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Company Name: Home Depot, Inc. (Chevedden) Document Sections: INQUIRY LETTER
[INQUIRY LETTER] Office of Chief Counsel Re: The Home Depot, Inc.Stockholder Proposal of Mr. John Chevedden Ladies and Gentlemen: We are writing on behalf of our client, The Home Depot, Inc. (the "Company"), to notify the staff of the Division of Corporation Finance (the "Staff") of the Company's intention to exclude a stockholder proposal from the Company's proxy materials for its 2006 Annual Meeting of Stockholders (the "2006 Proxy Materials"). Mr. John Chevedden (the "Proponent") submitted the proposal (the "2006 Proposal"), which is attached as Exhibit A. In accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we hereby respectfully request that the Staff confirm that no enforcement action will be recommended against the Company if the 2006 Proposal is omitted from the 2006 Proxy Materials. Pursuant to Rule 14a-8(j), enclosed are six copies of this letter and its attachments. A copy of this letter and its attachments are being mailed on this date to the Proponent in accordance with Rule 14a-8(j), informing him of the Company's intention to omit the 2006 Proposal from the 2006 Proxy Materials. The Company intends to begin distribution of its definitive 2006 Proxy Materials on or about April 10, 2006. Pursuant to Rule 14a-8(j), this letter is being submitted not less than 80 days before the Company files its definitive 2006 Proxy Materials with the Securities and Exchange Commission. In each of the past three years, the Company has received stockholder proposals relating to the use of stockholder rights plans, or "poison pills." These proposals expressed concern about the use of such plans and requested the Board of Directors of the Company (the "Board") to seek stockholder approval of any stockholder rights plan. The proposals received in 2003 and 2002 were included in the Company's annual meeting proxy statements and were approved by Company stockholders. To respond to stockholder wishes, the Company adopted a policy in 2005 with respect to stockholder approval of any rights plan that the Board may adopt in the exercise of its fiduciary duty (the "Company Policy"). Based on this policy and relevant precedent, the Staff granted the Company no-action relief under Rule 14a-8(i)(10) for a similar proposal received from the Proponent during the 2005 proxy season (the "2005 Proposal"), which was therefore excluded from the 2005 annual meeting proxy statement. The Home Depot, Inc. (Mar. 7, 2005) (the "Original Request"). We believe the Staff should again grant no-action relief with respect to the 2006 Proposal. As in 2005, the Company Policy substantially implements the 2006 Proposal and renders it moot. Specifically, the 2006 Proposal states: "RESOLVED: Shareholders request that our Board redeem any future or current poison pill, unless such poison pill is subject to a shareholder vote as a separate ballot item as soon as may be practicable. Charter or bylaw inclusion if practicable." The 2006 Proposal is substantially identical to the 2005 Proposal, which read as follows: "RESOLVED: Shareholders request that our Board adopt a policy that any future poison pill be redeemed or put to a shareholder vote within 4-months after it is adopted by our Board. And formalize this as corporate governance policy or bylaw consistent with the governing documents of our company." The only difference between the two proposals is a difference in the wording of the suggested period within which the Board must redeem or put to a stockholder vote any adopted rights plan. The 2005 Proposal provides that either redemption or a stockholder vote must take place within four months of the plan's adoption, whereas the 2006 Proposal requires a stockholder vote "as soon as practicable." The difference is inconsequential, particularly because in his supporting statement the Proponent suggests "as soon as practicable" could be "within 4 months." Accordingly, reconsideration of the Staff's 2005 position appears unnecessary because the language used in the 2006 Proposal is substantially identical to the 2005 Proposal. Although the Company does not currently have a stockholder rights plan, the Board considered these concerns and adopted a policy statement on rights plans on January 20, 2005, reflected in the Company's Corporate Governance Guidelines. See http://ir.homedepot.com/governance/guidelines.cfm#policy. This Company Policy has not been amended since the Staff's letter to the Company regarding this 2005 Proposal. The Company Policy states that the Board may not adopt a rights