Company Name: Gannett Co., Inc.
Public Availability Date: January 10, 2006
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
November 21, 2005
BY HAND 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: Gannett Co., Inc.Stockholder Proposal of United Brotherhood of Carpenters
Pension Fund
Ladies and Gentlemen:
On behalf Gannett Co., Inc., we are submitting this letter pursuant to Rule
14a-8(j) under the Securities Exchange Act of 1934 to notify the Securities and
Exchange Commission of Gannett's intention to exclude from its proxy materials
for its 2006 annual meeting of stockholders (the "Proxy Materials") a
shareholder proposal and a statement in support thereof (the "Proposal")
submitted by United Brotherhood of Carpenters Pension Fund (the "Proponent"). A
copy of the Proposal and all correspondence between Gannett and the Proponent
are attached as Exhibit 1. We request that the staff confirm that it will not
recommend any enforcement action to the Commission if, in reliance on the
interpretations of Rule 14a-8 set forth below, Gannett excludes the Proposal
from its Proxy Materials. Gannett currently intends to file definitive copies of
the Proxy Materials with the Commission on or about March 6, 2006.
Pursuant to Rule 14a-8(j), we are furnishing the staff with six copies of this
letter and its attached exhibits. A copy of this letter is also being provided
simultaneously to the Proponent.
As discussed more fully below, we believe that the Proposal may be excluded from
the Proxy Materials pursuant to the following rules:
(a) Rule 14a-8(i)(10), because Gannett has already substantially implemented the
Proposal.
(b) Rule 14a-8(i)(3), because the Proposal is in violation of the Commission's
proxy rules.
I. THE PROPOSAL
The Proposal states:
"That the shareholders of Gannett Co., Inc. ("Company") hereby request that the
Board of Directors initiate the appropriate process to amend Gannett's
governance documents (certificate of incorporation or bylaws) to provide that
director nominees shall be elected by the affirmative vote of the majority of
votes cast at an annual meeting of shareholders."
II. REASONS FOR EXCLUSION
A. Rule 14a-8(i)(10)The Proposal has already been substantially implemented by
Gannett.
1. Background
Rule 14a-8(i)(10) permits a company to exclude a stockholder proposal if a
company has already substantially implemented the proposal. The purpose of the
exclusion in Rule 14a-8(i)(10) is "to avoid the possibility of shareholders
having to consider matters which already have been favorably acted upon by the
management..." See, Exchange Act Release No. 34-12598 (July 7, 1976). The
standard the staff has applied consistently in determining whether a proposal
has been substantially implemented is whether a company's policies, practices
and procedures "compare favorably with the guidelines in the proposal." See,
Exchange Act Release No. 34-20091 (August 16, 1983); and Texaco, Inc. (March 28,
1991). This standard does not require that a proposal be implemented precisely;
rather, a proposal will be considered substantially implemented when the company
has procedures in place that address the subject matter or essential objectives
of the proposal. See, ConAgra Foods, Inc. (June 20, 2005); Raytheon Company
(February 11, 2005); The Talbots, Inc. (April 5, 2002); and The Gap, Inc. (March
16, 2001).
2. Gannett's Implementation of a Majority Voting Standard
The Proposal requests that the Board of Directors amend Gannett's governance
documents to provide that directors be elected by the affirmative vote of the
majority of votes cast at an annual meeting. On October 25, 2005, Gannett
announced that it has adopted a majority vote standard for uncontested director
elections. A copy of Gannett's majority voting policy is attached as Exhibit 2.
This new voting policy addresses the same subject matter of the Proposal, which
seeks implementation of a majority voting standard.
3. Substantial Implementation Analysis
As noted above, the Commission does not require that every aspect of a proposal
be enacted to achieve substantial implementation. See, SEC Release No. 34-20091
(August 16, 1983); and Raytheon Company (February 11, 2005). Gannett's majority
vote policy is not a precise implementation of the Proposal. Nevertheless, the
Proposal and Gannett's policy compare favorably because both require majority
stockholder approval for a director nominee to be elected with finality.
