Company Name: Pilgrim's Pride Corp.
Public Availability Date: November 6, 2006Document Sections:INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
September 21, 2006 U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549 RE: Pilgrim's Pride CorporationShareholder Proposal Submitted by People for the Ethical Treatment of Animals Ladies and Gentlemen: Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, on behalf of Pilgrim's Pride Corporation, a Delaware corporation (the "Company"), we hereby request confirmation that the Staff of the Securities and Exchange Commission (the "Commission") will not recommend enforcement action if, in reliance on Rule 14a-8, the Company excludes a proposal submitted by People for the Ethical Treatment of Animals ("PETA") from the proxy materials for the Company's 2007 Annual Meeting of Stockholders (the "2007 Proxy Materials"), which the Company expects to file in definitive form with the Commission on or about December 11, 2006. This letter sets forth the grounds upon which the Company deems exclusion of PETA's proposal (the "Proposal") to be proper. Pursuant to Rule 14a-8(j), enclosed herewith are six copies of the Proposal, this letter, and all attachments to this letter. A copy of this letter, with copies of all attachments, is being sent simultaneously to PETA, informing PETA of the Company's intention to omit the Proposal from its 2007 Proxy Materials. We would also be happy to provide you with a copy of each of the no-action letters referenced herein on a supplemental basis per your request. The Proposal The Company received a notice from PETA on August 17, 2006, submitting the Proposal for consideration at the Company's 2007 Annual Meeting of Stockholders. A full copy of the Proposal is attached as Exhibit A. The Proposal's resolution reads as follows: "NOW, THEREFORE, BE IT RESOLVED that shareholders request that the board of directors make transparent to shareholders the details of Pilgrim's Pride's evaluations of controlled-atmosphere killing. This report should be prepared by the end of July 2007 at a reasonable cost and should omit proprietary information." Bases for Exclusion of the Proposal The Company believes that the Proposal may be properly omitted from the 2007 Proxy Materials pursuant to Rule 14a-8 for the reasons set forth below: I. The Proposal may be properly excluded under Rule 14a-8(i)(12)(i) because it deals with substantially the same subject matter as a prior proposal that was included in the Company's 2006 proxy materials and, when previously submitted, the proposal did not receive the support necessary for resubmission. Rule 14a-8(i)(12)(i) permits the exclusion of a stockholder proposal dealing with "substantially the same subject matter as another proposal or proposals that has or have been previously included in the company's proxy materials within the preceding 5 calendar years" and the proposal received "less than 3% of the vote if proposed once within the preceding 5 calendar years ..." The Company included a proposal submitted by PETA (the "Previous Proposal") in its 2006 proxy materials filed on December 29, 2005. A full copy of the Previous Proposal as it appeared in the Company's 2006 proxy materials is attached hereto as Exhibit B. The Previous Proposal's resolution reads as follows: "RESOLVED: Shareholders request that the board of directors issue a report to shareholders by July 2006, prepared at reasonable cost and omitting proprietary information, on the feasibility of Pilgrim's Pride requiring its chicken and turkey suppliers to phase in controlled-atmosphere killing within a reasonable timeframe, with a focus on the animal welfare and economic benefits that this technology could bring to our company." Both the Previous Proposal and the Proposal are part of a series of numerous proposals submitted by PETA over the past three proxy seasons all regarding controlled-atmosphere killing. PETA has submitted stockholder proposals on controlled-atmosphere killing to companies such as ConAgra Foods, Inc., Wendy's International, Inc., Hormel Foods Corporation, Applebee's International, Inc., The Kroger Co., and Tyson Foods, Inc. The focus and substantive concern of both the Previous Proposal and the Proposal is controlled-atmosphere killing. Both the Previous Proposal and the Proposal focus on controlled-atmosphere killing as an alternative slaughter method to the USDA approved electric stunning method currently used by the Company and most of the rest of the U.S. chicken industry. Both the Previous Proposal and the Proposal describe the electric stunning method in detail, utilizing the exact same language such as "dumping", "shackling", "slitting their throats", and "scalding". Both proposals allege that the electric stunning method is painful for birds and that controlled-atmosphere killing is better for animal welfare. Both proposals allege that there are economic benefits to adopting controlled-atmosphere killing. Both proposals request that the board of directors issue a report to stockholders regarding controlled-atmosphere killing. Because the substantive concern of both proposals is the samei.e., controlled-atmosphere killingthe Previous Proposal and the Proposal are substantially similar for purposes of Rule 14a-8(i)(12). "Substantially the same subject matter," as that phrase is used in Rule 14a-8(i)(12), does not mean that the Previous Proposal and the Proposal must be identical in every respect. Although the predecessor to Rule 14a-8(i)(12) required a proposal to be "substantially the same proposal" as prior proposals, the Commission amended the rule in 1983. In SEC Release No. 34-20091 (August 16, 1983), the Commission explained the reason for and meaning of the revision, stating: The Commission believes that this change is necessary to signal a clean break from the strict interpretive position applied to the existing provision. The Commission is aware that the interpretation of the new provision will continue to involve difficult subjective judgments, but anticipates that those judgments will be based upon a consideration of the substantive concerns raised by a proposal rather