plan without prior stockholder approval unless all of the following conditions are satisfied: The Board adopts such plan after careful deliberation and in the exercise of its fiduciary duties (the "fiduciary out"); Not only the Board, but also a majority of the independent members of the Board, determine that, based on then prevailing circumstances, it would be detrimental to the Company and not in the best interests of the Company's stockholders to defer effectiveness of a stockholder rights plan until stockholder approval may be obtained; and The stockholder rights plan must have a one-year "sunset" i.e., it must terminate in one year if it has not been approved by stockholders. As in 2005, the Company Policy substantially addresses the concerns raised by the Proponent's 2006 Proposal (i.e., that any stockholder rights plan be redeemed if not put to a stockholder vote). In fact, the Company Policy provides for additional protection for stockholders by requiring (i) prior stockholder approval unless the Board determines that adoption of a rights plan is required by the fiduciary requirements of Delaware law; (ii) inclusion of a majority of the Company's independent directors in any determination by the Board not to defer adoption of a plan until stockholder approval can be obtained; and (iii) annual review of the Company Policy by the Nominating and Corporate Governance Committee of the Board. In addition, the "fiduciary out" is further limited in that the Company Policy requires that if a plan is adopted without prior stockholder approval, the plan will expire unless ratified by stockholders within one year of its effective date. As described in the opinion of Delaware counsel, Richards, Layton & Finger, which is attached as Exhibit B, the limited "fiduciary out" contained in the Company Policy is required under Delaware law to satisfy the fiduciary duties of the directors not to compromise their ability to act in the best interest of the corporation and its stockholders. This opinion states in relevant part, "...it is our opinion that it would be impermissible under the laws of the State of Delaware for the Board to purport to bind itself with respect to the adoption, maintenance, termination or amendment of a stockholder rights plan or to require in all cases prior or subsequent stockholder approval for its efficacy, without excepting from any such commitment or requirement actions which are necessary to be taken in order for the Board to act in a manner required by its fiduciary duties to the Company and its stockholders, whether such exception is expressly stated or results from the retained authority of the Board to amend or terminate such commitment or requirement." Since the fiduciary out in the Company Policy is still required by Delaware law, the Board has implemented the 2006 Proposal to the maximum extent permitted by law. Given that neither the Company Policy nor Delaware law have changed since submission of the 2005 Proposal and the Original Request, and the 2006 Proposal does not substantively differ from the 2005 Proposal for which the Staff granted no-action relief, it is the Company's view that the 2006 Proposal may be properly omitted in accordance with Rule 14a-8(i)(10). Rule 14a-8(i)(10) permits a company to omit a proposal if it is "already substantially implemented." To be omitted under this rule, a proposal need not be implemented in full or precisely as presented by a proponent. Instead, the standard is one of substantial implementation. See Rel. No. 34-20091 (Aug. 16, 1983). In previous no-action letters, the Staff has found that "a determination that the company has substantially implemented the proposal depends upon whether its particular policies, practices, and procedures compare favorably with the guidelines of the proposal." See Texaco Inc. (Mar. 28, 1991). Proposals have been considered substantially implemented where companies have implemented part, but not all, of a multi-pronged proposal. See Columbia/HCA Healthcare Corp. (Feb. 18, 1998). In other words, a proposal may be excluded as substantially implemented so long as a company's actions satisfactorily address the underlying concern of the proposal. The Staff also granted relief in Raytheon Co. (Jan. 26, 2005). The stockholder proposal at issue in Raytheon Co. ("Raytheon") was virtually identical to both the 2005 Proposal and the 2006 Proposal and, in fact, the Proponent submitted the proposal to Raytheon. The Raytheon policy featured provisions nearly identical to those of the Company Policy: (i) prior stockholder approval of any rights plan, unless implementation is compelled by the