Gannett's policy requires any director nominee receiving a greater number of
"withheld" votes than "for" votes in an uncontested election to submit a letter
of resignation to Gannett's Nominating and Public Responsibility Committee,
which then will recommend to the Board of Directors the action to be taken with
regard to the letter. Therefore if a director nominee does not receive the
required majority vote, Gannett's Board has the option to accept the nominee's
resignation letter, or reject it and allow the director to remain on the Board.
In contrast, the Proposal simply provides that a director will not be elected or
re-elected without receiving an affirmative vote of the majority of votes cast.
These minor differences between Gannett's policy and the Proposal do not alter
the fact that Gannett's policy achieves the essential objectives of the
Proposal, namely the implementation of a majority voting standard.
4. Potential Issues Arising Under The Proposal
Gannett's policy not only conforms favorably to the guidelines of the Proposal,
it resolves a number of potential problems that would arise were the Proposal
implemented as requested. Indeed the Proponent acknowledges the problems created
by the Proposal and suggests that the Board craft a solution to the Proposal's
problems, stating "Our proposal is not intended to limit the judgment of the
Board in crafting the requested governance change." In fact, the Board has
already crafted a solution: that is why it adopted the majority vote policy. The
Proposal notes that under its terms it is unclear what the status would be of
incumbent directors who fail to receive a majority vote. Gannett's policy
addresses this concern because in the event an incumbent director does not
receive the required majority vote, Gannett's Board of Directors may elect to
accept or reject that nominee's resignation. Under the Proposal, however, if an
incumbent director does not receive the required majority vote that director is
simply not re-elected. Under Delaware law, a director continues to serve until a
successor is duly elected and qualified. Gannett is incorporated in Delaware,
thus under the terms of the Proposal an incumbent director that does not receive
a majority of votes cast could continue to serve despite the lack of voting
support. In contrast, under Gannett's policy, the Board of Directors has
discretion as to how it should respond to such a situation.
Second, the Proposal indicates that a plurality voting standard might be
preferable where the number of nominees exceeds the available board seats. This
concern is resolved as Gannett's policy provides for a plurality voting standard
in contested elections. Gannett's policy only applies the majority voting
standard to uncontested elections, preserving a plurality based standard where
an election is contested.
Accordingly, Gannett's policy conforms favorably with the guidelines of the
Proposal because the policy resolves the concerns raised in the Proposal.
5. Gannett's Adoption of a Policy Implements the Proposal
The Proposal requests that the Board of Directors "amend the Company's corporate
governance documents (certificate of incorporation or bylaws)" to implement its
majority voting standard. As noted above, Gannett has adopted a corporate policy
that addresses this issue. The fact that Gannett has chosen to implement its
substantially similar voting standard by way of a corporate policy rather than
an amendment to its certificate of incorporation or bylaws does not change the
fact that Gannett has substantially implemented the Proposal. The effect of the
policy is substantially the same as if it were contained in Gannett's bylaws.
The staff has agreed previously that the manner of implementation is not
determinative of whether a proposal has been substantially implemented. See,
e.g., The Coca-Cola Company (avail. February 24, 1988) (proposal to prevent a
company from undertaking certain activities deemed substantially implemented
where the enactment of a federal law prohibiting the same activities had the
same effect); and Eastman Kodak Co. (avail. February 1, 1991) (proposal
substantially implemented where law required company disclosure of information
similar to that requested to be disclosed under the proposal).
Accordingly, since Gannett's policy produces the effect the Proposal seeks, the
manner of implementation is irrelevant.
