Company Name: PG&E Corp.
Public Availability Date: February 14, 2006
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 16, 2005
Via Federal Express
U.S. Securities and Exchange Commission
Division of Corporate Finance
100 F Street, N.E.
Washington, D.C. 20549
Re: Shareholder Proposal of Simon Levine
Ladies and Gentlemen:
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), PG&E Corporation requests confirmation that the staff of
the Division of Corporation Finance (the "Staff") of the Securities and Exchange
Commission (the "Commission") will not recommend any enforcement action if, in
reliance on certain provisions of Rule 14a-8, PG&E Corporation excludes the
shareholder proposal and accompanying supporting statement ("Proposal")
described below from the proxy statement, form of proxy and other proxy
materials for its 2006 Annual Meeting of Shareholders (the "2006 Proxy
Materials"). The Proposal was submitted by Simon Levine, who has designated Mr.
John Chevedden to act on his behalf with respect to the Proposal.
In accordance with Rule 14a-8(j), enclosed are six copies of this letter and the
Proposal. A copy of this letter also is being sent to John Chevedden and Simon
Levine, as notice of the Corporation's intent to omit the Proposal from the
Corporation's 2006 Proxy Materials.
For the reasons set forth below, PG&E Corporation intends to omit the Proposal
from the 2006 Proxy Materials.
I. BACKGROUND
On November 15, 2005, PG&E Corporation received a letter dated October 29, 2005,
from Mr. Levine, containing the following proposal for inclusion in the 2006
Proxy Materials.
RESOLVED: Directors to be Elected by Majority Vote. Shareholders request that
our Board initiate an appropriate process to amend our Company's governance
documents (charter or bylaws if practicable) to provide that director nominees
be elected or re-elected by the affirmative vote of the majority of votes cast
at an annual shareholder meeting.
II. REASONS FOR OMISSION
The Proposal, if implemented, would cause the Corporation to violate state laws
and the Corporation would lack the authority or power to implement the Proposal.
The Proposal may be excluded pursuant to Rule 14a-8(i)(2 and Rule 14a-8(i)(6).
Rule 14a-8(i)(2) provides that an issuer may omit a shareholder proposal from
the issuer's proxy materials if the proposal would, if adopted, cause the issuer
to violate any state, federal or foreign law. Rule 14a-8(i)(6) permits an issuer
to omit a shareholder proposal if the issuer would lack the power or authority
to implement the proposal.
The Corporation is incorporated in California. Section 708(c) of the California
Corporation Code requires that directors be elected by plurality vote, and
California law does not permit a company to adopt majority voting for director
elections.1 The law reads as follows:
In any election of directors, the candidates receiving the highest number of
affirmative votes of the shares entitled to be voted for them up to the number
of directors to be elected by such shares are elected; votes against the
director and votes withheld shall have no legal effect.
If the Corporation were to adopt majority voting for directors, the Corporation
would be in violation of California law, making the Proposal is impossible to
implement.
In recent No-Action Letters, the Staff agreed that several Delaware2
corporations could exclude shareholder proposals recommending that companies
with plurality director voting standards take actions consistent with a majority
voting standard for directors. See, e.g., Mattel, Inc., available February 27,
2005, and Occidental Petroleum, available February 3, 2005 (Staff agreed that
companies could rely on Rule 14a-8(i)(2) to exclude proposals recommending that
the companies' proxy materials permit shareholders to vote "AGAINST" a director,
which would have conflicted with the plurality voting standard in existence at
those companies and cause those companies' proxy statements to violate SEC Rule
14a-9.) The Staff also recently agreed that a company could rely on Rule
14a-8(i)(2) to exclude a proposal that, if implemented, would have caused the
company to violate California state law (see Safeway Inc., available March 28,
2005, where the proposal, if implemented, would have required the company to
violate federal and state employment laws).
Because the Proposal would require the Corporation to adopt a standard for
director voting which is not permitted under California law, the Proposal would
require the Corporation to violate California state law relating to director
elections, and therefore is beyond the Corporation's authority to implement.