exercise of the fiduciary duties of the directors; and (ii) a one-year "sunset" provision. Moreover, the Company Policy exceeds the Raytheon policy in protecting stockholder interests in that the Company requires a majority of independent directors to approve the adoption of a rights plan. The fact that the Raytheon Policy had a one-year "sunset," while the Proponent's proposal to Raytheon called for a four-month "sunset," was deemed insignificant by the Staff for purposes of its Rule 14a-8 analysis, which does not require that a stockholder proposal be implemented in exactly the same terms. Likewise, the Staff permitted Bristol-Myers Squibb Company ("Bristol-Myers") to exclude a proposal calling for a stockholder vote on a poison pill "at the earliest possible shareholder election" because company policy already contained both a one-year "sunset" and a fiduciary-out provision. Bristol-Myers Squibb Co. (Feb. 11, 2004). The Proponent's demand in the 2006 Proposal for a stockholder vote to be held "as soon as practicable" requires an identical analysis. The ambiguous nature of the phrase "as soon as practicable" would arguably provide less stockholder protection than the one-year limit provided in the Company Policy. See also General Motors Corp. (Mar. 14, 2005) (granting relief for proposal substantially implemented by company policy, which includes a fiduciary-out provision and a 12-month sunset provision) and Morgan Stanley (Feb. 14, 2005) (permitting exclusion of an identical proposal substantially implemented by company policy containing a fiduciary-out provision, but no sunset provision). The Staff's conclusion in Raytheon, Bristol-Myers and Home Depot as to the insignificance of the difference between a one-year "sunset" and a four-month "sunset" or a stockholder vote "at the earliest possible shareholder election" is, moreover, consistent with hostile takeover practice. It is not uncommon for unsolicited bids to develop into negotiated agreements over a period in excess of a few months from the date of the initial offer to the target, notwithstanding the effectiveness during this period of a stockholder rights plan or other anti-takeover device. Indeed, to take a relatively recent example, PeopleSoft, Inc. maintained its stockholder rights plan throughout the 18-month period during which the contested bid by Oracle Corporation evolved into a negotiated merger agreement. It is noteworthy that the PeopleSoft rights plan appears not to have impaired stockholder value since the ultimate purchase price paid by Oracle exceeded its original bid by approximately 65%. Any concern that attractive offers would be lost if the sunset on the stockholder rights plan is one year rather than "as soon as practicable" is simply without foundation. As a further indication of the reasonableness of a one-year "sunset" provision, we also note that the 2006 proxy voting policy of Institutional Shareholder Services, Inc. ("ISS") states that ISS will recommend voting against any stockholder proposal if the Company has already adopted a policy providing that if a rights plan is adopted without prior stockholder approval, it must include both a "fiduciary out" and a one-year "sunset" provision. As a rationale for this policy, ISS stated its understanding that negotiations with a potential acquirer might necessitate adoption of a stockholder rights plan without prior stockholder approval. While ISS also called for a stockholder vote "within a reasonable period of time" after adoption of the rights plan, it also acknowledged that "less than a twelve month period may require the board to incur additional costs by calling a special meeting just for this purpose or force a vote while the board may still be in delicate negotiations with the acquirer." See http://www.issproxy. com/2006policy. For the foregoing reasons, the Company believes it may properly exclude the 2006 Proposal from the 2006 Proxy Materials under Rule 14a-8(i)(10). Accordingly, the Company respectfully requests that the Staff not recommend enforcement action if the Company omits the 2006 Proposal from its 2006 Proxy Materials. If the Staff does not concur with the Company's position, we would appreciate an opportunity to confer with the Staff concerning this matter prior to the issuance of a Rule 14a-8 response. The Proponent is requested to copy the undersigned on any response it may choose to make to the Staff. If you have any questions or need any further information, please call the undersigned at (212) 225-2472. Very truly yours, /s/ Janet L. Fisher cc: Mr. John Chevedden Frank L. Fernandez, Esq. Attachments
