Company Name: Marathon Oil Corp.
Public Availability Date: January 23, 2006
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
APPENDIX 3
APPENDIX 4
APPENDIX 5
APPENDIX 6
APPENDIX 7
APPENDIX 8
INQUIRY LETTER
[INQUIRY LETTER]
December 7, 2005
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Request for No Action LetterShareholder Proposals for Inclusion in Marathon
Oil Corporation's 2006 Proxy Statement, Submitted by:
The Unitarian Universalist Association of Congregations The Board of Pensions of
the Evangelical Lutheran Church in America Catholic Healthcare West The
Congregation of the Sisters of Charity of the Incarnate Word
Ladies and Gentlemen:
Marathon Oil Corporation, a Delaware corporation ("Marathon") has received a
shareholder proposal and supporting statement (the "Proposal") from the
Unitarian Universalist Association of Congregations ("Unitarian") for inclusion
in Marathon's proxy statement for its 2006 Annual Meeting of Stockholders ("2006
Proxy Statement") to be held on April 26, 2006. (A copy of Unitarian's cover
letter dated November 8, 2005 and the Proposal are attached hereto as Exhibit
A). Subsequent to the receipt of the Proposal, Marathon received substantially
identical proposals (the "Duplicate Proposals") from (i) the Board of Pensions
of the Evangelical Lutheran Church in America, (ii) Catholic Healthcare West,
and (iii) the Congregation of the Sisters of Charity of the Incarnate Word,
copies of which are attached hereto as Exhibits B, C and D, respectively.
Unitarian, the Board of Pensions of the Evangelical Lutheran Church in America,
Catholic Healthcare West and the Congregation of the Sisters of Charity of the
Incarnate Word are collectively referred to herein as the "Proponents."
The resolution portion of the Proposal and Duplicate Proposals states:
RESOLVED: Shareholders request that our Board review the economic effects of the
HIV/AIDS, tuberculosis and malaria pandemics on the company's business strategy,
and its initiatives to date, and report to shareholders within six (6) months
following the 2006 annual meeting. This report, developed at reasonable costs
and omitting proprietary information, will identify the impacts of these
pandemics on the company.
Marathon believes that it may properly exclude the Proposal and the Duplicate
Proposals from the 2006 Proxy Statement for two reasons. First, the Proposal and
Duplicate Proposals may be omitted pursuant to Rule 14a-8(i)(7) because they
relate to Marathon's ordinary business operations. Second, in the event the
staff (the "Staff") of the Division of Corporation Finance does not agree with
the Marathon's conclusion concerning omission of the Proposal under Rule
14a-8(i)(7), Marathon believes the Duplicate Proposals may be properly omitted
pursuant to Rule 14a-8(i)(11) because the Duplicate Proposals are substantially
identical to the Proposal.
Marathon's statement of reasons is more particularly described below.
1. The Proposal and Duplicate Proposals may be omitted pursuant to Rule
14a-8(i)(7) because they relate to Marathon's ordinary business operations.
The Securities and Exchange Commission (the "Commission") has stated that the
purpose of Rule 14a-8(i)(7) is to confine the resolution of ordinary business
problems to management and the issuer's board of directors. See SEC Release No.
34-40018, Amendments to Rules on Shareholder Proposals (1998 WL 254809, S.E.C.
Release No. 34-40018) (the "Release"). The Release outlined two central
considerations on which this policy for exclusion rests: (i) the subject matter
of the proposal, which takes into account whether the tasks are so fundamental
to management's ability to run a company on a day-to-day basis that they would
not be appropriate for shareholder oversight; and (ii) the degree to which the
proposal seeks to "micromanage" the company by delving too deeply into complex
matters that the shareholders, as a group, would not be in position to make an
informed judgment. See Release at p. 4, 5. Marathon believes that the Proposal
meets both of these considerations and can properly be excluded under this rule.
The Proposal requests that the Board of Directors review the economic effects of
"the HIV/AIDS, tuberculosis and malaria pandemics on the company's business
strategy and its initiatives to date." Such a review requires an analysis of the
risks and liabilities of these pandemics on Marathon's business strategy. The
Division of Corporation Finance has stated that a company has a basis for
excluding a proposal under Rule 14a-8(i)(7) as relating to an evaluation of risk
when a proposal and supporting statement focus on the company engaging in an
internal assessment of the risks or liabilities that the company faces as a
result of its operations that may adversely affect the environment or the
public's health. See Staff Legal Bulletin No. 14C (2005 WL 1661094, June 28,
2005).
Similarly, in American International Group, Inc. ("American International") SEC
No-Action Letter (Feb. 19, 2004), the Staff concurred that the company could
exclude a similar shareholder proposal that requested the board of directors to
review and report on "the economic effects of HIV/AIDS, tuberculosis and malaria
pandemics on the company's business strategy" because it called for an
evaluation of risks and benefits.
Texas Instruments Incorporated ("TI"), SEC No-Action Letter (Jan. 28, 2005),
involved the same shareholder proposal, requesting that TI's board of directors
review the economic effects of the HIV/AIDS, tuberculosis and malaria pandemics
on the company's business strategy, and its initiatives to date, and report to
shareholders within six (6) months following the 2005 annual meeting. In TI, the
Staff agreed that there was some basis for TI's view that the proposal related
to TI's ordinary business operations because the proposal appeared to focus on
the company's evaluation of business risks and benefits as part of its
day-to-day operations. The same analysis applies here. Both upstream and
downstream segments of Marathon have adopted management systems which integrate
high standards into business decisions and incorporate risk management into
project planning to identify and address potential impacts to people and the
environment as part of its day-to-day operations.
Marathon is headquartered in Houston, Texas and is an integrated international
energy company with expertise in exploration and production; integrated gas; and
refining, marketing and transportation. It conducts exploration and production
(upstream) activities in the United States, the United Kingdom, Norway, Angola,
Equatorial Guinea, Gabon, Ireland, Russia and Canada. It also refines,
transports and markets (downstream) crude oil and petroleum products in the
Midwest and Southeast United States.
Marathon's commitment to corporate social responsibility (CSR) is an essential
element of how the company approaches business around the world. Marathon calls
this "Living Our Values." Marathon's approach to addressing the referenced
health challenges in Africa, namely the three "opportunistic diseases" HIV/AIDS,
malaria and tuberculosis, has focused on prioritizing the response to these
diseases based on the severity of the impact they impose on the general public,
and the communities of the countries where the company operates in Africa.