6. Gannett's Policy is a Result of Governance Trends
Gannett's adoption of the new majority voting policy is the result of a study of
evolving trends among companies that have dealt with similar issues. The
supporting statement accompanying the Proposal cites a number of companies,
including Raytheon Company and Office Depot, Inc., where shareholder proposals
substantially identical to the Proposal have recently been considered. In
response to shareholder support of these proposals, both Raytheon and Office
Depot have adopted policies substantially similar to the recently adopted
Gannett majority voting policy. Copies of press releases from Raytheon and
Office Depot announcing adoption of majority vote policies are attached as
Exhibit 3. It is clear from these trends that Gannett has been proactive in
identifying the issues raised by the subject matter of the Proposal and taking
action to implement responsive policies. Gannett's adoption of its majority
voting policy is an example of its management and Board acting favorably upon a
matter to which a shareholder proposal relates. It is worth noting that
Gannett's Board of Directors approved the new policy despite the failure of a
similar proposal to obtain the support of holders of a majority of the shares
voted at Gannett's 2005 annual meeting.
For all of the above reasons reasons, Gannett has substantially implemented the
Proposal and it may be excluded from the Proxy Materials under Rule
14a-8(i)(10).
B. Rule 14a-8(i)(3)The Proposal is misleading and contrary to the Commission's
proxy rules.
Rule 14a-8(i)(3) permits the exclusion of a proposal and an accompanying
supporting statement if either is contrary to the Commission's proxy rules. One
of the Commission's proxy rules, Rule 14a-9, prohibits false or misleading
statements in proxy materials. The Commission has indicated that a company may
rely on Rule 14a-8(i)(3) in excluding a statement where "the company
demonstrates objectively that a factual statement is materially false and
misleading." See, Division of Corporation Finance: Staff Legal Bulletin No. 14B
(September 15, 2004).
The supporting statement accompanying the Proposal states, "Our Company
presently uses the plurality vote standard to elect directors." This statement
is false and misleading because Gannett has changed its director election
standards to provide for majority voting in uncontested director elections. See,
Exhibit 2.
Under Rule 14a-9(a), the omission of any material fact necessary to make a
statement not false or misleading is no different than a false or misleading
statement. The supporting statement to the Proposal states, "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." This statement is false and misleading
because it does not take into account Gannett's current policy which requires a
director to submit a letter of resignation in the event the majority of votes
are "withheld" from that nominee. While it is true that Gannett's Board of
Directors could decide not to accept a director nominee's letter of resignation,
thereby allowing a director nominee to be ultimately appointed with a minority
of the affirmative vote, the supporting statement implies that will always be
the result, when it may well not be. Accordingly, the above section of the
supporting statement omits material information necessary to make the statements
not false or misleading.
Finally, the supporting statement presents examples where majority voting
proposals have recently received majority shareholder support at company annual
elections. The Proponent identifies "Marsh and McClennan" as one such company.
We believe the Proponent intends to refer to "Marsh & McLennan Companies, Inc."
because the name "Marsh and McClennan" does not appear in the Commission's EDGAR
database. The reference to Marsh & McLennan is false and misleading because,
although Marsh & McLennan included in its 2005 proxy materials a shareholder
proposal substantially similar to the Proposal, that proposal did not receive a
majority of the votes required for stockholder approval. A copy of a Marsh &
McLennan press release reporting the results of its 2005 annual meeting and a
copy of Marsh & McLennan's 2005 proxy statement are attached as Exhibit 4.
The Commission has stated that "when a proposal and supporting statement will
require detailed and extensive editing in order to bring them into compliance
with the proxy rules, we may find it appropriate for companies to exclude the
entire proposal, supporting statement, or both..." See, Division of Corporation
Finance: Staff Legal Bulletin No. 14 (July 13, 2001). The above statements are
objectively false and misleading in violation of Rule 14a-9, and will require
extensive editing to bring them into compliance with the Commission's proxy
rules. Therefore we believe the Proposal and supporting statement may properly
be excluded under Rule 14a-8(i)(3) as materially false and misleading. If the
staff does not agree that the entire Proposal and supporting statement may be
excluded, we believe that, at a minimum, the above statements may be properly
excluded.
3. CONCLUSION
For the reasons set forth above, we believe Gannett may exclude the Proposal
from the Proxy Materials under Rules 14a-8(i)(10) and (i)(3), and hereby request
confirmation that the staff will not recommend any enforcement action to the
Commission if Gannett so excludes the Proposal.