[INQUIRY LETTER] The Home Depot, Inc. (HD) Dear Mr. Nardelli, This Rule 14a-8 proposal is respectfully submitted to advance the long-term performance of our company. This proposal is submitted for the next annual shareholder meeting. Rule 14a-8 requirements are intended to be met including the continuous ownership of the required stock value until after the date of the applicable shareholder meeting. This submitted format, with the shareholder-supplied emphasis, is intended to be used for definitive proxy publication. Your consideration and the consideration of the Board of Directors is appreciated in advancing the long-term performance of our company. Sincerely, /s/ November 24, 2005 John Chevedden cc: Frank L. Fernandez
[APPENDIX] 3 - Redeem or Vote Poison Pill RESOLVED, Shareholders request that our Board redeem any future or current poison pill, unless such poison pill is subject to a shareholder vote as a separate ballot item as soon as may be practicable. Charter or bylaw inclusion if practicable. Thus there would be no loophole to allow exceptions to override a shareholder vote as soon as practicable. Since a vote would be as soon as practicable, it could take place within 4-months of the adoption of a new poison pill. To give our board valuable insight on shareholders' views of their poison pill, a vote would occur even if a new poison pill was promptly terminated because our board could turnaround and readopt their poison pill. John Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach, Calif. 90278 submitted this proposal. 67% yes-vote We as shareholders voted in support of this topic: |[NCCDEF,12] |[UCA1] |[TDC4,MP1,QC,VU] |[TCC4,M'Yes Vote',QC,VU] |[TCC4,MP2,QL,VU] |[XT] |[ST]|[LC5]|[RS4]|[CU]Year|[XU] |[TA]|[RS4]|[CU]Yes Vote|[XU] |[TA]|[RS4](based on yes and no votes cast) |[ST]|[LC5]2003 |[TA]64% |[ST]|[LC5]2004 |[TA]67% |[ET] The Council of Institutional Investors www.cii.org. whose members have $3 trillion invested, recommends: Adoption of this proposal topic. Adoption of proposals which wins one majority shareholder vote. The Corporate Library (TCL) http://www.thecorporatelibrary.com/. a pro-investor research firm, has repeatedly stated that companies with policies for their board to override a shareholder vote on a poison pill - have not implemented this type of proposal. In our board's case it claims it can adopt a one-year poison pill and never have a shareholder vote on it. Further details are in The Home Depot, Inc. (March 7, 2005) available through SECnet http://www.wsb.com/. Pills Entrench Current Management "Poison pills ... prevent shareholders, and the overall market, from exercising their right to discipline management by turning it out. They entrench the current management, even when it's doing a poor job. They water down shareholders' votes." "Take on the Street" by Arthur Levitt, SEC Chairman, 1993-2001 Redeem or Vote Poison Pill Yes on 3 Notes: The above format is the format submitted and intended for publication. The company is requested to assign a proposal number (represented by "3" above) based on the chronological order in which proposals are submitted. The requested designation of "3" or higher number allows for ratification of auditors to be item 2. This proposal is believed to conform with Staff Legal Bulletin No. 14B (CF), September 15, 2004 including: Accordingly, going forward, we believe that it would not be appropriate for companies to exclude supporting statement language and/or an entire proposal in reliance on rule 14a-8(i)(3) in the following circumstances: the company objects to factual assertions because they are not supported; the company objects to factual assertions that, while not materially false or misleading, may be disputed or countered; the company objects to factual assertions because those assertions may be interpreted by shareholders in a manner that is unfavorable to the company, its directors, or its officers; and/or the company objects to statements because they represent the opinion of the shareholder proponent or a referenced source, but the statements are not identified specifically as such. See also: Sun Microsystems, Inc. (July 21, 2005). Please note that the title of the proposal is part of the argument in favor of the proposal. In the interest of clarity and to avoid confusion the title of this and each other ballot item is requested to be consistent throughout the proxy materials. Please advise if there is any typographical question. Stock will be held until after the annual meeting. Please acknowledge this proposal within 14-days and advise the most convenient fax number and email address for the Corporate Secretary's office.