than the specific language or actions proposed to deal with those concerns. While the Staff initially seemed to take a very restrictive view of the current version of Rule 14a-8(i)(12) (see, e.g., Procter & Gamble Co. (July 27, 1988), which dealt with live animal testing), more recently the Staff has made it clear that Rule 14a-8(i)(12) does not require that the proposals, or their subject matters, be identical in order for a company to exclude the later-submitted proposal. When considering whether a proposal deals with substantially the same subject matter, the Staff has increasingly focused on the "substantive concerns" raised by the proposal as the essential consideration, rather than the specific language or corporate action proposed to be taken. The Staff has thus concurred with the exclusion of proposals under Rule 14a-8(i)(12) when the proposal in question shares similar underlying social or policy issues with a prior proposal, even if the subsequent proposal recommended that the company take different actions or provide different reports as to some substantive concern. See Gillette Co. (February 25, 1993). For example, in Bristol-Myers Squibb Co. (February 6, 1996), the Staff permitted exclusion of a proposal recommending that the board of directors form a committee to formulate an educational plan to inform women of the possible abortifacient (abortion-causing) effects of any of the company's products because it dealt with substantially the same subject matter as prior proposals asking the company to refrain from giving charitable contributions to organizations that perform abortions. Despite the different actions requested and the different subject matters of the prior proposals (charitable contributions) and the proposal at issue (consumer education), the substantive concern of both proposals was abortion-related matters; thus the Staff concluded that the proposal at issue dealt with substantially the same subject matter as the proposals regarding the company's charitable contributions. Similarly, in both Medtronic, Inc. (June 2, 2005) and Bank of America Corp. (February 25, 2005), the Staff permitted the omission of proposals requesting that the companies list all of their political and charitable contributions on their websites. In prior proposals, shareholders had requested that the companies cease making charitable contributions. Again, despite the different actions requested and the different subject matters of the prior proposals (ceasing contributions) and the proposals at issue (disclosure of contributions), the substantive concern of both proposals was corporate contributions and thus the Staff concluded that the proposals at issue dealt with substantially the same subject matter. See also Dow Jones & Co., Inc. (December 17, 2004) (proposal requesting the company publish in its proxy materials information relating to its process of donations to a particular non-profit organization was excludable as it dealt with substantially the same subject matter as a prior proposal requesting an explanation of the procedures governing all charitable donations); Saks Inc. (March 1, 2004) (a proposal requesting the board of directors to implement a code of conduct based on International Labor Organization standards, establish an independent monitoring process and annually report on adherence to such code was excludable as it dealt with substantially the same subject matter as a prior proposal requesting a report on the company's vendor labor standards and compliance mechanism); Bristol-Myers Squibb Co. (February 11, 2004) (a proposal requesting the board review pricing and marketing policies and prepare a report on how the company will respond to pressure to increase access to prescription drugs was excludable because it dealt with substantially the same subject matter as prior proposals requesting the creation and implementation of a policy of price restraint on pharmaceutical products). More recently, in Abbott Laboratories (February 28, 2006), the Staff allowed the exclusion of a proposal by PETA requesting a report on the feasibility of amending the company's current policies regarding animal welfare to extend to contract laboratories. The Staff concurred that the proposal at issue involved the same substantive concernanimal testingas a previous proposal requesting that the Company commit to using only non-animal testing methods. Thus, under the Staff's interpretation of Rule 14a-8(i)(12), the proposals dealt with substantially the same subject matter. See also Bank of America Corp. (February 14, 2006) (a proposal recommending that the board of directors nominate at least 50% more director nominees than there are open board seats involved the same substantive concerns and thus substantially the same subject matter as proposals recommending that the board of directors nominate 100% more director nominees than there are open board seats). Here, the Proposal requests that the Company issue a report to shareholders on the Company's evaluations of controlled-atmosphere killing, while the Previous Proposal requested that the Company issue a report to shareholders on the feasibility of the Company requiring its chicken and turkey suppliers to phase in controlled-atmosphere killing. Whether the requested report is intended to review the feasibility of controlled-atmosphere killing or the Company's evaluation of controlled-atmosphere killing, the same substantive concern is addressed in both proposals. Despite the technically different actions requested by the proposals, both the Previous Proposal and the Proposal deal with the same substantive concern and thus substantially the same subject matter for purposes of Rule 14a-8(i)(12) controlled-atmosphere killing. Both proposals (whether in their respective resolutions, recitals, or supporting statements) argue that the Company should implement controlled-atmosphere killing and request reports regarding controlled-atmosphere killing, albeit by styling the reports requested differently. As evidenced in Exhibit C, the Previous Proposal received 0.4% of the vote at the Company's 2006 Annual Meeting of Stockholders.
