Company Name: Johnson & Johnson
Public Availability Date: February 17, 2006Document Sections:INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 22, 2005
Direct Dial (202) 955-8653
Fax No. (202) 530-9677
Client No. 45016-01913
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Shareholder Proposal of Vicki Lee Martin Securities Exchange Act of 1934 -
Rule 14a-8
Ladies and Gentlemen:
This letter is to inform you that it is the intention of our client, Johnson &
Johnson (the "Company"), to omit from its proxy statement and form of proxy for
its 2006 Annual Meeting of Shareholders (collectively, the "2006 Proxy
Materials") a shareholder proposal (the "Proposal") and statement in support
thereof (the "Supporting Statement") received from Vicki Lee Martin (the
"Proponent").
A copy of the Proposal and supporting statement, as well as related
correspondence from the Proponent, is attached to this letter as Exhibit A. We
hereby respectfully request that the staff of the Division of Corporation
Finance (the "Staff") concur in our view that the Proposal may be excluded from
the 2006 Proxy Materials pursuant to Rules 14a-8(i)(10), because the Company has
substantially implemented the Proposal, and 14a-8(i)(7), because the Proposal
deals with a matter relating to the Company's ordinary business operations.
THE PROPOSAL
The Proposal requests the following:
That Johnson and Johnson stockholders recommend the Board direct management of
Johnson and Johnson company and all U.S. subsidiaries to verify the employment
legitimacy of all current and future U.S. workers and to immediately terminate
any workers not in compliance.
ANALYSIS
I. The Proposal May Be Excluded Under Rule 14a-8(i)(10) Because The Company Has
Substantially Implemented The Proposal.
A. Background
Rule 14a-8(i)(10) permits companies to exclude shareholder proposals from their
proxy materials if the company has "substantially implemented" the relevant
proposal. See Release No. 34-39093 (Sept. 18, 1997). The Securities and Exchange
Commission (the "Commission") stated in 1976 that the predecessor to Rule
14a-8(i)(10) "is designed to avoid the possibility of shareholders having to
consider matters which have already been favorably acted upon by the
management." See Release No. 34-12598 (July 7, 1976). The Commission has refined
Rule 14a-8(i)(10) over the years. In the 1983 amendments to the proxy rules, the
Commission indicated:
In the past, the staff has permitted the exclusion of proposals under Rule
14a-8(c)(10) only in those cases where the action requested by the proposal has
been fully effected. The Commission proposed an interpretative change to permit
the omission of proposals that have been "substantially implemented by the
issuer." While the new interpretative position will add more subjectivity to the
application of the provision, the Commission has determined the previous
formalistic application of this provision defeated its purpose. Amendments to
Rule 14a-8 Under the Securities Exchange Act of 1934 Relating to Proposals by
Security Holders, Release No. 20091, at Section II.E.5. (Aug. 16, 1983) (the
"1983 Release").
The 1998 amendments to the proxy rules, which (among other things) implemented
the current Rule 14a-8(i)(10), reaffirmed this position. See Amendments to Rules
on Shareholder Proposals, Exchange Act Release No. 40018 at n.30 and
accompanying text (May 21, 1998). Consequently, as noted in the 1983 Release, in
order to be excludable under Rule 14a-8(i)(10), a shareholder proposal need only
be "substantially implemented," not "fully effected." Moreover, precedent under
Rule 14a-8(i)(10) confirms that the standard for determining whether a proposal
has been "substantially implemented" is not dependent on the means by which
implementation is achieved. When it initially adopted the predecessor of Rule
14a-8(i)(10), the Commission stated "mootness can be caused for reasons other
than the actions of management, such as statutory enactments, court decisions,
business changes and supervening corporate events." Adoption of Amendments
Relating to Proposals by Security Holders, Exchange Act Release No. 19771 (Nov.
22, 1976). Rule 14a-8(i)(10)'s focus on the end result, not on the process, was
recently highlighted in Intel Corp. (avail Feb. 14, 2005), where the Staff
concurred that FASB's approval of Statement 123(R) had substantially implemented
the proposal.