[INQUIRY LETTER] Division of Corporation Finance The Home Depot, Inc. (HD) Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison Pill Shareholder: John Chevedden Ladies and Gentlemen: This is an initial response to The Home Depot no action request. The rule 14a-8 proposal text that follows this letter is the current update of the proposal submitted prior to the company due date for rule 14a-8 proposals. This updated text differs from the proposal text included in the company no action request. It is respectfully requested that concurrence not be granted to the company. It is also respectfully requested that there be an opportunity for additional material in support of the inclusion of this shareholder proposal. Also that the shareholder have the last opportunity to submit material since the company had the first opportunity. Sincerely, John Chevedden cc: Janet Fisher<jfisher@cgsh.com> 3 Redeem or Vote Poison Pill RESOLVED, Shareholders request that our Board redeem any future or current poison pill, unless such poison pill is subject to a shareholder vote as a separate ballot item as soon as may be practicable to give our board valuable insight on shareholders' views of a poison pill. As soon as may be practicable, as a separate ballot item and to give our board prompt valuable insight are key elements. A poison pill sunset would not substitute for a shareholder vote. Charter or bylaw inclusion if practicable. Thus there would be no loopholes to allow our board to override a required shareholder vote as soon as practicable. Since a vote would be as soon as practicable, it could take place within 4-months of the adoption of a new poison pill and thereby save our company the added expense of a special meeting. To give our board valuable insight on shareholders' views of their poison pill, a vote would be held even if a new poison pill was promptly terminated because our board could turnaround and readopt their poison pill. Furthermore our company has no policy that would prevent our board from turning around and readopting a poison pill if our board excluded our vote by terminating a poison pill It would be difficult to argue that a board policy to allow a one-year blackout on a shareholder vote implements a policy calling for a vote as soon as possible. An initial one-year blackout on a shareholder vote would not seem to be a good omen to implement a proposal calling for a vote as soon as possible. Under the current company policy, our board could put us to the added expense and shareholder inconvenience of a special election one-year after a poison pill was adopted, when such vote could easily be combined with a regular shareholder meeting. Additionally a special meeting, for only a single topic, would run the risk of low shareholder participation unless our company spent additional money for special solicitations. 67% yes-vote We as shareholders voted in support of this topic: |[NCCDEF,12] |[UCA1] |[TDC4,MP1,QC,VU] |[TCC4,M'Yes Vote',QC,VU] |[TCC4,MP2,QL,VU] |[XT] |[ST]|[LC5]|[RS4]|[CU]Year|[XU] |[TA]|[RS4]|[CU]Yes Vote|[XU] |[TA]|[RS4](based on yes and no votes cast) |[ST]|[LC5]2003 |[TA]64% |[ST]|[LC5]2004 |[TA]67% |[ET] The Corporate Library (TCL) http://www.thecorporatelibrary.com/, a pro-investor research firm, has repeatedly stated that companies with policies for their board to override a shareholder vote on a poison pill have not implemented this type of proposal. In our board's case it claims it can adopt a one-year poison pill and never have a shareholder vote on it. Further details are in The Home Depot, Inc. (March 7, 2005) available through SECnet http://www.wsb.com/. Pills Entrench Current Management "Poison pills ... prevent shareholders, and the overall market, from exercising their right to discipline management by turning it out. They entrench the current management, even when it's doing a poor job. They water down shareholders' votes." "Take on the Street" by Arthur Levitt, SEC Chairman, 1993-2001 Redeem or Vote Poison Pill yes on 3