1 Since the Previous Proposal failed to meet the required 3% threshold at the 2006 Annual Meeting of Stockholders and the other rule requirements are satisfied, the Proposal may be excluded from the 2007 Proxy Materials pursuant to Rule 14a-8(i)(12)(i). II. The Proposal may be properly excluded under Rule 14a-8(i)(7) because it relates to the conduct of the Company's ordinary business operations. Rule 14a-8(i)(7) permits the exclusion of a stockholder proposal that deals with matters relating to the conduct of the company's "ordinary business." For a proposal requesting the preparation and dissemination of a report to stockholders, the Staff consistently permits the exclusion of such a proposal under Rule 14a-8(i)(7) where the requested report involves matters which relate to the company's ordinary business operations. See SEC Release No. 34-20091 (August 16, 1983); Abbott Laboratories (March 9, 2006) (a proposal requesting 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 was excludable as it related to the company's ordinary business operations); Mead Corp. (January 31, 2001) (a proposal requesting that the board of directors report on the financial implications of environmental performance was excludable as it related to ordinary business operations). In SEC Release No. 34-40018 (May 21, 1998), the Commission explained that the "ordinary business" exclusion rests on two central considerations. The first consideration is that "[c]ertain tasks are so fundamental to management's ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight" and such proposals may therefore be excluded. The second consideration is "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." These considerations are consistent with the purpose of Rule 14a-8(i)(7). In SEC Release No. 34-12999 (November 22, 1976), the Commission explained that the purpose of the "ordinary business" exclusion is to exclude proposals on which "shareholders, as a group, would not be qualified to make an informed judgment ... due to their lack of business expertise and their lack of intimate knowledge of the [company's] business." The Commission further explained later that the purpose of the 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 shareholders meeting." SEC Release No. 34-40018 (May 21, 1998). See, e.g., Pfizer Inc. (January 28, 2005) (a proposal requiring that the Company make no more donations or contributions designated to promote animal testing was excludable). Similarly, proposals that potentially provide stockholders with any ability to second-guess management's decisions regarding ordinary business activities constitute an attempt to interfere with the day-to-day conduct of ordinary business operations. See PetSmart, Inc. (April 14, 2006). Here, the Proposal requests the preparation and dissemination of a report to stockholders which details the Company's evaluation of controlled-atmosphere killing as an alternative slaughter method to the USDA approved electric stunning method currently used by the Company and most of the rest of the U.S. chicken industry. The Company's evaluation of controlled-atmosphere killing is related to the Company's ordinary business operations for purposes of Rule 14a-8(i)(7). The Company is an international, vertically integrated poultry producer. As such, it controls the breeding, hatching, growing, processing, preparation, packaging and sale of its poultry products. The nature of the Company's business is complex, and in making the Company's processing, operational, and investment decisions, the Company's management regularly considers a wide variety of business factors and economic risks that may affect the Company's operations. The Company's management must evaluate a broad spectrum of factors and risks, none of which can readily be isolated from other factors. The Company's slaughter methods are no exception. Although the Proposal seems to suggest that controlled-atmosphere killing can be meaningfully evaluated in isolation, decisions regarding the Company's slaughter methods necessarily involve the evaluation of several factors and risks. Specifically, in evaluating controlled-atmosphere killing, management must consider, among other things, animal welfare, scientific research and studies, production methods used commercially both in the U.S. and internationally, food safety, production quality, product yields, production costs, ergonomics, labor costs, the safety of humans involved in the slaughter process, employee turnover, technical difficulties in operating equipment and procedures, environmental factors, government regulations and expected costs. Consequently, a report of the Company's evaluation of controlled-atmosphere killing would involve stockholders in scrutinizing a variety of day-to-day decisions made by the Company in managing its international operations. Stockholders as a group are less familiar with the variety of