Should the staff make an initial determination that the Proposal may not be
excluded from the Proxy Materials, I would appreciate an opportunity to discuss
the staff's determination before a response to this letter is issued. When a
written response to this letter becomes available, please fax the letter to me
at (202) 637-5910. A copy of the staff's response may be faxed to the Proponent
at (202) 543-5724 and to Edward J. Durkin at (202) 543-4871. Should the staff
have any questions in the meantime, please feel free to call me at (202)
637-8357.
Sincerely,
/s/
James E. Showen
cc: Todd A. Mayman, Vice President, Associate General Counsel and Secretary,
Gannett Co., Inc.
Douglas J. McCarron, Fund Chairman, United Brotherhood of Carpenters Pension
Fund
Edward J. Durkin, Director, Corporate Affairs Department, United Brotherhood of
Carpenters and Joiners of America
Enclosures
[INQUIRY LETTER]
[SENT VIA MAIL AND FACSIMILE 703-854-2031]
October 26, 2005
Todd A. Mayman
Corporate Secretary
Gannett Co., Inc.
7950 Jones Branch Drive
McLean, Virginia 22107
Dear Mr. Mayman:
On behalf of the United Brotherhood of Carpenters Pension Fund ("Fund"), I
hereby submit the enclosed shareholder proposal ("Proposal") for inclusion in
the Gannett Co., Inc. ("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 the vote standard in director elections. 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 4,400 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]
Director Election Majority Vote Standard Proposal
Resolved: That the shareholders of Gannett Co., Inc. ("Company") hereby request
that the Board of Directors initiate the appropriate process to amend the
Company's governance documents (certificate of incorporation or bylaws) 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 Delaware. Delaware law
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). The law provides that if the level of voting support necessary for
a specific action is not specified in a corporation's certificate or bylaws,
directors "shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors."
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]
[SENT VIA HAND DELIVERY & FACSIMLE 202-772-9201]
December 20, 2005
Office of Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Response to Gannett Co., Inc.'s Request for No-Action Advice Concerning the
United Brotherhood of Carpenters Pension Fund's Shareholder Proposal
Dear Sir or Madam:
The United Brotherhood of Carpenters Pension Fund ("Fund") hereby submits this
letter in reply to Gannett Co., Inc.'s ("Gannett" or "Company") Request for
No-Action Advice to the Security and Exchange Commission's Division of
Corporation Finance staff ("Staff") concerning the Fund's Director Election
Majority Vote Standard shareholder proposal ("Proposal") and supporting
statement submitted to the Company for inclusion in its 2006 proxy materials.
The Fund respectfully submits that the Company has failed to satisfy its burden
of persuasion and should not be granted permission to exclude the Proposal.
Pursuant to Rule 14a-8(k), six paper copies of the Fund's response are hereby
included and a copy has been provided to the Company.
We note at the outset that the Proposal is identical to previous director
election vote standard proposals submitted by the Fund for the last two years
that have been unsuccessfully challenged. See, e.g., AT&T Wireless Services,
Inc. (Feb. 13, 2004,), Citigroup, Inc. (Feb. 14, 2005), JP Morgan Chase & Co.
(Feb. 22, 2005). We submit that the Staff should follow the clear precedent and
deny the Company's request for no-action relief.
The Company Fails to Satisfy Its Burden of Persuasion that the Proposal May be
Excluded Under Rules 14a-8(i)(10) because Gannett Has Not Substantially
Implemented the Proposal
The Company's request for no-action relief is based on its assertion that the
Proposal has been substantially implemented. The Company bears the burden of
persuasion to show that it has substantially implemented the Proposal - a burden
we will show it fails to meet.
Gannett notes that it has adopted a majority vote policy which it claims
provides that directors must be elected by the affirmative vote of the majority
of votes cast. Its policy provides in pertinent part:
At any annual meeting of the stockholders at which directors are subject to an
uncontested election, any nominee for director who receives a greater number of
votes `withheld' from his or her election than votes `for' such election shall
submit to the board of directors a letter of resignation for consideration by
the Nominating and Public Responsibility Committee.