[INQUIRY LETTER] Division of Corporation Finance The Home Depot, Inc. (HD) #2 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison Pill Shareholder: John Chevedden Ladies and Gentlemen: This is a 2nd response to The Home Depot no action request. The company sent a December 14, 2005 letter to the proponent with no copy noted for the staff. In this December 14, 2005 letter the company essentially said that it need not follow these parts of Rule 14a-8. "c. Question 3: How many proposals may I submit: Each shareholder may submit no more than one proposal to a company for a particular shareholders' meeting." "f. Question 6: What if I fail to follow one of the eligibility or procedural requirements explained in answers to Questions 1 through 4 of this section? "1. The company may exclude your proposal, but only after it has notified you of the problem, and you have failed adequately to correct it. Within 14 calendar days of receiving your proposal, the company must notify you in writing of any procedural or eligibility deficiencies, as well as of the time frame for your response. Your response must be postmarked, or transmitted electronically, no later than 14 days from the date you received the company's notification. A company need not provide you such notice of a deficiency if the deficiency cannot be remedied, such as if you fail to submit a proposal by the company's properly determined deadline. If the company intends to exclude the proposal, it will later have to make a submission under Rule 14a-8 and provide you with a copy under Question 10 below, Rule 14a-8(j)." I believe that once a company submits a no action request that it should provide the staff with all subsequent correspondence with the proponent. It is respectfully requested that there be an opportunity for additional material in support of the inclusion of this shareholder proposal. Also that the shareholder have the last opportunity to submit material since the company had the first opportunity. Sincerely, John Chevedden cc: Janet Fisher<jfisher@cgsh.com>
[INQUIRY LETTER] Division of Corporation Finance The Home Depot, Inc. (HD) #3 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison Pill Shareholder: John Chevedden Ladies and Gentlemen: The following is the updated text of the rule 14a-8 proposal which was submitted to the company prior to the date that the company no action request was submitted to the proponent: "[December 11, 2005 Update] "3 Redeem or Vote Poison Pill "RESOLVED, Shareholders request that our Board redeem any future or current poison pill, unless such poison pill is subject to a shareholder vote as a separate ballot item as soon as may be practicable. As soon as may be practicable and as a separate ballot item are key elements. Charter or bylaw inclusion if practicable. "Thus there would be no loopholes to allow our board to override a required shareholder vote as soon as practicable. Since a vote would be as soon as practicable, it could take place within 4-months of the adoption of a new poison pill. To give our board valuable insight on shareholders' views of their poison pill, a vote would occur even if a new poison pill was promptly terminated because our board could turnaround and readopt their poison pill. "It would be difficult to argue that our board's current policy to allow a one-year blackout on a shareholder vote implements a policy calling for a vote as soon as possible. An initial one-year blackout on a shareholder vote would not seem to be a good omen to implement a proposal calling for a vote as soon as possible. "Under the current company policy, our board could put us to the added expense of a special election one year after a poison pill was adopted, when such vote could easily be combined with a regular shareholder meeting which could be held only one month earlier." The company does not explain how a proposal that calls for "no loophole" can be implemented by a company policy with the exact loophole that is intended to be excluded through a policy triggered by low director vote-standard. The company cites no precedent on excluding a rule 14a-8 poison pill proposal with this "no loophole" text. According to the company argument a vote as soon as 4-months is no different than no vote whatsoever for the existence of the company as long as there is a one-year sunset for a poison pill. The company policy also has a low threshold to exclude a shareholder vote a mere one-vote margin of whatever vaguely-defined directors are entitled to vote. Furthermore the vague text of the company "Policy" makes it unworkable and unenforceable as anything other than a blank-check. The company does not define and/or give examples of the vague text in its "policy" that would trigger a poison pill without a shareholder vote: "in the exercise of its fiduciary duties" "a majority of the independent members of the Board [By a loose or strict definition of independence?] "prevailing circumstances [Adds nothing, there are prevailing circumstances 365-days a year.]" "it would be detrimental [In any trivial respect whatsoever?]" Also the 2005 company policy fails to address "as a separate ballot item" in the rule 14a-8 proposal text: "a shareholder vote as a separate ballot item, to be held as soon as may be practicable." Hence the vote on the pill could