factors and risks that must be considered in such decision making. The Company's management is in a better position than the stockholders as a group to deal with these complex matters. In addition, not only would the report requested by the Proposal address the Company's ordinary business operations and is thus generally excludable, but since the Company has already evaluated and continues to evaluate controlled-atmosphere killing, the report requested by the Proposal would also offer stockholders an opportunity to second guess management's decisions regarding ordinary business operations. The Company's view is consistent with recent guidance provided by the Staff in Staff Legal Bulletin No. 14C (June 28, 2005). The Staff explains that while Rule 14a-8(i)(7) permits a company to exclude a proposal that deals with a matter relating to the company's ordinary business operations, the fact that a proposal relates to ordinary business matters does not conclusively establish that a company may exclude the proposal from its proxy materials. Proposals that relate to ordinary business matters but that focus on "sufficiently significant social policy issues ... would not be considered to be excludable, because the proposals would transcend the day-to-day business matters." In determining whether the focus of a proposal is a "sufficiently significant social policy issue", the Staff considers both the proposal and the supporting statement as a whole. To the extent that 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, the Staff concurs with the company's view that there is a basis for it to exclude the proposal under Rule 14a8(i)(7) as relating to an evaluation of risk. On the other hand, to the extent that a proposal and supporting statement focus on the company minimizing or eliminating operations, the Staff does not concur with the company's view that there is a basis for it to exclude the proposal under Rule 14a-8(i)(7). Staff Legal Bulletin No. 14C (June 28, 2005) (discussing in particular social policy issues of the environment and public health). Accordingly, in making the determination of whether a proposal is excludable as involving ordinary business operations when a social policy is involved, the Staff categorizes proposals into two groups: (1) requests for evaluations of risks and benefits, and (2) requests to minimize or eliminate operations. See CVS Corp. (March 3, 2006). While the Staff has found that proposals focusing on the humane treatment of animals and humane slaughter methods can raise "sufficiently significant social policy issues," see Wendy's Int'l Inc. (February 8, 2005) and Hormel Foods Corp. (November 10, 2005); the humane treatment of animals is not the focus of the Proposal at issue. Rather, the Proposal is similar to the proposal in Xcel Energy Inc. (April 1, 2003) in that it requests a report on management's evaluation of the risks and benefits of implementing a particular operational method of conducting an aspect of its business. In Xcel, the proposal requested a report disclosing the economic risks associated with the company's emissions of carbon dioxide and various other emissions, and the economic benefits of committing to a substantial reduction of those emissions related to its current business activities. The proposal, as pointed out by the Staff in Staff Legal Bulletin No. 14C, requested an evaluation of risks and benefits and thus was excludable as it involved ordinary business operations. This is in direct contrast to the proposal in Exxon Mobil Corp. (March 18, 2005), that requested a report on the potential environmental damage that would result from drilling for oil in protected areas and the implications of a policy of refraining from drilling in those areas. As pointed out by the Staff in Staff Legal Bulletin No. 14C, the Exxon proposal focused on the company refraining from drilling in protected areas. Unlike the Exxon proposal, the Proposal at issue does not focus on the Company eliminating or minimizing its current slaughter method, but rather on making transparent the Company's evaluation of the benefits, and correspondingly the risks, of controlled-atmosphere killing. For example, the recitals to the Proposal assert that the alternative method "reduces financial losses," "improves product quality and yield, "reduces labor costs," and reduces "carcass contamination," and then the Proposal requests a report on the details of the Company's evaluation of the alternative method. This is no different than in Xcel, where the recitals of the proposal discussed the problems surrounding air pollution and supported reducing emissions and then the proposal requested a report on the economic risks and benefits. Still, the Staff concurred that the focus of the proposal was an evaluation of risks and benefits and thus the proposal was excludable as an ordinary business operation even though the clear objective was to