Exclusion of the Proposal on these grounds would be consistent with Staff
positions stated in recent No-Action Letters.
CONCLUSION
Based on the foregoing, PG&E Corporation believes, and it is my opinion as an
attorney registered with the California State Bar, that the Proposal is
excludable from the Corporation's 2006 Proxy Materials under Rule 14a-8(i)(2)
and Rule 14a-8(i)(6). My opinion makes no assumptions about the operation of the
Proposal that are not called for by the language of the Proposal.
The Corporation respectfully requests confirmation that the Staff will not
recommend any enforcement action if the Proposal is excluded. If the Staff does
not concur with this position, the Corporation would appreciate an opportunity
to confer with the Staff concerning these matters before the Staff issues its
Rule 14a-8 response.
PG&E Corporation intends to release definitive copies of its 2006 Proxy
Materials to its shareholders on or about March 14, 2006, and plans to submit a
draft of the 2006 Proxy Materials to its printer by March 1, 2006. Accordingly,
the Corporation would appreciate the Commission's response as promptly as
possible.
If you have any questions or would like any additional information regarding the
foregoing, please do not hesitate to call me at (415) 817-8201, or Frances Chang
at (415) 817-8207.
If possible, I would appreciate it if the Staff would send a copy of its
response to this request to me by fax at (415) 817-8225 when it is available.
The Corporation will promptly forward the response to Mr. Chevedden and Mr.
Levine. Mr. John Chevedden's fax number is (310) 371-7872.
Please confirm this filing by returning a receipt-stamped copy of this letter.
An extra copy of this letter and a pre-addressed postage paid envelope are
enclosed.
Thank you for your attention to this matter.
Very truly yours,
/s/
Gary P. Encinas
Enclosures
cc: Simon Levine
John Chevedden (via facsimile (310) 371-7872)
Linda Y.H. Cheng
-----FOOTNOTES-----
1 Many other state corporation laws permit a company to replace a plurality
voting standard with majority voting for directors, by amending the company's
charter or bylaws. For example, under Section 216 of the Delaware General
Corporations Law, "[i]n the absence of [any] specification in the certificate of
incorporation or bylaws of the corporation ... directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors."
2 The Corporation has been unable to find existing No-Action Letters that apply
Rules 14a-8(i)(2) and 14a-8(i)(6) to proposals recommending that a California
corporation implement majority voting for directors.
[INQUIRY LETTER]
Simon Levine
960 Shorepoint Ct., No. 306
Alameda, CA 94501
NOV 15 2005
Mr. Robert Glynn, Jr.
Chairman
PG&E Corporation (PCG)
One Market, Spear Tower, Suite 2400
San Francisco, CA 94105
PH: 415-267-7000
FX: 415-267-7267
Dear Mr. Glynn,
This Rule 14a-8 proposal is respectfully submitted in support of 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. This is the proxy for Mr. John Chevedden and/or his designee to act
on my behalf in shareholder matters, including this Rule 14a-8 proposal for the
forthcoming shareholder meeting before, during and after the forthcoming
shareholder meeting. Please direct all future communication to Mr. Chevedden at:
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278
PH: 310-371-7872
Your consideration and the consideration of the Board of Directors is
appreciated in support of the long-term performance of our company.
Sincerely,
/s/
Simon Levine
Date 10-29-05
cc: Linda Y.H. Cheng
Corporate Secretary
PH: 415-267-7070
FX: 415-267-7260
FX: 415-267-7268
[APPENDIX]
[November 15, 2005]
3Directors to be Elected by Majority Vote
Resolved: Directors to be Elected by Majority Vote. Shareholders request that
our Board initiate an appropriate process to amend our Company's governance
documents (charter or bylaws if practicable) to provide that director nominees
be elected or re-elected by the affirmative vote of the majority of votes cast
at an annual shareholder meeting.
This proposal requests that that a majority vote standard replace our Company's
current plurality vote. The new standard should provide that our director
nominees must receive a majority of the votes cast in order to be elected or
re-elected to our Board. To the fullest extent possible this proposal asks that
our directors not make any provision to override our shareholder vote and keep a
director in office who fails this criteria.