The Staff has further stated "a determination that the company has substantially
implemented the proposal depends upon whether [the company's] particular
policies, practices and procedures compare favorably with the guidelines of the
proposal." See Texaco, Inc. (avail. March 28, 1991). In other words, Rule
14a-8(i)(10) permits exclusion of a shareholder proposal when a company has
implemented the essential objective of the proposal, even where the manner by
which a company implements a proposal does not precisely correspond to the
actions sought by a shareholder proponent. See 1983 Release; Exxon Mobil
Corporation (avail. March 18, 2004) and Xcel Energy, Inc. (avail. Feb. 17, 2004)
(each permitting exclusion of a proposal requesting that the board prepare a
report explaining the company's response to climate changes and greenhouse gas
emissions where the company was already addressing the general issues identified
in the proposal through various policies and reports); The Talbots, Inc. (avail.
Apr. 5, 2002) (permitting exclusion of a proposal requesting that company commit
itself to implementation of a code of conduct based on International Labor
Organization human rights standards where the company had established and
implemented its own business practice standards); AMR Corporation (avail. Apr.
17, 2000) (permitting exclusion of a proposal requiring members of various board
committees to be independent where the company used a definition of independence
different from that referenced in the supporting statement); Masco Corporation
(avail. March 29, 1999) (permitting exclusion of a proposal setting a standard
for independence of the company's outside directors where the company had
adopted a standard that, unlike the proposal, provided that only material
relationships with affiliates would affect a director's independence); Erie
Indemnity Company (avail. March 15, 1999) (permitting exclusion of a proposal
banning board members from accepting gifts from officers where the board had
adopted a resolution with a similar effect).
B. The Company's Actions
The Company has taken several actions that we believe substantially implement
the Proposal, and, accordingly, pursuant to Rule 14a-8(i)(10), the Proposal may
be properly omitted from the 2006 Proxy Materials.
As mentioned above, the Proposal requires the Company and its U.S. subsidiaries
to verify the employment legitimacy of all current and future employees, and to
immediately terminate any employee not authorized to work in the United States.
The Company and its U.S. subsidiaries are already required by law to verify the
employment eligibility of each employee they have hired since November 7, 1986
under the Immigration Reform and Control Act of 1986 ("IRCA" or "Act"), 8 U.S.C.
§1324a. To do so, the Company and each of its U.S. subsidiaries must complete an
Immigration and Naturalization Service ("INS") Form I-9, the Employment
Eligibility Verification Form, for each employee it hires, and examine certain
documents that establish the employee's eligibility to work in the United
States. The law also requires the Company and its U.S. subsidiaries to retain
the completed Form I-9 and allow inspection of such forms by several federal
agencies, including the INS and the Department of Labor. The Company and its
U.S. subsidiaries comply with these legal obligations and verify the employment
eligibility of employees hired since the Act took effect, which comprise over 91
percent of the Company's work force in the United States.
The Company and its U.S. subsidiaries also have taken action with respect to the
termination of ineligible employees. Section 274A of the Immigration and
Nationality Act ("INA"), 8 U.S.C. §1324a, makes it unlawful for a U.S. employer
to continue employing an individual when the employer knows the employee is or
has become unauthorized with respect to such employment. The Company and its
U.S. subsidiaries, in compliance with this law, immediately terminate the
employment of any individual who is found to be ineligible to work in the United
States, regardless of whether they were hired before or after the IRCA's
enactment.
C. Analysis
When a company can demonstrate that it has already adopted policies or taken
actions to address each element of a shareholder proposal, the Staff has
concurred that the proposal has been "substantially implemented" and may be
excluded as moot. See, e.g., Bristol-Myers Squibb Co. (avail. Feb. 18, 2005)
(permitting exclusion of a proposal requiring disclosure of the company's
political contributions where the board of directors had adopted a resolution
calling for disclosure substantially similar to that prescribed by the
proposal); Intel Corp. (avail. March 11, 2003) (concurring that a proposal
requesting that Intel's board submit to a shareholder vote all equity
compensation plans and amendments to add shares to those plans that would result
in material potential dilution was substantially implemented by a board policy
that excepted certain awards from the policy); The Gap, Inc. (avail. March 16,
2001) (permitting the exclusion of a proposal that requested a report on the
child labor practices of the company's vendors because the company had already
established a code of vendor conduct, monitored vendor compliance and published
the related information); Nordstrom, Inc. (avail. Feb. 8, 1995) (concurring that
a proposal requesting a report to shareholders on Nordstrom's relationship with
suppliers and a commitment to regular inspections was substantially implemented
by existing company guidelines and a press release, even though the guidelines
did not commit the company to conduct regular or random inspections to ensure
compliance).