reduce emissions of carbon dioxide, sulfur dioxide and other emissions. Since the Proposal relates to the conduct of the Company's ordinary business operations and requests a report evaluating controlled-atmosphere killing as an alternative method (i.e., an evaluation of risks and benefits of an alternative method), the Proposal may be excluded from the 2007 Proxy Materials pursuant to Rule 14a-8(i)(7). Conclusion Based on the foregoing, the Company hereby respectfully requests your confirmation that the Staff will not recommend any enforcement action to the Commission if the Proposal is excluded from the 2007 Proxy Materials in reliance on Rules 14a-8(i)(12) and 14a-8(i)(7). If the Staff has any questions with respect to the foregoing, or if for any reason the Staff does not agree that the Company may exclude the Proposal from its 2007 Proxy Materials, please contact me at (214) 978-3095. I may also be reached by facsimile at (214) 978-3099 and would appreciate it if you would send your response to the Company by facsimile to that number. Very truly yours, Baker & McKenzie LLP /s/ Roger W. Bivans Enclosures cc: People for the Ethical Treatment of Animals c/o Matt Prescott 501 Front St. Norfolk, VA 23510 -----FOOTNOTES-----
1 Tabulation is as follows: votes cast for2,323,376 and votes cast against567,442,960. Pursuant to the Staff's position on counting votes for purposes of Rule 14a-8(i)(12), abstentions and broker non-votes were not included for purposes of the calculation. See Staff Legal Bulletin No. 14, Question F.4 (July 13, 2001).
[INQUIRY LETTER]
August 16, 2006 Richard A. Cogdill, EVP, CFO, Secretary, Treasurer, and Director
Pilgrim's Pride Corporation
110 South Texas Street
Pittsburg, TX 75686 Dear Mr. Cogdill: Attached you'll find People for the Ethical Treatment of Animals' (PETA) shareholder proposal, submitted for inclusion in the proxy statement for the 2007 annual meeting. Also enclosed is a letter from PETA's brokerage firm, Morgan Stanley, confirming ownership of 260 shares of Pilgrim's Pride Corporation's common stock acquired more two years ago. PETA has held these shares continuously for more than two years and intends to hold them through and including the date of the 2007 annual shareholders meeting. Please contact me if you need any further information. If Pilgrim's Pride Corporation will attempt to exclude any portion of this proposal under Rule 14a-8, please advise me within 14 days of your receipt of this proposal. I can be reached at 757-962-8264, or via e-mail at MattPrescott@peta.org. Thank you. Sincerely, /s/ Matt Prescott
Manager of Factory Farming Campaigns Enclosures: PETA's 2007 Shareholder resolution; Morgan Stanley letter Shareholder Resolution re Transparency on Movement Toward Controlled-Atmosphere Killing WHEREAS Pilgrim's Pride kills birds with electric stunning, which involves dumping and shackling live birds, shocking them in an electrified water bath, slitting their throats, and defeathering them in tanks of scalding-hot water; and WHEREAS Pilgrim's Pride suffers financial losses by using electric stunning: Birds suffer broken bones, bruising, and hemorrhaging when they are dumped and shackled. This decreases carcass quality and meat yield. Birds flap about, and many miss the stun baths entirely; those who are shocked are merely immobilized and still feel pain afterward. Many birds also miss the killing blades. This means that live birds enter the scalding tanks, which decreases yield (these carcasses are condemned) and increases contamination (live birds defecate in tanks). Workers handle live birds at each stage, exposing Pilgrim's Pride to greater legal and financial liabilities. (Reuters reported that Pilgrim's Pride's stock price immediately dropped by nearly 6 percentand by nearly 20 percent within 26 trading daysafter video footage was released in which workers stomped on live birds, spit tobacco into their eyes, and spray-painted their faces.) When CBS Evening News aired the video footage, Dan Rather said: "[T]here's no mistaking what [the video] depicts: cruelty to animals, chickens horribly mistreated before they're slaughtered...." WHEREAS controlled-atmosphere killing (CAK) is USDA-approved and reduces the financial losses of electric stunning while improving animal welfare: With CAK, birds are placed into chambers while they are still in their transport crates, where their oxygen is replaced with inert gasses (i.e., argon and nitrogen), efficiently and gently putting them "to sleep." CAK improves product quality and yield (birds suffer fewer broken bones and less bruising), shelf life (the decaying process is slowed down), and energy costs (refrigeration time and space needs are reduced). CAK reduces labor costs (better ergonomics mean less payout because of injury), carcass contamination (birds are dead when they are scalded, so they don't defecate in tanks), and the number of instances in