Marathon has also long maintained an anti-discrimination policy both in its
hiring practices and in providing health coverage to its employees including
treatment for HIV/AIDS. Marathon is committed to ensuring that employees have
access to confidential testing and treatment for all medical conditions,
including HIV/AIDS, tuberculosis and malaria. Marathon also provides educational
resources to its employees. These educational programs address HIV/AIDS as well
as other health concerns and support Marathon's policy of supporting its
employees with information that will help them lead productive and healthy
lives.
Marathon also believes that the Proposal seeks to micro-manage the company.
Marathon's largest presence on the African continent is in Equatorial Guinea
where we operate the Alba gas field and are constructing a liquid natural gas
facility on Bioko Island. Equatorial Guinea's most severe public health
challenge is malaria, well ahead of tuberculosis and HIV/AIDS. Marathon has
responded to this challenge by launching a five-year program that is intended to
eliminate or significantly reduce malaria from Bioko Island. The project was
launched in late 2003 and has achieved outstanding results. In its first year of
implementation, the program was able to reduce by 80% the risk of being bitten
by a mosquito carrying the malaria parasite; and the prevalence of malaria in
children under 15 years of age (in general) has fallen by 37% in the same time
frame. Attached is a press release that provides additional information on the
key elements of the project (see Exhibit E).
Tuberculosis was assessed as the second health priority, and Marathon provided a
program that addresses this health matter to our employees. The program provides
adequate coverage for our employees and their dependents. This includes
screening for tuberculosis and provisions for the necessary treatment.
HIV/AIDS was assessed as the third priority though it is now experiencing an
increased presence among the population. Marathon's HIV/AIDS intervention
focuses on providing financial as well as in-kind support to national awareness
drives for the benefit of the general public conducted by local associations and
the Ministry of Health and Social Wellbeing of Equatorial Guinea. For its
employees, Marathon provides internal awareness sessions conducted by health
professionals.
Consequently, Marathon is addressing the issues involving malaria, tuberculosis
and HIV/AIDS in its ordinary course of business operations. This is consistent
with previous guidelines provided by the Staff.
The Proposal submitted to Marathon, like the ones in American International and
TI, relates to an ordinary course business matter of evaluating financial risks,
benefits and costs. The Staff granted no action relief in each of the foregoing
precedents, despite the fact that the proposals in part related to larger social
issues. Because the Proposal focuses on the economic effects of the pandemics,
which requires analysis of the risks and liabilities of these pandemics on
Marathon's business strategy, it too is properly excludable under Rule
14a-8(i)(7).
The fact that the Proposal also asks Marathon to prepare and make available to
its stockholders a report within six months of the 2006 Proxy Statement does not
insulate the Proposal from exclusion on ordinary business grounds. In SEC
Release No. 34-20091 (Aug. 16, 1993), the Commission stated that where proposals
request that companies prepare reports on specific aspects of their business,
"the staff will consider whether the subject matter of the special report...
involves a matter of ordinary business" and "where it does, the proposal will be
excludable." Accordingly, the Staff has consistently permitted the exclusion of
proposals seeking the preparation of reports on matters of ordinary business.
See, e.g., Texas Instruments (Jan. 28, 2005); AT&T Corp. (Feb. 21, 2001); The
Mead Corporation (Jan. 31, 2001); Wal-Mart Stores, Inc. (March 15, 1999); Nike,
Inc. (July 10, 1997).
2. In the event the Staff does not agree with the Marathon's conclusion
concerning omission of the Proposal under Rule 14a-8(i)(7), Marathon believes
that the Duplicate Proposals may be properly omitted pursuant to Rule
14a-8(i)(11) because the Duplicate Proposals are substantially identical to the
Proposal.
The Duplicate Proposals may properly be excluded under Rule 14a-8(i)(11) because
each of the Duplicate Proposals is substantially identical to the Proposal, as
evidenced by the text of the Proposal and the Duplicate Proposals attached
hereto. If the Commission is unable to concur with Marathon's decision to
exclude the Proposal and the Duplicate Proposals on the grounds described above,
the company requests confirmation that the Commission would not recommend
enforcement action if Marathon excludes the Duplicate Proposals pursuant to Rule
14a-8(i)(11).
Based upon the reasons set forth above and in accordance with Rules 14a-8(i)(7)
and 14a-8(i)(11) under the Securities and Exchange Act of 1934, as amended
("Exchange Act"), Marathon respectfully requests that the Staff confirm that it
will not recommend any enforcement action if Marathon omits the Proposal and
Duplicate Proposals from its 2006 Proxy Statement. By copy of this letter to the
Unitarian Universalist Association of Congregations, the Board of Pensions of
the Evangelical Lutheran Church in America, Catholic Healthcare West, and the
Congregation of the Sisters of Charity of the Incarnate Word, Marathon
respectfully notifies them of its intention to exclude the Proposal and
Duplicate Proposals from its 2006 Proxy Statement.
In accordance with Rule 14a-8(j) of the Exchange Act, Marathon is enclosing six
copies of this letter and all exhibits to this letter, including the Proposal
and Duplicate Proposals. Please acknowledge receipt of the enclosed materials by
date-stamping the enclosed receipt copy of this letter and returning it in the
enclosed, self-addressed postage-paid envelope.
If the Staff disagrees with any of the conclusions or positions taken herein,
such that it will not be able to take the no-action positions requested above,
Marathon would appreciate the opportunity to confer with the Staff prior to the
issuance of a negative response. Please feel free to call me at 713-296-2535 if
you have any questions or comments.
Sincerely,
/s/
Richard J. Kolencik
General Attorney
ACW
171744
Attachments
cc w/attachments:
W.F. Schwind, Jr.