The Proposal requires the Company to verify the employment legitimacy of all
current and future employees, and to immediately terminate any employee not
authorized to work in the United States. The Company's and its U.S.
subsidiaries' actions discussed above substantially implement the Proposal's
request because the Company and its U.S. subsidiaries verify employees'
eligibility status and terminate ineligible employees.
As discussed above, the Company and its U.S. subsidiaries are already required
by federal law to verify the employment eligibility of each employee hired since
November 7, 1986. The law also requires termination of any employees who are
found to be unauthorized. The Company and its U.S. subsidiaries have
consistently complied with the law in both respects. Furthermore, the Company
and its U.S. subsidiaries immediately terminate any employees found not to be
authorized to work in the United States, regardless of whether they were hired
before or after the IRCA's enactment.
We believe that the Company has substantially implemented the Proposal. The
Proposal requests two things: for the Company to verify the employment status of
all current and future employees, and to terminate employees found to be
unauthorized workers. The Company has already taken each action. The Company has
verified the employment status of each employee it has hired since November 7,
1986, which constitutes over 91 percent of the Company's work force in the
United States, and will continue to do so for any new employees. In addition,
the Company and its U.S. subsidiaries terminate any employees found ineligible
to work in the United States, regardless of when they were hired.
Thus, the Company's policies and practices compare favorably with the objectives
of the Proposal. Under established Staff precedent, including the Bristol-Myers
Squibb and Intel letters referred to above, the Proposal is excludable under
Rule 14a-8(i)(10) because the Company has substantially implemented it.
II. The Proposal Deals With A Matter Relating To The Company's Ordinary Business
Operations And May Therefore Be Excluded Under Rule 14a-8(i)(7).
A. Background
The Proposal is properly excludable pursuant to Rule 14a-8(i)(7) because the
Proposal pertains to the Company's ordinary business operations. According to
the Commission's Release accompanying the 1998 amendments to Rule 14a-8, the
underlying policy of the ordinary business exclusion is "to confine the
resolution of ordinary business problems to management and the board of
directors, since it is impracticable for shareholders to decide how to solve
such problems at an annual meeting." Release No. 34-40018 (May 21, 1998) (the
"1998 Release").
In the 1998 Release, the Commission described the two "central considerations"
for the ordinary business exclusion. The first was that certain tasks were "so
fundamental to management's obligation to run a company on a day to day basis"
that they could not be subject to direct shareholder oversight. The second
consideration related to "the degree to which the proposal seeks to
'micro-manage' the company by probing too deeply into matters of a complex
nature upon which shareholders, as a group, would not be in a position to make
an informed judgment." The Staff also provided examples of what it generally
considers to be ordinary business operations, including "management of the
workforce, such as the hiring, promotion, and termination of employees," and has
considered such proposals to be excludable because they are employment-related
matters. Exxon Corp. (avail. Dec. 31, 1996). In addition, the Staff has
concurred in the exclusion of proposals that relate to the general conduct of a
company's legal compliance. Humana Inc. (avail. Feb. 25, 1998). We believe the
Proposal is excludable on both of these bases under the ordinary business
exception of Rule 14a-8(i)(7).