which workers abuse birds (birds are dead before being handled). Every published review of CAKincluding one conducted by McDonald'sconcludes that it is superior to electric stunning with regard to animal welfare, as Dr. Temple Grandin, Dr. Ian Duncan, Dr. Mohan Raj, and other top industry advisors have also concluded. WHEREAS, although CAK is optimal for birds and profits, Pilgrim's Pride has yet to implement it anywhere. Rather, it makes vague statements alleging movement toward CAK (i.e., that the company "has evaluated, and continues to evaluate, CAK") yet has not shown the public or shareholders that it is doing anything toward that end; NOW, THEREFORE, BE IT RESOLVED that shareholders request that the board of directors make transparent to shareholders the details of Pilgrim's Pride's evaluations of controlled-atmosphere killing. This report should be prepared by the end of July 2007 at a reasonable cost and should omit proprietary information.
[INQUIRY LETTER]
September 26, 2006 BY REGULAR & ELECTRONIC MAIL: cfletters@sec.gov Office of the Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F. Street, N.W.
Washington, D.C. 20549 Re: Shareholder Proposal of PETA for Inclusion in the 2007 Proxy Statement of Pilgrim's Pride Corporation Ladies and Gentlemen: This letter is filed in response to a letter dated September 21, 2006, submitted to the SEC by Pilgrim's Pride Corporation ("Pilgrim's Pride" or "the Company"). The Company seeks to exclude a shareholder proposal submitted by People for the Ethical Treatment of Animals ("PETA"). The Company argues that the proposal under review is substantially the same as one filed in 2005, and should be omitted pursuant to Rule 14a-8(i)(12) since last year's proposal did not garner enough votes. The Company also argues that the proposal may be omitted under Rule 14a-8(i)(7) because it relates to the conduct of ordinary business operations. For the reasons which follow, we request that the SEC recommend enforcement action if the proposal is omitted. The resolution under review is very straightforward: NOW, THEREFORE, BE IT RESOLVED that shareholders request that the board of directors make transparent to shareholders the details of Pilgrim's Pride's evaluation of controlled-atmosphere killing. This report should be prepared by the end of July 2007 at a reasonable cost and should omit proprietary information. (the "Proposal.") By contrast, the proposal filed last year was directed to the issuance of a report to shareholders on the "feasibility of Pilgrim's Pride requiring its chicken and turkey suppliers to phase in controlled atmosphere killing within a reasonable timeframe, with a focus on the animal welfare and economic benefits ... to our company." (referred to as the "Previous Proposal.") In sum, the Previous Proposal requested that the Board consider the feasibility of the Company's requiring its suppliers to implement controlled atmosphere killing ("CAK") while the Proposal seeks to hold the Company accountable for its statement that Pilgrim's Pride has "evaluated and continues to evaluate CAK." There is a credibility gap created by the Company's stated "commitment, leadership and results with respect to animal welfare matters," its avowed "long standing commitment to the humane treatment of animals," and its promise to "improve animal welfare," and its failure to implement CAK. (Quotes from Pilgrim's Pride Board Recommendation Against Previous Proposal). Accordingly, the Proposal seeks the disclosure of information relating to CAK. I. THE DISSIMILARITY BETWEEN THE PREVIOUS PROPOSAL AND THE PROPOSAL During the last two decades, the Staff has ruled on a number of proposals submitted by PETA that implicate the use and consumption of animals. For example, in Procter & Gamble (July 27, 1988) the Staff denied the company's no-action application, ruling that a proposal which requested that the company cease all animal tests not required by law and begin to phase out product lines that could not be marketed without animal tests, was not substantially similar to an earlier proposal asking the company to report on the cost of live-animal testing. In its denial, the Staff stated "The proposal relates to the preparation of a report to shareholders regarding the scope and cost of live-animal testing in Company research." Just as Procter & Gamble argued that the "underlying subject of both proposals is ... conducting safety testing of products on animals," Pilgrim's Pride argues that "the substantive concern of both the Previous Proposal and the Proposal is controlled-atmosphere killing." (No-Action Letter, p. 2.) The Procter & Gamble opinion reflects the Commission's long-standing intent to focus on the substantive concerns raised by a proposal in order to determine whether the proposal should be excluded for being "substantially similar" pursuant to the policy objective embodied in Rule 14a-8(i)(12). The Previous