Gannett then states that its "majority vote policy is not a precise
implementation of the Proposal" but "[n]evertheless, the Proposal and Gannett's
policy compare favorably because both require majority stockholder approval for
a director nominee to be elected with finality." As we show below, Gannett's
policy does not substantially implement the Proposal for under its policy
directors can be elected even if a nominee receives as little as a single vote
in an uncontested election.
The Company's entire argument rests on a flawed assumption that misconstrues the
intent of the Proposal and the role prescribed for the Board in the requested
implementation of the Proposal. The Company incorrectly presumes that the intent
of the Proposal is to compel a certain outcome when a director nominee fails to
receive a majority of the vote cast. It then argues that a recently adopted
informal Board governance policy that requires a director nominee who receives a
majority "withhold" vote under the Company's current plurality vote standard to
tender his or her resignation produces essentially the same outcome as the
Fund's Proposal requests. However, the clear focus of the Proposal is a
Board-initiated process to amend Gannett's bylaws or certificate of
incorporation to change its legal director election vote standard from a
plurality vote standard to a majority of votes cast standard. The Proposal does
not seek to prescribe any particular post-election treatment of directors that
fail to receive the requisite vote.
In fact, the Proposal is not focused on achieving a certain election outcome as
the Company's argument suggests, but on establishing a new election vote
standard to provide shareholders a legally significant vote in the election of
directors. This reform can only be accomplished by an amendment to the Company's
bylaws or certificate of incorporation, not through a board governance policy,
and the Proposal requests that the Board initiate the reform process. The
adoption of a majority vote standard would provide Company shareholders a vote
in director elections that has a legal consequence.
Director nominees that fail to receive a majority of the vote cast would not be
elected or re-elected. The Company's adoption of a post-election policy calling
for the resignation of a director legally elected despite receiving a "withhold"
vote under a plurality vote standard is a fundamentally different proposition.
The Proposal intends exactly what it says, that the legal standard for director
elections be a majority vote. The director resignation policy fails to
accomplish that end. The Supporting Statement acknowledges that the Board will
have discretion to implement the Proposal, but that discretion is limited to the
exercise of its judgment within the context of initiating a process to amend the
certificate or bylaws to change to a majority vote standard.
The Precedent Clearly Supports Inclusion of the Proposal
The Company cites several no-action letters in support of its argument. Those
cases all presented very different fact patterns in which the companies were
granted relief under Rule 14a-8(i)(10) because they either actually implemented
the shareholder proposal or essentially did so. However, there are a series of
cases directly on point in which this exact shareholder proposal was challenged
on 14a-8(i)(10) grounds and the Staff denied the requested relief and found that
the shareholder proposal should be included. See, e.g., AT&T Wireless Services,
Inc. (Feb. 13, 2004,), Citigroup, Inc. (Feb. 14, 2005), JPMorgan Chase & Co.
(Feb. 22, 2005).
For example, in JPMorgan Chase & Co. (February 22, 2005), the same proponent -
the United Brotherhood of Carpenters Pension Fund - presented exactly the same
proposal as that submitted to Gannett. JP Morgan Chase challenged on several
grounds, including arguing substantial implementation under Rule 14a-8(i)(10).
While it did not argue that it had a director resignation policy that mooted the
proposal, it did make essentially the same argument as the Company now makes. JP
Morgan Chase argued that the proposal sought to achieve the outcome of
"removing" directors who fail to receive a majority vote at an election of
directors and premised its substantial implementation argument on this
presumption. The Staff rejected JPMorgan Chase's arguments.
Gannett uses its director resignation policy to argue the other side of the same
coin. It argues that under its policy a director nominee who fails to get a
majority vote would have to tender his resignation, thus accomplishing even more
effectively than the Proposal the goal of "removing" directors. Like JPMorgan
Chase, Gannett ignores the true intent of the Proposal. And like JPMorgan Chase,
the Company's request should be denied.