B. The Proposal is Excludable Because It Deals with Legal Compliance Issues
The Proposal essentially relates to the Company's compliance with applicable
law, particularly the Company's compliance with the IRCA and INA. The Staff has
concurred in the exclusion of similar proposals as being part of a company's
ordinary business operations. For example, in Humana Inc. (avail. Feb. 25,
1998), the Staff concurred with the omission of a proposal requesting that the
company's board of directors oversee an "anti-fraud compliance committee." The
company argued that it was engaged in a regulated industry with compliance
obligations relating to statutory and regulatory requirements, which all
constituted ordinary business matters. In granting no-action relief, the Staff
concurred that such programs constituted part of the company's ordinary business
operations, i.e., the conduct of a legal compliance program, noting in
particular that the proposal did not focus on any violations involving fraud by
the company. The situation in Humana is similar to the one at issue here. The
Proponent has requested that the Company do little more than comply with the
law, and has not alleged any wrongdoing by the Company with regard to the hiring
of ineligible employees. See also Hudson United Bancorp (avail. Jan. 24, 2003)
(concurring in the omission of a proposal requesting the board to appoint an
independent shareholder committee to investigate possible corporate misconduct
on the basis that it related to the general conduct of a legal compliance
program); Duke Power Company (avail. March 7, 1988) (concurring in the exclusion
of a proposal regarding the preparation of a report detailing the company's
environmental activities as ordinary business operations (i.e., compliance with
governmental regulations relating to the environmental impact of power plant
emissions)).
Furthermore, the Staff has concurred with exclusions of compliance-type
proposals regardless of whether a company had been involved in illegal activity.
For example, in Allstate Corporation (avail. Feb. 16, 1999), a proposal sought,
among other things, an independent shareholder committee to investigate and
prepare a report on alleged illegal activities. The company had already entered
consent awards relating to such activities and had paid several fines. The
company argued that it was impractical under Rule 14a-8(i)(7) for shareholders
to evaluate allegations of illegal activities and, more importantly, that
management already did so on a day-to-day basis. The Staff concluded that what
the shareholder actually soughtcompliance with applicable lawwas excludable,
as the conduct of a legal compliance program properly fell within the company's
ordinary business operations. In the present case, the essential objective of
the Proposal is to ensure compliance with applicable law regarding unauthorized
workers.
While the Staff has allowed the inclusion of ordinary business-type proposals
where a proposal focuses on sufficiently significant social policy issues, the
Proposal does not focus on such issues. Furthermore, the Staff does not simply
except a proposal from the ordinary exclusion rules because it relates to a
public policy issue. See, e.g., Mead Corp. (avail. Jan. 31, 2001) (permitting
exclusion of a proposal regarding information related to environmental risks);
and Wal-Mart Stores, Inc. (avail. March 15, 1999) (allowing the exclusion of a
proposal requesting a report on the company's labor conditions). Instead, the
Staff considers proposals on a case-by-case basis, taking into account factors
such as the nature of the proposal and the company to which it is directed.
Under Staff precedent, the employment-based nature of a proposal is significant
to the Staff's determination. See Cracker Barrel Old Country Store, Inc. (avail.
Oct. 13, 1992). In Cracker Barrel, the Staff stated that it would recommend no
enforcement action if the company omitted from its proxy materials a proposal
requesting the company to: (1) implement nondiscriminatory employment policies
relating to sexual orientation; and (2) revise its employment policy statement
to specifically prohibit discrimination on the basis of sexual orientation. The
Staff indicated that the fact that a shareholder proposal regarding employment
policies and practices "is tied to a social issue will no longer be viewed as
removing the proposal from the realm of ordinary business operations of the
registrant. Rather ... such proposals are properly governed by the
employment-based nature of the proposal." In that regard, the current Proposal
does not raise a significant social policy and does not warrant the
participation of the Company's shareholders.
Therefore, like the proposal received by Allstate discussed above, the Proposal
deals with the Company's day-to-day business operations regarding legal
compliance, and does not touch upon significant policy issues, and, as a result,
the Company may exclude it from the 2006 Proxy Materials under Rule 14a-8(i)(7).