Jerry Gabert
Treasurer and Vice President of Finance
Unitarian Universalist Association of Congregations
25 Beacon Street
Boston, Massachusetts 02108
Mr. Jim Gunning (via email)
Sister Lillian Anne Healy, CCVI
Congregation of the Sisters of Charity of the Incarnate Word
6510 Lawndale
Houston, TX 77223-0969
Heather H. Williamson
Senior Investment Manager
Board of Pensions of the Evangelical Lutheran Church in America
800 Marquette Ave., Suite 1050
Minneapolis, MN 55402-2892
Susan Vickers, RSM
VP Community Health
Catholic Healthcare West
185 Berry Street, Suite 300
San Francisco, CA 94107-1739
[APPENDIX1]
November 8, 2005
Mr. Clarence P. Cazalot, Jr.,
Chairman and CEO
Marathon Oil Corporation
5555 San Felipe Road
Houston TX 770056-2723
Dear Mr. Cazalot:
On behalf of the Unitarian Universalist Association, we are hereby submitting
the enclosed resolution requesting that Marathon Oil Corporation review the
economic effects of the HIV/AIDS, tuberculosis and malaria pandemics on the
company's business strategy. We are also notifying you of our intention to
present the attached proposal for consideration and action by the stockholders
at the next annual meeting.
The Unitarian Universalist Association is a national denomination with over 1000
congregations across the country with more than 200,000 members. Unitarian
Universalism is a liberal religion with Jewish-Christian roots. It has no creed.
It affirms the worth and dignity of human beings, advocates freedom of belief
and the search for advancing truth, and tries to provide a warm, open,
supportive community for people who believe that ethical living is the supreme
witness of religion.
We submit this resolution for inclusion in the proxy statement in accordance
with Rule 14-a-8 of the General Rules and Regulations of the Securities and
Exchange Act of 1934 for consideration and action by the shareowners at the
annual meeting. Verification that we are beneficial owners of 3,000 shares of
common stock in Marathon Oil corporation will be provided upon request. We
intend to maintain ownership of the shares at least until after the next annual
meeting. Mr. Jim Gunning, a member of the Committee on Socially Responsible
Investing, is our representative for this initiative.
Mr. Gunning has had limited conservations with your staff following our letter
to you of October 8, 2005, most recently with Mr. Adel Chaouch. We would be
pleased to have a continuing dialogue with representatives of Marathon Oil to
further discuss this matter. We are hopeful that you will seriously consider
this request. Mr. Gunning, can be reached by telephone at 201.836.5901 and / or
by email to (jimgunning@optonline.net). On behalf of the UUA and other
interested shareholders, we look forward to discussing our concerns with you.
Respectfully yours,
/s/
Jerry Gabert
Treasurer and Vice President of Finance
[APPENDIX2]
REPORT RELATED TO GLOBAL HIV/AIDS-TB-MALARIA PANDEMICS
Resolved:
Shareholders request that our Board review the economic effects of the HIV/AIDS,
tuberculosis and malaria pandemics on the company's business strategy, and its
initiatives to date, and report to shareholders within six (6) months following
the 2006 annual meeting. This report, developed at reasonable costs and omitting
proprietary information, will identify the impacts of these pandemics on the
company.
Supporting Statement:
Scope of the Pandemics
In 2004, 39.4 million were infected with HIV, an all-time high, and 3.1 million
died from the disease. While two-thirds of global HIV cases remain in
sub-Saharan Africa, infections are rising in every region of the world. India,
for example, now has at least 5 million people living with HIV. In addition,
tuberculosis kills 2 million per year and malaria a further million. India and
Russia have the steepest increases in HIV infection and are highly exposed to
malaria and tuberculosis, respectively.i
The economic impact of these diseases can be immense. According to the Council
on Foreign Relations, eleven African countries will lose over 10% of their
workforces by the end of 2006, "an astounding figure that implies stark economic
consequences." Malaria alone is responsible for a 'growth penalty' of up to 1.3%
of GNP per year in some countries.ii
The World Economic Forum calls AIDS "a dark doud hanging over" Asia's economy
and warns "most Asian firms lack clear information on which specific areas of
their business HIV/AIDS is likely to affect." iii
Effects On Our Company
We believe that HIV/AIDS, Tuberculosis and Malaria can materially impact the
emerging markets in which our company operates.
A recent report by UBS and F&C Asset Management found, "There is sufficient
evidence to suggest that the presence of HIV/AIDS in the workplace adversely
affects company profit margins." In some cases "the impact of HIV/AIDS on
profitability can be substantial." iv
Consumers increasingly expect action from companies. One US consumer attitude
survey found that 71% believed companies should be "actively involved in
fighting AIDS." v
Corporate Leaders are Emerging
Proponents concur with the UBS / F&C report stating: "We believe any company
operating in, or looking to expand into, areas of HIV prevalence should, at a
minimum, be able to demonstrate that it has considered and evaluated the
possible effects of the disease on its operations."
Several large-cap firms are making reporting on infectious diseases best
practice. The Bill & Melinda Gates Foundation has funded an HIV/AIDS Resource
Document at the Global Reporting Initiative (GRI). Companies such as Proctor &
Gamble and Ford Motor Company have effectively used this reporting standard.vi
In 2004, 98% of Coca-Cola shareholders approved a similar resolution.
Coca-Cola's subsequent report notes, "the moral and business imperatives are of
equal importance" in responding to HIV/AIDS.vii
These companies' experience demonstrates such reports need not be onerous. In
our opinion, shareholders must fully understand the threats posed by these
diseases to make informed assessments of our company's value.
We urge a vote FOR this resolution.
-----FOOTNOTES-----
i UNAIDS State of the Epidemic 2005; and Global Fund to Fight AIDS, TB & Malaria
Status Report 2005.
ii Council on Foreign Relations HIV and National Security 2005; and WHO Roll
Back Malaria website.
iii Business and HIV/AIDS In Asia: Pushing Back The Tide. World Economic Forum
2005. http://www.weforum.org/pdf/Initiatives/GHI Asia Aids Report05.pdf
iv UBS and F&C Asset Management HIV/AIDS Beyond Africa 2005.
v Survey conducted on behalf of the Global Business Coalition on HIV/AIDS, 2004.
vi Global Reporting Initiative website; Ford Motor Company HIV/AIDS Report 2005;
and Proctor & Gamble HIV/AIDS In South Africa 2005.
vii Coca-Cola AIDS in Africa 2004 and correspondence with Coca-Cola investor
relations.
Word count - 492 (w/o footnotes)
[APPENDIX3]
VIA OVERNIGHT DELIVERY
November 15, 2005
Mr. Clarence P. Cazalet, Jr.