This proposal is not intended to unnecessarily limit our Board's judgment in
crafting the requested governance change. For instance, our Board should address
the status of incumbent directors who fail to receive a majority vote when
standing for election under a majority vote standard and whether a plurality
director election standard is appropriate in contested elections.
A Single Yes-Vote from Our 370 Million Shares Can Now Elect a Director
I believe our directors can be complacent under our present system because our
directors can now be elected with one yes-vote from our 370-plus million voting
shares. This is possible through our plurality voting.
Progress Begins with One Step
It is important to take one step forward and adopt the above RESOLVED statement
since our 2005 governance was not impeccable. For instance in 2005 it was
reported:
The Corporate Library (TCL) http://www.thecorporatelibrary.com/ a pro-investor
research firm rated our company:
"D" in Overall Board Effectiveness.
"D" in CEO Compensation.
"F" in Shareholder Responsiveness.
Overall Governance Risk Assessment=High
Poison pill: Our board adopted a policy requiring shareholder approval of
poison pills. And then paradoxically our board turned around and said that our
board could override our vote and adopt a poison pill nonetheless.
Cumulative voting was not allowed.
CEO compensation of $14 million was reported for our Chairman Mr. Glynn after
years of bankruptcy and a suspended dividend under his watch.
Fifty-four (54) shareholder proposals in 2005
Fifty-four (54) shareholder proposals on this topic won a significant 44%
average yes-vote in 2005 through late-September - especially good for a new
topic. The Council of Institutional Investors www.cii.org, whose members have $3
trillion invested, recommends adoption of this proposal topic. Additionally the
Council is sending letters asking the 1,500 largest U.S. companies to comply
with the Council's policy and adopt this topic.
Notes:
The above format is the format submitted and intended for publication.
Simon Levine, 960 Shorepoint Ct., No. 306, Alameda, CA 94501 submitted this
proposal.
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 advise the most convenient fax number and email address for the Corporate
Secretary's office.
[INQUIRY LETTER]
December 20, 2005
Division of Corporation Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington D.C. 20549
PG&E Corporation (PCG)
Shareholder Position on Company No-Action Request Rule 14a-8 Proposal: Simple
Majority Vote
Shareholder: Simon Levine
Ladies and Gentlemen:
This is an initial response to the PG&E December 16, 2005 no action request.
The no action request is at least incomplete on more than one point. The no
action request is a bare 4-page letter with no exhibits whatsoever - not even
the rule 14a-8 proposal. This is contrary to rule 14a-8.
The company letter claims that California law does not permit majority voting
for director elections. The proposal notes that, "Many other state corporation
laws permit a company to replace a plurality voting standard with majority
voting for directors, by amending the company's charter or bylaws."
The company rings the bell by stating that other states appear to preclude
majority voting yet have a replacement provision allowing majority voting. Yet
the company does not rule out this alternative in California law having once
rang the bell on this solution to the company's objection.
Furthermore the company calls attention to its inability to find any No-Action
Letter that supports its position in regard to simple majority voting for
directors and California law.
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 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:
Simon Levine
Gary Encinas<gary.encinas@pge-corp.com>
[STAFF REPLY LETTER]
February 14, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: PG&E Corporation Incoming letter dated December 16, 2005
The proposal requests that the board initiate the appropriate process to amend
PG&E's governance documents (charter or bylaws if practicable) to provide that
director nominees shall be elected or re-elected by the affirmative vote of the
majority of votes cast.
There appears to be some basis for your view that PG&E may exclude the proposal
under rule 14a-8(i)(2). We note that in the opinion of your counsel,
implementation of the proposal would cause PG&E to violate state law.
Accordingly, we will not recommend enforcement action to the Commission if PG&E
omits the proposal from its proxy materials in reliance on rule 14a-8(i)(2). In
reaching this position, we have not found it necessary to address the
alternative basis for omission upon which PG&E relies.
Sincerely,
/s/
Amanda McManus
Attorney-Adviser
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