C. The Proposal is Excludable Because It Deals with Employment-Related Matters
The Proposal requires the Company to verify the employment status of each
current and future employee and to terminate employees found to be ineligible to
work in the United States. The hiring and retention of employees are routine
matters normally left to the day-to-day managers of a corporation. Indeed, in
Cracker Barrel Old Country Store, Inc. (avail. Oct. 13, 1992), the Staff said
that it would view proposals directed at a company's employment policies and
practices with respect to its non-executive workforce to be uniquely matters of
the company's ordinary business operations. The Staff then provided examples of
the categories of proposals that had been deemed excludable on that basis, which
included management of the workplace and employee hiring and firing. In
accordance with that view, the Staff has consistently determined that
shareholder proposals relating to employment are properly excludable from proxy
materials. See, e.g., Wisconsin Energy Corporation (avail. Jan. 30, 2001)
(permitting exclusion of a proposal requesting the board to seek the resignation
of the company's CEO and president); Public Service Company of Colorado (avail.
March 19, 1987) (allowing exclusion of a proposal seeking new leadership in the
company's management).
The Proposal would require the Company to perform an additional verification of
its employees' immigration status, which action relates to the Company's
management of its work force. Thus, the Proposal seeks to require the Company to
take employment-related actions that are directly related to the Company's
day-to-day management of its employees, and hence deals with the Company's
ordinary business operations. As such, we believe the Proposal deals with
day-to-day employment business matters, as in the proposal received by Cracker
Barrel discussed above, and is therefore excludable under Rule 14a-8(i)(7).
CONCLUSION
Based upon the foregoing analysis, we respectfully request that the Staff concur
that it will take no action if the Company excludes the Proposal from its 2006
Proxy Materials. Pursuant to Rule 14a-8(j), enclosed herewith are six copies of
this letter and its attachments. Pursuant to Rule 14a-8(j), this letter is being
filed with the Commission no later than 80 calendar days before the Company
files its definitive 2006 Proxy Materials with the Commission. On behalf of the
Company, we hereby agree to promptly forward to the Proponent any Staff response
to this no-action request that the Staff transmits by facsimile to us only.
Consistent with the provisions of Rule 14a-8(j), copies of this correspondence
are being provided concurrently to the Proponent.
We would be happy to provide you with any additional information and answer any
questions that you may have regarding this subject. Should you disagree with the
conclusions set forth in this letter, we respectfully request the opportunity to
confer with you prior to the determination of the Staff's final position. If you
have any questions, please do not hesitate to call me at (202) 955-8653 or
Michael H. Ullmann, the Company's Corporate Secretary, at (732) 524-2455.
Sincerely,
/s/
Amy L. Goodman
Enclosure
cc: Michael H. Ullmann, Johnson & Johnson
Vicki Lee Martin
[INQUIRY LETTER]
13 October 2005
Johnson and Johnson Shareholder Proposals
Dear Sir or Madam:
Please accept this proposal for Johnson and Johnson's next annual meeting. The
SEC recommended an electronic submission rather than postal service. If there is
any mistake on my part please allow me to make correction(s) in a timely manner.
I'm sorry I couldn't get the left margin to line up correctly.
We have 4,000 illegal immigrants pouring across our borders daily in violation
of the Constitution IV, 4 and Federal Immigration and Naturalization Act, 8 USC
1324(a) (1) (A) (iii-iv). The Immigration and Customs Enforcerent agency (ICE)
of the US government delegates fewer than 200 agents to police over eight
million employers and 12-20 million illegal immigrants. ICE employer sanctions
plummet while illegal immigration is the highest in history-- 2002 employer
sanctions totaled 13.
Third world economies have cheaper economies. Mexican maquiladora factory
workers, for instance, earn $6 daily. The American entry level unskilled jobs
these illegal workers steal are the jobs our most vulnerable workers-youth,
minorities, disabled, and minimally educatedare limited to doing. Dollars from
these "menial jobs" exchange to professional salaries in pesos. In 2005 Mexicans
working in America bank wired $20 billion home. More billions go by personal
carriers. The drug trade sends $10 billion. This total money is Mexico's prime
source of foreign income.
While billions of dollars leave and are lost to building American businesses, we
taxpayers, personal and corporate, must shell out hundreds of billions in social
services for illegal residents. Incarcerations alone cost $35 billion yearly for
the 29% of convicts from foreign countries. The American victims of these
criminals are left to pay funeral, medical, and other costs of their
victimization both as persons and as businesses.