Chairman and CEO
Marathon Oil Corporation
5555 San Felipe Road
Houston TX 770056-2723
Dear Mr. Cazalet, Jr.:
As a faith-based pension plan and institutional investor, the Board of Pensions
of the Evangelical Lutheran Church in America (ELCA) seeks to reflect its
values, principles and mission in its investment decisions. We believe that
corporations need to promote positive corporate policies that sustain the human
community and all of creation.
The ELCA Board of Pensions is beneficial owner of over 64,000 shares of Marathon
Oil Corporation common stock. A letter of ownership verification from the
custodian of our portfolio will follow under separate cover. We have been a
shareholder of more than $2,000 of common stock for over one year, and we intend
to maintain an ownership position through the date of the annual meeting of
shareholders.
Enclosed is a shareholder proposal requesting that Marathon Oil Corporation
prepare a report that identifies the impacts of the HIV/AIDS, tuberculosis and
malaria pandemics on the Company. According to SEC Rule 14a-8, we ask that this
resolution be included in the proxy materials for the next annual meeting of
shareholders. Should the Board of Directors choose to oppose the resolution, we
ask that our supporting statement be included as well in the proxy materials.
The Unitarian Universalist Association (UUA) is the primary filer on this
resolution.
UUA will continue as the lead shareholder, and is prepared to assemble a
dialogue team. If you have any questions, please contact Patricia Zerega at
412-367-7575 in the Corporate Social Responsibility office of the ELCA.
Sincerely,
/s/
Heather H. Williamson
Senior Investment Manager
ELCA Board of Pensions
CC: Pat Zerega
ELCA SW PA Synod
9625 Perry Highway
Pittsburgh, PA 15237-5590
Dan RosanICCR
475 Riverside DriveRoom 550
New York, NY 10115
Kelli DeverMellon Global
Security Services
135 Santilli Highway
Everett, MA 02149
[APPENDIX4]
REPORT RELATED TO GLOBAL HIV/AIDS-TB-MALARIA PANDEMICS
Resolved:
Shareholders request that our Board review the economic effects of the HIV/AIDS,
tuberculosis and malaria pandemics on the company's business strategy, and its
initiatives to date, and report to shareholders within six (6) months following
the 2006 annual meeting. This report, developed at reasonable costs and omitting
proprietary information, will identify the impacts of these pandemics on the
company.
Supporting Statement:
Scope of the Pandemics
In 2004, 39.4 million were infected with HIV, an all-time high, and 3.1 million
died from the disease. While two-thirds of global HIV cases remain in
sub-Saharan Africa, infections are rising in every region of the world. India,
for example, now has at least 5 million people living with HIV. In addition,
tuberculosis kills 2 million per year and malaria a further million. India and
Russia have the steepest increases in HIV infection and are highly exposed to
malaria and tuberculosis, respectively.i
The economic impact of these diseases can be immense. According to the Council
on Foreign Relations, eleven African countries will lose over 10% of their
workforces by the end of 2006, "an astounding figure that implies stark economic
consequences." Malaria alone is responsible for a 'growth penalty' of up to 1.3%
of GNP per year in some countries.ii
The World Economic Forum calls AIDS "a dark cloud hanging over" Asia's economy
and warns "most Asian firms lack clear information on which specific areas of
their business HIV/AIDS is likely to affect." iii
Effects On Our Company
We believe that HIV/AIDS, Tuberculosis and Malaria can materially impact the
emerging markets in which our company operates.
A recent report by UBS and F&C Asset Management found, "There is sufficient
evidence to suggest that the presence of HIV/AIDS in the workplace adversely
affects company profit margins." In some cases "the impact of HIV/AIDS on
profitability can be substantial." iv
Consumers increasingly expect action from companies. One US consumer attitude
survey found that 71% believed companies should be "actively involved in
fighting AIDS." v
Corporate Leaders are Emerging
Proponents concur with the UBS / F&C report stating: "We believe any company
operating in, or looking to expand into, areas of HIV prevalence should, at a
minimum, be able to demonstrate that it has considered and evaluated the
possible effects of the disease on its operations."
Several large-cap firms are making reporting on infectious diseases best
practice. The Bill & Melinda Gates Foundation has funded an HIV/AIDS Resource
Document at the Global Reporting Initiative (GRI). Companies such as Proctor &
Gamble and Ford Motor Company have effectively used this reporting standard.vi
In 2004, 98% of Coca-Cola shareholders approved a similar resolution.
Coca-Cola's subsequent report notes, "the moral and business imperatives are of
equal importance" in responding to HIV/AIDS.vii
These companies' experience demonstrates such reports need not be onerous. In
our opinion, shareholders must fully understand the threats posed by these
diseases to make informed assessments of our company's value.
We urge a vote FOR this resolution.
-----FOOTNOTES-----
i UNAIDS State of the Epidemic 2005; and Global Fund to Fight AIDS, TB & Malaria
Status Report 2005.
ii Council on Foreign Relations HIV and National Security 2005; and WHO Roll
Back Malaria website.
iii Business and HIV/AIDS In Asia: Pushing Back The Tide. World Economic Forum
2005. http://www.weforum.org/pdf/Initiatives/GHI Asia Aids Report05.pdf
iv UBS and F&C Asset Management HIV/AIDS Beyond Africa 2005.
v Survey conducted on behalf of the Global Business Coalition on HIV/AIDS, 2004.
vi Global Reporting Initiative website; Ford Motor Company HIV/AIDS Report 2005;
and Proctor & Gamble HIV/AIDS In South Africa 2005.
vii Coca-Cola AIDS in Africa 2004 and correspondence with Coca-Cola investor
relations.
[APPENDIX5]
November 14, 2005
Clarence P. Cazalot, Jr.
Chief Executive Officer
Marathon Oil Corp.
5555 San Felipe Road
Houston, TX 77056-2723
Re: Shareholder Proposal for 2006 Annual Meeting
Dear Mr. Cazalot:
Catholic Healthcare West (CHW) is a health care delivery system serving
communities in the western United States. As a religiously sponsored
organization, CHW seeks to reflect its values, principles and mission in its
investment decisions.
Catholic Healthcare West has held the required number of shares for at least a
year Verification of ownership is enclosed with this letter.