arguably be bundled with a vote on another ballot item which could be much more attractive to shareholders. In other words a carrot and stick approach to obtain a favorable shareholder vote on an pill that a majority of shareholders actually oppose. The poison pill topic possibly poses the highest potential conflict of interest (of any shareholder proposal topic) in discriminating between "exercise of its fiduciary duties" and the directors own personal interest in continued longevity at The Home Depot and a corresponding steady-stream of attractive pay, prestige and prerequisites. The Corporate Library (TCL) http://www.thecorporatelibrary.com/, an independent investment research firm, has repeatedly stated that companies with policies for their board to override a shareholder vote on a poison pill have not implemented this type of proposal. For instance The Corporate Library said, in regard to the 2004 Home Depot rule 14a-8 poison pill proposal which won 67% support: "The [2004 poison pill] proposal asked the Company not to adopt a poison pill without seeking shareholder approval, but did not specify a mechanism for implementing the proposal at a company, like this one, that currently has no pill in place. Such mechanisms could include the adoption of a formal governance policy requiring shareholder approval for a pill to be adopted, or the adoption of a bylaw containing a similar restriction. The Company has not responded to the proposal by implementing any limitation of this kind." Source: http://www.boardanalyst.com/companies/shp/proposal.detail.aspx?ResolutionID=2461 The company does not claim The Corporate Library's conclusion that Home Depot had not implemented a poison pill policy commensurate with the rule 14a-8 proposal, was brought to the attention of the staff before the staff made its determination in any prior no action request. The company has not made any changes to its 2005 policy to accommodate the new 2006 rule 14a-8 proposal text: 1) "Charter or bylaw inclusion if practicable." 2) "Thus there would be no loopholes to allow our board to override a required shareholder vote as soon as practicable. Since a vote would be as soon as practicable, it could take place within 4-months of the adoption of a new poison pill." For the above reasons it is respectfully requested that concurrence not be granted to the company. It is also respectfully requested that there be an opportunity to submit additional material in support of the inclusion of this rule 14a-8 proposal. Also that the shareholder have the last opportunity to submit material since the company had the first opportunity. Sincerely, John Chevedden cc: Frank Fernandez<Frank_Fernandez@homedepot.com>
[INQUIRY LETTER] Division of Corporation Finance The Home Depot, Inc. (HD) #4 Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Poison Pill Shareholder: John Chevedden Ladies and Gentlemen: The following adds to the previous responses to the company no action request. The company does not explain how a proposal that calls for "no loophole" can be implemented by a company policy with the exact loophole that is intended to be excluded through a policy triggered by low director vote-standard. The company cites no precedent on excluding a rule 14a-8 poison pill proposal with this "no loophole" text. According to the company argument a vote as soon as 4-months is no different than no vote whatsoever for the existence of the company as long as there is a one-year sunset for a poison pill. The company policy also has a low threshold to exclude a shareholder vote a mere one-vote margin of whatever vaguely-defined directors are entitled to vote. This could mean a narrow 4-to-3 vote with 3 abstentions. Furthermore the vague text of the company "Policy" makes it unworkable and unenforceable as anything other than a blank-check. The company does not define and/or give examples of the vague text in its "policy" that would trigger a poison pill without a shareholder vote: "in the exercise of its fiduciary duties" "a majority of the independent members of the Board [By a loose or strict definition of independence?] "prevailing circumstances [Adds nothing, there are prevailing circumstances 365-days a year.]" "it would be detrimental [In any trivial respect whatsoever?]" "not in the best interests of the Company's stockholders [Again in any trivial respect whatsoever?]" "it must terminate in one year if it has not been approved by stockholders [Which stockholders those who attend the board meetings?] Also the 2005 company policy fails to address "as a separate ballot item" in the rule 14a-8 proposal text: "a shareholder vote as a separate ballot