Proponent understood when it submitted its proposal to JPMorgan Chase, and
continues to understand, that Delaware law provides a specific procedure for
removing directors and that nominees failing to receive a majority vote would
"hold over" and not be immediately removed. Such an outcome was not the intent
of the Proposal in JPMorgan Chase, nor is it in the instant case. The goal was,
and remains, to give shareholders a meaningful role in the election of directors
by adopting a legal vote standard that would mean shareholders' votes count.
Gannett has not substantially implemented the Proposal and so should be denied
its requested relief under Rule 14a-8(i)(10).
The Proposal's Intent is that the Certificate of Incorporation or Bylaws be
Amended to Establish the Majority Vote Standard as the Legal Standard for
Electing Directors.
A careful review of the Proposal demonstrates that the Proposal does not seek to
mandate a specific outcome to an election, but rather to revise the legal
standard for being elected to the Board of Directors. The Proposal requests that
the Board initiate a process to amend the Company's certificate of incorporation
or bylaws so that the legal standard for being elected a director will be a
majority of votes cast at an annual meeting rather than the current plurality
standard the Company uses. The Proposal and Supporting Statement provide in
pertinent part:
Resolved: That the shareholders of Gannett Co., Inc. ('Company') hereby request
that the Board of Directors initiate the appropriate process to amend the
Company's governance documents (certificate of incorporation or bylaws) 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 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.
Some companies have adopted board governance policies requiring director
nominees that fail to receive majority vote 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.
The Proposal has not been substantially implemented by Gannett based on its
adoption of an informal post-election director resignation policy. This informal
post-election Board policy, which is subject to amendment by the Board, in no
way approximates a formal change in the legal standard for electing directors
via an amendment to Gannett's certificate of incorporation or bylaws. The
Company's argument is premised on the notion that there is no consequence to
whether a nominee has actually been elected to the Board of Directors. Under the
Company's logic, it matters not whether the legal director election vote
standard is a majority vote standard or a plurality standard, which allows for
the election of a nominee with as little as a single vote. This logic cannot
prevail. The Proposal was not motivated by a desire to remove directors that
failed to get a majority vote. The Fund's intent in submitting the Proposal, as
is explicitly stated, is to achieve an amendment to the certificate or bylaws
revising the legal standard for being elected a director. Gannett has failed to
do that.
The Board of Directors' Discretion Under the Proposal is Limited to Implementing
a Majority Vote Standard as the Legal Standard Under Either the Certificate or
Bylaws
The Proposal has been submitted to urge adoption of a majority vote standard in
the Company's bylaws or certificate of incorporation in order to provide
shareholders a meaningful vote in director elections. The Proposal recognizes
that the Board in instituting the vote standard reform in the Company's bylaws
or certificate of incorporation should consider and address related issues, such
as the status of directors who fail to be re-elected and the appropriateness of
the majority vote standard for contested director elections. The Proposal's
recognition of limited Board discretion is in the context of implementing a
formal reform of the Company's bylaws or certificate. This recognition does not
mean that an informal director resignation policy supplants the need to change
to a majority vote standard. Indeed, we believe that such a policy would be an
appropriate supplement to the majority vote standard. However, it certainly does
not represent substantial implementation of a majority vote standard.
The Company has Failed to Satisfy its Burden of Persuasion that the Proposal is
False and Misleading and May be Excluded under Rule 14a-8(i)(3)
The Company next argues that the proposal is false and misleading because the
supporting statement to the Proposal states: "Our Company presently uses the
plurality vote standard to elect directors." The Company's basis for this
argument is that it has a director resignation policy; that is, a director
elected under the plurality vote standard that Gannett still uses has to tender
his or her resignation for Board consideration. Gannett's argument seems to be
that because a director elected under its plurality standard will be subject to
an informal policy that he or she tender its resignation it is somehow false to
say that Gannett uses the plurality standard to elect directors. However, the
representation made in the supporting statement is completely accurate - Gannett
does use the plurality vote standard to elect directors. Article II, Section 6
of Gannett's bylaws provides in pertinent part: "Section 6. Election: At each
annual meeting of stockholders, Directors shall, except as otherwise required or
provided by law or by the Certificate of Incorporation, be elected by a
plurality of the votes cast at such meeting by the holders of stock entitled to
vote in the election." The fact that an elected director may then tender his or
her resignation pursuant to Gannett's policy in no way renders false or
misleading the supporting statement's accurate representation that Gannett
employs a plurality vote standard for the election of directors.