We present the attached resolution for inclusion in the proxy statement for
action at the annual meeting in 2006 in accordance with rule 14a-8 of the
general rules and regulations of the Securities and Exchange Act of 1934. We
request that Catholic Healthcare West be listed as a sponsor of this resolution
in the company proxy statement. There will be a representative present at the
annual meeting to present this resolution as required by SEC rules. We are
filing this resolution along with other concerned investors. Jim Gunning,
Unitarian Universalist Association.
We would welcome dialogue with representatives of our company, which might lead
to withdrawal of the resolution prior to the 2006 annual meeting.
Sincerely,
/s/
Susan Vickers, RSM
VP Community Health
Encl.
Cc: Jim Gunning, Unitarian Universalist Association Dan Rosan, ICCR
[APPENDIX6]
REPORT RELATED TO GLOBAL HIV/AIDS-TB-MALARIA PANDEMICS
Resolved:
Shareholders request that our Board review the economic effects of the HIV/AIDS,
tuberculosis and malaria pandemics on the company's business strategy, and its
initiatives to date, and report to shareholders within six (6) months following
the 2006 annual meeting. This report, developed at reasonable costs and omitting
proprietary information, will identify the impacts of these pandemics on the
company.
Supporting Statement:
Scope of the Pandemics
In 2004, 39.4 million were infected with HIV, an all-time high, and 3.1 million
died from the disease. While two-thirds of global HIV cases remain in
sub-Saharan Africa, infections are rising in every region of the world. India,
for example, now has at least 5 million people living with HIV. In addition,
tuberculosis kills 2 million per year and malaria a further million. India and
Russia have the steepest increases in HIV infection and are highly exposed to
malaria and tuberculosis, respectively.i
The economic impact of these diseases can be immense. According to the Council
on Foreign Relations, eleven African countries will lose over 10% of their
workforces by the end of 2006, "an astounding figure that implies stark economic
consequences." Malaria alone is responsible for a 'growth penalty' of up to 1.3%
of GNP per year in some countries.ii
The World Economic Forum calls AIDS "a dark cloud hanging over" Asia's economy
and warns "most Asian firms lack clear information on which specific areas of
their business HIV/AIDS is likely to affect." iii
Effects On Our Company
We believe that HIV/AIDS, Tuberculosis and Malaria can materially impact the
emerging markets in which our company operates.
A recent report by UBS and F&C Asset Management found, "There is sufficient
evidence to suggest that the presence of HIV/AIDS in the workplace adversely
affects company profit margins." In some cases "the impact of HIV/AIDS on
profitability can be substantial." iv
Consumers increasingly expect action from companies. One US consumer attitude
survey found that 71% believed companies should be "actively involved in
fighting AIDS." v
Corporate Leaders are Emerging
Proponents concur with the UBS / F&C report stating: "We believe any company
operating in, or looking to expand into, areas of HIV prevalence should, at a
minimum, be able to demonstrate that it has considered and evaluated the
possible effects of the disease on its operations."
Several large-cap firms are making reporting on infectious diseases best
practice. The Bill & Melinda Gates Foundation has funded an HIV/AIDS Resource
Document at the Global Reporting Initiative (GRI). Companies such as Proctor &
Gamble and Ford Motor Company have effectively used this reporting standard.vi
In 2004, 98% of Coca-Cola shareholders approved a similar resolution.
Coca-Cola's subsequent report notes, "the moral and business imperatives are of
equal importance" in responding to HIV/AIDS.vii
These companies' experience demonstrates such reports need not be onerous. In
our opinion, shareholders must fully understand the threats posed by these
diseases to make informed assessments of our company's value.
We urge a vote FOR this resolution.
-----FOOTNOTES-----
i UNAIDS State of the Epidemic 2005; and Global Fund to Fight AIDS, TB & Malaria
Status Report 2005.
ii Council on Foreign Relations HIV and National Security 2005; and WHO Roll
Back Malaria website.
iii Business and HIV/AIDS In Asia: Pushing Back The Tide. World Economic Forum
2005. http://www.weforum.org/pdf/Initiatives/GHI Asia Aids Report05.pdf
iv UBS and F&C Asset Management HIV/AIDS Beyond Africa 2005.
v Survey conducted on behalf of the Global Business Coalition on HIV/AIDS, 2004.
vi Global Reporting Initiative website; Ford Motor Company HIV/AIDS Report 2005;
and Proctor & Gamble HIV/AIDS In South Africa 2005.
vii Coca-Cola AIDS in Africa 2004 and correspondence with Coca-Cola investor
relations.
[APPENDIX7]
November 15, 2005
Mr. Clarence P. Cazalet, Jr., Chairman and CEO
Marathon Oil Corporation
5555 San Felipe Road
Houston, TX 770056-2723
Dear Mr. Cazalet, Jr.,
The Congregation of the Sisters of Charity of the Incarnate Word, Houston looks
for social and environmental as well as financial accountability in its
investments. We are particularly concerned about the financial impact of the
HIV/AIDS panademic in Africa, Asia and other emerging markets.
Therefore, I am authorized to notify you of our intention to submit the
shareholder proposal with Unitarian Universalist Association. I submit it for
inclusion in the proxy statement for consideration and action by the
shareholders at the next meeting in accordance withy Rule 14(a)(8) of the
General Rules and Regulations of the Securities and Exchange act of 1934. We
hope that the company will be willing to dialogue with the filers about this
proposal. Please note that the contact person for this resolution will be Mr. J
Gunning if you believe that dialogue might be helpful. His telephone number is
201-836-5901.
Our portfolio custodian will send you a letter verifying that we are beneficial
owners of at least $2,000 worth of common stock in Unitarian Universalist
Association. It is our intention to keep these shares in our portfolio at least
until after the annual meeting.
Sincerely,
/s/
Sister Lillian Anne Healy, CCVI
Director of Corporate Social Responsibility
Enclosure
/jch
Cc: J. Gunning, Unitarian Universalist Association Dan Rosan, ICCR
[APPENDIX8]
REPORT RELATED TO GLOBAL HIV/AIDS-TB-MALARIA PANDEMICS
Resolved:
Shareholders request that our Board review the economic effects of the HIV/AIDS,
tuberculosis and malaria pandemics on the company's business strategy, and its
initiatives to date, and report to shareholders within six (6) months following
the 2006 annual meeting. This report, developed at reasonable costs and omitting
proprietary information, will identify the impacts of these pandemics on the
company.