item, to be held as soon as may be practicable." Hence the vote on the pill could arguably be bundled with a vote on another ballot item which could be much more attractive to shareholders. In other words a carrot and stick approach to obtain a favorable shareholder vote on an pill that a majority of shareholders might oppose as a stand-alone issue. The poison pill topic possibly poses the highest potential conflict of interest (of any shareholder proposal topic) in discriminating between "exercise of its fiduciary duties" and the directors own personal interest in continued longevity at The Home Depot and a corresponding steady-stream of attractive pay, prestige and prerequisites. The Corporate Library (TCL) http://www.thecorporatelibrary.com/, an independent investment research firm, has repeatedly stated that companies with policies for their board to override a shareholder vote on a poison pill have not implemented this type of proposal. For instance The Corporate Library said, in regard to the 2004 Home Depot rule 14a-8 poison pill proposal which won 67% shareholder support: "The [2004 poison pill] proposal asked the Company not to adopt a poison pill without seeking shareholder approval, but did not specify a mechanism for implementing the proposal at a company, like this one, that currently has no pill in place. Such mechanisms could include the adoption of a formal governance policy requiring shareholder approval for a pill to be adopted, or the adoption of a bylaw containing a similar restriction. The Company has not responded to the proposal by implementing any limitation of this kind." Source: http://www.boardanalyst.com/companies/shp/proposal.detail.aspx?ResolutionID=2461 The company does not claim The Corporate Library's conclusion that Home Depot, or any other similarly situated company had not implemented a poison pill policy commensurate with the rule 14a-8 proposal, was brought to the attention of the Staff before the Staff made its determination in any prior no action request. The company has not made any changes to its 2005 policy to accommodate the new 2006 rule 14a-8 proposal text: 1) "Charter or bylaw inclusion if practicable." 2) "Thus there would be no loopholes to allow our board to override a required shareholder vote as soon as practicable. Since a vote would be as soon as practicable, it could take place within 4-months of the adoption of a new poison pill." Potentially related to this rule 14a-8 proposal is that the Staff in January 2006 rejected Hewlett-Packard's argument that its majority voting policy "substantially implemented" a shareholder proposal seeking to establish a majority vote standard for the election of directors. The proposal was submitted by the United Brotherhood of Carpenters Pension Fund, who requested that the company's board of directors "initiate the appropriate process" to amend Hewlett-Packard's governance documents to provide that director nominees be elected by the affirmative vote of the majority of votes cast. Under Hewlett-Packard's majority voting policy, a director who received a greater number of votes withheld from his or her election than votes "for" such election was required to tender his or her resignation to Hewlett-Packard's Nominating and Corporate Governance Committee. The Staff rejected the Hewlett-Packard argument that this policy compared favorably with the proposal. One interpretation of this no-action letter is that a company would henceforth have to adopt a bylaw amendment or obtain shareholder approval of a charter amendment in order to substantially implement a majority vote shareholder proposal under Rule 14a-8(i)(10). A policy statement would not be sufficient. For the above reasons it is respectfully requested that concurrence not be granted to the company. It is also respectfully requested that the shareholder have the last opportunity to submit material since the company had the first opportunity. Sincerely, John Chevedden cc: Frank Fernandez<Frank_Fernandez@homedepot.com>
[STAFF REPLY LETTER] Response of the Office of Chief Counsel Division of Corporation Finance Re: The Home Depot, Inc. Incoming letter dated December 9, 2005 The proposal requests that the board amend its charter or bylaws to require that any future or current poison pill be redeemed unless it is submitted to a shareholder vote as soon as practicable. We are unable to concur in your view that Home Depot may exclude the proposal under rule 14a-8(i)(10). Accordingly, we do not believe that Home Depot may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(10). Sincerely, /s/ Mary Beth Breslin |
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