Gannett then notes that the Supporting Statement contained a typographical error
by which the company "Marsh & McLennan" was inadvertently spelled "Marsh &
McClennan." Gannett also states that the proposal at Marsh & McLennan "did not
receive a majority of the votes required for stockholder approval." The
supporting statement stated:
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 (sic), Office Depot, Raytheon, and others.
Marsh & McLennan's Form 10-Q filed on August 9, 2005, stated:
A stockholder proposal requesting the MMC Board of Directors to amend MMC's
governance documents to provide that director nominees be elected by the
affirmative vote of the majority of votes cast at the annual meeting of
stockholders did not receive a majority of the votes cast and thus was not
approved. This proposal received 197,516,369 votes in favor, 196,641,000 votes
against, 6,295,356 abstentions and 68,680,991 broker nonvotes
Thus, the proposal did receive majority support. We note in this regard that
Staff Legal Bulletin No. 14 provides the following:
How do we count votes under rule 14a-8(i)(12)?
Only votes for and against a proposal are included in the calculation of the
shareholder vote of that proposal. Abstentions and broker non-votes are not
included...
We believe it is accurate and certainly reasonable to state that a proposal
which received more votes for than against received majority support. In any
event, the Fund is willing to delete its reference to Marsh & McLennan from the
supporting statement to resolve this matter, if that is necessary. Certainly
omission of the Proposal on this basis would not be a just result.
Conclusion
The Proposal requests a formal change in the Company's certificate or bylaws
establishing a majority vote as the legal standard to be elected to the board of
directors. Gannett has not substantially implemented the Proposal. Rather, it
has adopted a post-election director resignation policy that leaves in place the
plurality standard as the legal vote standard for director elections. The
Company's entire argument rests on the incorrect presumption that the Proposal's
intent was to mandate a specific post-election outcome, when in fact the intent
of the Proposal is to give shareholders a meaningful role in director elections
by revising formally the legal standard for being elected director.
For all these reasons we believe the company has failed to satisfy its burden of
persuasion under Rule 14a-8(i)(3) or (10) and its request should be denied. If
you have any questions about this matter or would like any additional
information, please contact me at (202) 546-6206 x 221. Additionally, should you
disagree with the conclusions set forth in this response to the Company's
Request for No-Action Advice, I respectfully request the opportunity to confer
with you prior to the issuance of the Staff's final determination. I would
appreciate receiving a copy of the Staff's response to the Company's Request by
fax at (202) 543-4871 when it is available.
Sincerely,
/s/
Edward J. Durkin
Director, Corporate Affairs Department
cc: Douglas J. McCarron - Fund Chair, United Brotherhood of Carpenters Pension
Fund
Todd A. Mayman, Vice President, Associate General Counsel and Secretary, Gannett
Co., Inc.
James E. Showen, Hogan & Hartson, L.L.P.
[INQUIRY LETTER]
December 23, 2005
BY HAND 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: Gannett Co., Inc.Stockholder Proposal of United Brotherhood of Carpenters
Pension Fund
Ladies and Gentlemen:
On behalf of Gannett Co., Inc., we would like to respond briefly to the recent
letter from the United Brotherhood of Carpenters Pension Fund (the "Proponent")
concerning Gannett's letter of November 21, 2005 seeking the staff's concurrence
that Gannett may exclude a shareholder proposal submitted by the Proponent (the
"Proposal"). The Proponent's letter, despite its length, appears to make only a
few points, none of which are persuasive.