Supporting Statement:
Scope of the Pandemics
In 2004, 39.4 million were infected with HIV, an all-time high, and 3.1 million
died from the disease. While two-thirds of global HIV cases remain in
sub-Saharan Africa, infections are rising in every region of the world. India,
for example, now has at least 5 million people living with HIV. In addition,
tuberculosis kills 2 million per year and malaria a further million. India and
Russia have the steepest increases in HIV infection and are highly exposed to
malaria and tuberculosis, respectively.i
The economic impact of these diseases can be immense. According to the Council
on Foreign Relations, eleven African countries will lose over 10% of their
workforces by the end of 2006, "an astounding figure that implies stark economic
consequences." Malaria alone is responsible for a 'growth penalty' of up to 1.3%
of GNP per year in some countries.ii
The World Economic Forum calls AIDS "a dark cloud hanging over" Asia's economy
and warns "most Asian firms lack clear information on which specific areas of
their business HIV/AIDS is likely to affect." iii
Effects On Our Company
We believe that HIV/AIDS, Tuberculosis and Malaria can materially impact the
emerging markets in which our company operates.
A recent report by UBS and F&C Asset Management found, "There is sufficient
evidence to suggest that the presence of HIV/AIDS in the workplace adversely
affects company profit margins." In some cases "the impact of HIV/AIDS on
profitability can be substantial." iv
Consumers increasingly expect action from companies. One US consumer attitude
survey found that 71% believed companies should be "actively involved in
fighting AIDS." v
Corporate Leaders are Emerging
Proponents concur with the UBS / F&C report stating: "We believe any company
operating in, or looking to expand into, areas of HIV prevalence should, at a
minimum, be able to demonstrate that it has considered and evaluated the
possible effects of the disease on its operations."
Several large-cap firms are making reporting on infectious diseases best
practice. The Bill & Melinda Gates Foundation has funded an HIV/AIDS Resource
Document at the Global Reporting Initiative (GRI). Companies such as Proctor &
Gamble and Ford Motor Company have effectively used this reporting standard.vi
In 2004, 98% of Coca-Cola shareholders approved a similar resolution.
Coca-Cola's subsequent report notes, "the moral and business imperatives are of
equal importance" in responding to HIV/AIDS.vii
These companies' experience demonstrates such reports need not be onerous. In
our opinion, shareholders must fully understand the threats posed by these
diseases to make informed assessments of our company's value.
We urge a vote FOR this resolution.
-----FOOTNOTES-----
i UNAIDS State of the Epidemic 2005; and Global Fund to Fight AIDS, TB & Malaria
Status Report 2005.
ii Council on Foreign Relations HIV and National Security 2005; and WHO Roll
Back Malaria website.
iii Business and HIV/AIDS In Asia: Pushing Back The Tide. World Economic Forum
2005. http://www.weforum.org/pdf/Initiatives/GHI Asia Aids Report05.pdf
iv UBS and F&C Asset Management HIV/AIDS Beyond Africa 2005.
v Survey conducted on behalf of the Global Business Coalition on HIV/AIDS, 2004.
vi Global Reporting Initiative website; Ford Motor Company HIV/AIDS Report 2005;
and Proctor & Gamble HIV/AIDS In South Africa 2005.
vii Coca-Cola AIDS in Africa 2004 and correspondence with Coca-Cola investor
relations.
[INQUIRY LETTER]
January 13, 2006
Securities & Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Att: Mark Vilardo, Esq.
Office of the Chief Counsel
Division of Corporation Finance
Re: Shareholder Proposal Submitted to Marathon Oil Corporation
Via fax 202-772-9201
Dear Sir/Madam:
I have been asked by the Unitarian Universalist Association, the Board of
Pensions of the Evangelical Lutheran Church in America, Catholic Healthcare West
and the Congregation of the Sisters of Charity of the Incarnate Word (who are
hereinafter collectively referred to as the "Proponents"), each of which is the
beneficial owner of shares of common stock of Marathon Oil Company (hereinafter
referred to either as "Marathon" or the "Company"), and who have jointly
submitted a shareholder proposal to Marathon, to respond to the letter dated
December 7, 2005, sent to the Securities & Exchange Commission by the Company,
in which Marathon contends that the Proponents' shareholder proposal may be
excluded from the Company's year 2006 proxy statement by virtue of Rules
14a-8(i)(7) and 14a-8(i)(11).
I have reviewed the Proponents' shareholder proposal, as well as the aforesaid
letter sent by the Company, and based upon the foregoing, as well as upon a
review of Rule 14a-8, it is my opinion that the Proponents' shareholder proposal
must be included in Marathon's year 2006 proxy statement and that it is not
excludable by virtue of either of the cited rules.
The proposal requests the Company to report on the Company's response to the
HIV/AIDS, tuberculosis and malaria pandemics epidemics which are, as is well
known, rampant in sub-Sahara Africa.
BACKGROUND
Marathon's Sub-Sahara operations are important and extensive. It appears from
marathon's 10-K for 2004 that the Company is highly dependent on Sub-Sahara
Africa for production of hydrocarbons, and that that dependence will increase in
the future. Thus, in the portion of Items 1 and 2 devoted to "Exploration and
Production", which appears on pages 1-10 of the Company's 10-K, reference is
made to Equatorial Guinea, Gabon or West Africa on every page. The section
begins by noting that Angola and Equatorial Guinea are two of the five nations
in which the Company's "principal exploration activities" occur (along with US,
Canada and Norway). Equatorial Guinea and Gabon are two of the seven nations
hosting the Company's "principal development and production activities".
Altogether, sub-Sahara nations are three of the nine nations mentioned in the
introduction, which notes that, in addition, Marathon is "also pursuing
opportunities in north and west Africa and in the Middle East". More detailed
references to the Companies sub-Sabaran activities are to be found on pages 2-3,
where it is revealed that of the 10 "discoveries" made word-wide in 2004,
one-half (5) were in either Equatorial Guinea or Angola (as against three in the
US). Other references to sub-Saharan activities are to be found on pages 5 and
6. On the latter page, we observe from the table that of the "Estimated
Quantities of Net Proved Oil and Gas Reserves", some 42.5% of the combined
proved reserves (both developed and undeveloped) are in West Africa (484/1139)
as opposed to 36.7% in the US (418/1139), 17.4% in Europe (primarily Norway)
(198/1139) and 3.4% elsewhere (39/1139). Even more significant for the future of
the Company is the fact that 56.3% (242/430) of the proved but undeveloped
reserves are in West Africa (as opposed to 19.1% in the US, 21.9% in Europe and
2.8% elsewhere). Other West Africa discussions are on pages 7, 8, 9, 10 and 35.
