LETTER]
July 17, 2006
David S. Maltz
Associate General Counsel
Duke Energy Corporation
139 East Fourth St., 29 ATII
P.O. Box 960
Cincinnati, OH 45201-0960
Re: Duke Energy Corporation
Dear Mr. Maltz:
This is in regard to your letter dated July 14, 2006 concerning the shareholder
proposal submitted by the Massachusetts Laborers' Pension Fund for inclusion in
Duke Energy's proxy materials for its upcoming annual meeting of security
holders. Your letter indicates that the proponent has withdrawn the proposal,
and that Duke Energy therefore withdraws its June 23, 2006 request for a
no-action letter from the Division. Because the matter is now moot, we will have
no further comment.
Sincerely,
/s/
Ted Yu
Special Counsel
cc: Thomas P.V. Masiello
Fund Administrator
Massachusetts Laborers' Pension Fund
14 New England Executive Park
Suite 200
P.O. Box 4000
Burlington, MA 01803-0900
|