The Proponent makes numerous references to the fact that the Proposal seeks an
amendment to Gannett's certificate of incorporation or bylaws to implement a
majority voting standard, whereas Gannett's majority voting policy was adopted
as a corporate governance principle. The Proponent uses that distinction to
argue that Gannett has not substantially implemented the Proposal under Rule
14a-8(i)(10). In doing so, the Proponent fails to recognize the previously cited
precedent establishing the staff's view that the manner in which a company
implements policies or procedures designed to address a proposal is not
determinative of whether such proposal has been substantially implemented for
Rule 14a-8(i)(10) purposes. See, The Coca-Cola Company (February 24, 1988) and
Eastman Kodak Co. (February 1, 1991). In this case the Proponent seems to be
arguing that form should trump substance by claiming that the only possible way
the Proposal may be substantially implemented is through an amendment to
Gannett's governing documents. We believe this argument conflicts directly with
the purpose of Rule 14a-8(i)(10). In 1983 the Commission changed its
interpretation of Rule 14a-8(i)(10) to "add more subjectivity to the application
of [Rule 14a-8(i)(10)]" See, SEC Release No. 34-20091 (August 16, 1983). The
Commission's intent was to move away from the prior "formalistic application of
the provision." Id. The Proponent's argument that a technical difference in the
manner of implementation of a proposal should defeat a substantive
implementation is clearly at odds with the Commission's desire to insert
flexibility into the Rule 14a-8(i)(10) analysis. Indeed, if the Proponent's
argument were to be accepted, any proposal specifying a particular method of
implementation would not be excludable under Rule 14a-8(i)(10) unless such
method were followed precisely.
The Proponent also cites JP Morgan Chase & Co. (Feb. 22, 2005) as precedent to
support its conclusion that the Proposal may not be excluded. The citation to JP
Morgan is badly chosen, however, because although the JP Morgan matter involved
the same proposal, the arguments for exclusion under Rule 14a-8(i)(10) in that
case were based on completely different grounds than in Gannett's case. In JP
Morgan the company argued that because the Proposal does not specify a manner of
implementation, it is vague. As a result, it may be construed as granting the
company's Board powers it already has, which would mean the Proposal has already
been substantially implemented. The staff declined to allow exclusion on those
grounds. In contrast, Gannett argues that it has substantially implemented the
Proposal by instituting a majority voting policy. Accordingly, the Proponent's
references to JP Morgan to support its position are inappropriate.
The Proponent also disputes Gannett's assertion that the Proposal is false and
misleading under Rule 14a-8(i)(3). Gannett believes the phrase, "Our company
presently uses the plurality vote standard to elect directors," contained in the
Proposal's supporting statement, is false and misleading as it fails to address
the existing majority voting policy. The Proponent claims that the statement is
completely accurate since Gannett's bylaws provide for plurality voting. The
supporting statement, however, does not say that Gannett's bylaws provide for a
plurality vote standard. Rather, the supporting statement only states that
Gannett uses a plurality vote standard. Nor does it qualify the statement with
information concerning Gannett's majority voting policy, information necessary
to make the statements not misleading. The anti-fraud provisions of Rule 14a-9
prohibit proxy statements containing an omission of a material fact necessary to
make statements therein not misleading. The Proponent's failure to address the
existing majority voting policy constitutes an omission that is necessary to
make a supporting statement not misleading.
Should you have any questions, please feel free to call me at (202) 637-8357.
Sincerely,
/s/
James E. Showen
cc: Todd A. Mayman, Esq.
Douglas J. McCarron
Edward J. Durkin
[STAFF REPLY LETTER]
January 10, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Gannett Co., Inc.
Incoming letter dated November 21, 2005
The proposal requests that the board initiate the appropriate process to amend
Gannett's governance documents to provide that director nominees shall be
elected by the affirmative vote of the majority of votes cast.
We are unable to concur in your view that Gannett may exclude the proposal under
rule 14a-8(i)(10). Accordingly, we do not believe that Gannett may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(10).
We are unable to concur in your view that Gannett may exclude the proposal or
portions of the supporting statement under rule 14a-8(i)(3). Accordingly, we do
not believe that Gannett may omit the proposal or portions of the supporting
statement from its proxy materials in reliance on rule 14a-8(i)(3).
Sincerely,
/s/
Ted Yu
Special Counsel
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