In addition, in the portion (page 45) of the 10-K discussing capital
expenditures, Marathon notes that it expects to spend almost one-half billion
dollars in 2005 alone for "the ongoing construction of the LNG plant in
Equatorial Guinea". Already, 18.6% of the Company's worldwide assets, including
refining and marketing as well as exploration, are in Equatorial Guinea. (See
Footnote 8 to the Company's Financial Statements, page F-22 of the 10-K.) In
contrast, in 2002 only 8.6% of the Company's worldwide assets were located in
that country. In light of the construction budget, one can only expect that
percentage to continue to increase. Indeed, on page F-37 the Company reports
(see table) that its contract commitments to acquire property totaled more than
a billion dollars as of December 31, 2004, as compared with $565 million the
year before and that "the $529 million increase is primarily due to contractual
commitments related to the Equatorial Guinea LNG project." When the two
remaining West Africa countries (Gabon and Angola) are included, it appears that
the total capitalized costs (net of depreciation) in West Africa already
constitute 24.7% of the world-wide figure. (See table on page F-41 of the 10-K.)
In addition, of the four "major exploration activities" discussed (pages 45-46),
two (Angola and Equatorial Guinea) are in West Africa. Of the total costs
incurred for "Property Acquisition, Exploration and Development" for the three
years ended December 31, 2004, some 36.4% were spent in West Africa (1470/4036)
as compared with 32.2% in the US (1299/4036), 16.7% in Europe (676/4036) and
14.6% elsewhere (591/4036). (See table page F-41 of the 10-K).
Although these figures indicate a rapid ramping up of the Company's West Africa
activities, the positive results of which will impact future bottom lines, the
Company is already deriving a significant portion (almost 16%) of its production
profits from Africa (some $162,000,000 in 2005) (up from $76,000,000, less than
12% of profit, two years earlier). (See table page F-42 of the 10-K.)
In summary, Marathon's operations in sub-Sahara Africa are already very
important to the Company and will soon become crucial to it.
RULE 14a-8(i)(7)
BACKGROUND RE PANDEMIC
In order for a shareholder proposal to be excludable by virtue of Rule
14a-8(i)(7), the proposal must not only pertain to a matter of ordinary company
business, but it must also fail to raise a significant policy issue. Thus, Rel
34-40018 (May 21, 1998) states:
However, proposals relating to such matters but focusing on sufficiently
significant social policy issues... generally would not be considered to be
excludable, because the proposals would transcend the day-to-day business
matters and raise policy issues so significant that it would be appropriate for
a shareholder vote.
Clearly, the worldwide AIDS pandemic raises such a policy issue for companies
with extensive sub-Saharan operations.
Had there been any question as to the seriousness of the underlying social
problem caused by the pandemic, it was laid to rest by President Bush's State of
the Union message delivered January 28, 2003. In that speech he made the
combating of AIDS in sub-Sahara Africa one of only a couple of new initiatives
announced, calling for a $ 15 billion program over five years, saying:
Today, on the continent of Africa, nearly 30 million people have the AIDS virus
including three million children under the age of 15. There are whole countries
in Africa where more than one-third of the adult population carries the
infection...
And to meet a severe and urgent crisis abroad, tonight I propose the Emergency
Plan for AIDS Relief, a work of mercy beyond all current international efforts
to help the people of Africa.
In recent sessions of Congress numerous bills have been, introduced that were
designed to alleviate the crisis, a crisis that is taking place primarily in the
third world, and especially in sub-Saharan Arica. These concerns culminated in
the passage by the 108th Congress of H.R. 1298 (The "UNITED STATES LEADERSHIP
AGAINST HIV/AIDS, TUBERCULOSIS, AND MALARIA ACT OF 2003"), which became P.L.
108-25 on May 28, 2003. (The final version of the bill had been passed by voice
vote in the Senate on May 15, 2003 (149 Cong. Rec. S 6475 at 6500) and
subsequently by voice vote in the House on May 21, 2003 (Cong. Rec. H 4375 at
4382. Note that in Section 2 of the Act, which sets forth the Congressional
Findings which underlie the Act, Finding 22F. states that the United States can
enhance the effectiveness of governmental action by "encouraging active
involvement of the privare sector, including businesses".
Earlier, in the 107th Congress, on December 11, 2001, the House had passed by
voice vote H 2069, entitled the "GLOBAL ACCESS TO HIV/AIDS PREVENTION,
AWARENESS, EDUCATION, AND TREATMENT ACT OF 2001", and on July 12, 2002, the
Senate had passed (by unanimous consent) an amended version by substituting S
2525 ("UNITED STATES LEADERSHIP AGAINST HIV/AIDS, TUBERCULOSIS, AND MALARIA ACT
OF 2002") and S 2649 ("INTERNATIONAL AIDS TREATMENT AND PREVENTION ACT OF
2002"), each of which had been introduced by the majority leader, Senator Frist
(Senator Frist had also introduced two other bills on the same subject in the
107th, Congress, S 1032 "INTERNATIONAL INFECTIOUS DISEASES CONTROL ACT OF 2001"
and S 15 "UNITED STATES LEADERSHIP AGAINST HIV/AIDS, TUBERCULOSIS, AND MALARIA
ACT OF 2002". A total of some thirty Senators had cosponsored one or more of
these bills.) However, the 107th Congress never reconciled the House and Senate
versions.
Attached as Appendix A are the remarks that Senator Frist made in connection
with his introduction of S 1032 and which appeared in the Congressional Record
of June 13, 2001. (See 107th Cong 1st Sess, 147 Cong Rea S 6226.)
LEGAL BASIS AND PRECEDENT
In light of the concems expressed by the President and the Congress, there can
be no doubt that a shareholder proposal concerning AIDS, TB and Malaria
submitted to a company with extensive sub-Saharan operations raises important
policy issues with respect to that registrant. In the words of Senator Frist,
his bill addressed "the most pressing moral, humanitarian and public health
crisis of modern times".