The FBI estimates half of all criminal gang members are illegal aliens: 95% of
Los Angeles homicide warrants are for illegal immigrants. All 9-11 terrorists
were in violation of at least one immigration law according to the National
Committee on Terrorist Attacks. Another 80,000 violent criminals were ordered
deported-but merely disappeared. This includes 4,000 violent criminals from
nations sponsoring terrorism.
The Department of Homeland Security has a program allowing employers to check
the immigration status of all applicants with a few clicks and entries on the
internet. The Social Security Administration has a toll free telephone number
for employers to verify applicant Social security numbers.
The credo appearing on the cover of last year's annual report delineated our
first responsibility is to the users and buyers of our products and services.
Another major responsibility is to abide by law, The Federal immigration and
Naturalization Act 8 USC 1324 (a) (1) (A) (iii-iv) makes it a felony to assist a
foreigner to come or to stay in America illegally.
We Johnson and Johnson shareholders would hate to see our company court-ordered
to pay mega millions for the actions of an illegal worker--even one committing
an unintentional crime like vehicular homicide with or without DUI.
Therefore Be It Resolved: That Johnson and Johnson stockholders recommend the
Board direct management of Johnson and Johnson company and all U.S. subsidiaries
to verify the employment legitimacy of all current and future U.S. workers and
to immediately terminate any workers not in compliance.
Sincerely,
Vicki Martin
2013 S 350 E
Clearfield, UT. 84015
vmrtn@yahoo.com
/s/
[INQUIRY LETTER]
31 Dec 2005
Vicki Martin
2013 S 350 E
Clearfield, UT 84015
808-776-3584
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street N.E.
Washington,
D.C. 20549
Ladies and Gentlemen:
In our law, Title 8, Section 1324 was passed which provides (a) Criminal
penalties for (1)(A) any person who(iv) encourages or induces an alien to come
to, enter, or reside in the United States, knowing or in reckless disregard of
the fact that such coming to, entry, or residence is or will be in violation of
law. ... (ii) in the case of a violation of sub paragraph (A)(ii), (iii), (iv),
or (v)(II), be fined under title 18, imprisoned not more than 5 years, or both;
(iii) in the case of a violation of subparagraph (A)(i). To protect employers
there is a Social Security toll free phone number and a Department of Homeland
Security web site which can be used to verify prospective workers.
Stamford, CT. city fathers instituted "no hassle" zones for illegal immigrants
to congregate while waiting for employers to pick them up for a days work.
Connecticut Citizens for Immigration Control is suing Stamford under 8 USC 1324.
Johnson and Johnson claims my proxy should be excluded based on Rules
14a-8(i)(10) because the Company has substantially implemented my proposal and
14a-8(i)(7) because the Proposal deals with ordinary business Operations.
Part of Johnson and Johnson (JNJ) "ordinary business operations" include
recognizing the Immigration Reform and Control Act (IRCA) of 1986 by having
perspective JNJ has not "substantially implemented" my proposal by refusing to
utilize the two procedures available to verify each applicant's legality.
Endangering the company reputation and shareholder investments by refusing to
implement these quick and simple safety measures is not "ordinary business
operations".
Sincerely,
Vicki L. Martin
2013 S 350 E
Clearfield, UT
84015
(801) 776-3584 Eve
/s/
[STAFF REPLY LETTER]
February 17, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Johnson & Johnson Incoming letter dated December 22, 2005
The proposal requests that the board direct the company's management to verify
the employment legitimacy of all current and future U.S. employees and terminate
any employees not in compliance.
There appears to be some basis for your view that Johnson & Johnson may exclude
the proposal under rule 14a-8(i)(10). Accordingly, we will not recommend
enforcement action to the Commission if Johnson & Johnson omits the proposal
from its proxy materials in reliance on rule 14a-8(i)(10). In reaching this
position, we have not found it necessary to address the alternative basis for
omission upon which Johnson & Johnson relies.
Sincerely,
/s/
Geoffrey M. Ossias
Attorney-Advisor
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