In light of the significant policy issues raised for issuers by the pandemic, it
is not at all surprising that the Staff has held that a shareholder proposal
addressed to an issuer that does not manufacture drugs for Aids, for TB or for
malaria nevertheless cannot be excluded under (i)(7). Johnson & Johnson
(February 7, 2003) ("proposal raises significant social policy issues that are
beyond the ordinary business operations of Johnson & Johnson" despite the fact
that the registrant had stated that it made no drugs for the three diseases).
Similarly, the Staff has recognized that the three pandemics affecting
sub-Sahara Africa raise such important policy issues that, for non-drug company
registrants that operate in that region, shareholder proposals relating to the
pandemics raise such important policy questions that the issue becomes, in the
words of(i)(5) "otherwise significantly related to the company's business".
Pepsico, Inc (March 4, 2003); Johnson & Johnson (February 7, 2003); Caterpillar,
Inc (January 3, 2003). Logically, if a social policy issue is significantly
related to the business of an issuer under (i)(5) because it raises a
significant non-economic issue, surely it similarly raises a significant policy
issue under (i)(7).
In an attempt to evade the force of previous Staff determinations about the
importance of the pandemic to issuers with sub-Sahara operations, the Company
has attempted to characterize the Proponents' shareholder proposal as a "risk
evaluation" proposal. Nothing could be further from the truth. The Staff has
helpfully described what they consider to be a risk proposal as one where "the
proposal and supporting statement focus on the company engaging in an internal
assessment of the risks or liabilities that the company faces as a result of its
operations". (See Staff Legal Bulletin No. 14C (June 28, 2005.)) There is no
such focus in the Proponents' shareholder proposal. On the contrary, what the
Proponents' shareholder proposal asks for, in essence, is that the Company
describe what it is doing to alleviate the suffering of the population in the
area (sub-Sahara Africa) where it has many of its most important operations. The
two letters relied upon by the Company. American International Group, Inc.
(February 19, 2004) and Texas Instruments Incorporated (January 28, 2005) are
not relevant since in each case there was no evidence that the registrant had
any significant operations in sub-Sahara Africa. Consequently, any impacts of
the pandemics were theoretical and hypothetical. In those circumstances, the
proposals submitted to those issuers might properly be deemed to be requesting
them to evaluate risks. In contrast, the Proponents' shareholder proposal calls
on Marathon to report to the shareholders on the initiatives that it is taking
to alleviate suffering in the geographic areas in which it actually operates. No
assessment of potential liabilities is called for.
Finally, the Proponents' shareholder proposal does not "micro-manage" the
Company. It does not prescribe what the requested report should contain and it
does not set forth any prescription for the Company to follow. There is
therefore no possibility that the proposal probes "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" See Rel 34-40018 (May 21, 1998); Rel 34-12999 (Nov
22, 1976).
For the foregoing reasons, the Proponent's shareholder proposal is not
excludable by virtue of Rule 14a-8(i)(7).
RULE 14a-8(i)(11)
The Proponents do not intend, and never have intended, that more than one
shareholder proposal appear in the Company's proxy statement. On the contrary,
they intended to all be co-sponsors of the proposal submitted by the Unitarian
Universalist Association, and not to be independent sponsors of four separate
proposals.
Only one proposal, co-sponsored by four institutions, has been submitted to the
Company. This is evident from the various letters that were sent to the Company
by the Proponents. The "principal filer" is the Unitarian Universalist
Association, which in its letter to Marathon submitting the shareholder proposal
states that its contact person in the matter is Mr. Jim Gurming. The remaining
co-sponsors of the shareholder proposal make explicit reference to the fact that
they are co-filers of the shareholder proposal with the Unitarian Universalist
Association. Thus, the letter to the Company from the Board of Pensions of the
Evangelical Lutheran Church in America specifically states: "The Unitarian
Universalist Association (UUA) is the primary filer on this resolution."
Similarly, the Congregation of the Sisters of Charity of the Incarnate Word's
letter to Marathon states: "" I am authorized to notify you of our intension to
submit the shareholder proposal with Unitarian Universalist Association." So,
too, the letter to the Company from Catholic Healthcare West not only makes
reference to "filing this resolution with other concerned investors", but makes
explicit reference not only to the Unitarian Universalist Association, but also
to Mr. Jim Gunning, the individual that the Unitarian Universalist Association
had, in its own letter to the Company, notified Marathon was its contact person
in the matter (and who was familiar to the Company, having previously met with
Marathon on this very issue).
It is therefore factually apparent that only one shareholder proposal has been
submitted to Marathon, which shareholder proposal is co-sponsored by four
separate institutions. Under these circumstances, only one shareholder proposal
is to be placed in the proxy statement, but the Company must recognize all four
co-sponsors of the proposal. The Staff has explicitly recognized that proposals
can be co-sponsored by more than one shareholder. See Staff Legal Bulletin No.
14C, Section H (June 28, 2005); Staff Legal Bulletin No. 14, Section B.15 (July
13, 2001).
In conclusion, we request the Staff to inform the Company that the SEC proxy
rules require denial of the Company's no action request. We would appreciate
your telephoning the undersigned at 941-349-6164 with respect to any questions
in connection with this matter or if the staff wishes any further information.
Faxes can be received at the same number. Please also note that the undersigned
may be reached by mail or express delivery at the letterhead address (or via the
email address).
Very truly yours,
Paul M. Neuhauser
Attorney at Law
cc: Richard J. Kolencik
Proponents
Sister Pat Wolf
[STAFF REPLY LETTER]
January 23, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Marathon Oil Corporation Incoming letter dated December 7, 2005
The proposal requests that the board of directors review and report to
shareholders on the economic effects of the HIV/AIDS, tuberculosis and malaria
pandemics on the company's business strategy and initiatives to date.
There appears to be some basis for your view that Marathon Oil may exclude the
proposal under rule 14a-8(i)(7), as relating to Marathon Oil's ordinary business
operations (i.e., evaluation of risk). Accordingly, we will not recommend
enforcement action to the Commission if Marathon Oil omits the proposal from its
proxy materials in reliance on rule 14a-8(i)(7). In reaching this position, we
have not found it necessary to address the alternative basis for omission upon
which Marathon Oil relies.
Sincerely,
/s/
Mark F. Vilardo
Special Counsel
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