Proposal and the Proposal both relate to a class of beings collectively referred to as "animals," and a subset of those animals called "poultry" in food industry terms. In SEC Release No. 34-20091 (August 16, 1983) the SEC explained its reason for adopting the "substantially the same subject matter" standard, stating that staff determinations should be "based upon a consideration of the substantive concerns raised by a proposal rather than the specific language or actions proposed to deal with those concerns." Thus, the substantially similar determination hinges on the substantive concerns raised by the proposals at issue. The fact that two proposals relate to the same subject matter or class is not dispositive under Rule 14a-8(i)(12). The staff has consistently found that where two proposals address different substantive concerns involving the same broad issue, the second proposal will not be barred by the earlier proposal. For example, in Cooper Industries, Inc. (January 14, 2002) the company was required to include a shareholder proposal which requested a report detailing social and environmental issues related to sustainability notwithstanding the company's argument that a prior proposal that sought global corporate standards on human rights, workplace safety, and the environment, was substantially similar. The company argued that the proposals were substantially similar in that both proposals focused primarily on living wages, social justice, and environmental issues in the communities where the company operated. The Staff did not concur. See also V.F. Corp. (Feb. 19, 1987) (the proponent's first proposal asked the company to implement the MacBride labor principles. The second proposal asked the board to establish a review committee to undertake an in-depth review of Northern Ireland operations); General Electric Co. (Feb. 4, 1988) (the proponent's first proposal asked the company to develop an action plan to provide assistance to utilities to retire nuclear reactors and convert to coal or gas power systems. In the second proposal, the proponent requested a report detailing safety concerns related to boiling water reactors); Dresser Industries (Jan. 25, 1984) (the first proposal asked the company to sign the Sullivan Principles. The second proposal requested a report on the company's labor policies and practices in South Africa). The Commission's stated reason for focusing on substantive concerns was expressed when the Rule was amended in 1983. "The Commission believes that by focusing on substantive concerns addressed in a series of proposals, an improperly broad interpretation of the new rule will be avoided." SEC Release No. 34-20091 (August 16, 1983). Specifically on point, the Staff has previously stated that two proposals dealing with the use of animals in product testing do not necessarily implicate substantially the same subject matter. In Bristol-Myers Squibb Company (March 7, 1991), the Staff stated that Bristol-Myers Squibb could not omit a shareholder proposal dealing with animal testing under the "substantially similar" rule. The proposal under review in Bristol-Myers Squibb requested that the company cease all animal tests not required by law and stop selling certain products that required animal testing. The Staff held that the proposal could not be excluded where a prior proposal requested a report detailing the scope of the company's use of animal tests in product testing. The Staff stated that: In arriving at this position the staff takes particular note of the fact that, while the four proposals concern the same broad issue (i.e., use of live animals in product development and testing), the present proposal recommends that the Company take a very active and defined course of action as to the broad issue (i.e., cease all animal tests not required by law and drop certain products). The previous proposals asked only that the Company take a passive course of action (i.e., supply information). Accordingly, the staff does not believe the Company may rely on Rule 14a-8(c)(12) as a basis for omitting the proposal from its proxy materials. (Emphasis supplied.) Like the respective proposals at issue in Bristol-Myers Squibb, the Proposal asks the Company to bridge the gap between its public pronouncements on animal welfare and its failure to implement CAK. In other words, the Proposal seeks a narrow, passive course of action with respect to supplying information to shareholders on CAK, information which the Company has already compiled. As Pilgrim's Pride acknowledges, "... The Company has already evaluated and continues to evaluate controlled-atmosphere killing ..." (No Action Letter, p. 7.) The Proposal is simply asking the Company to share its findings on this important issue with shareholders, especially given Pilgrim's Pride's pledge that it "works hard to be a good corporate citizen and believes in good animal handling practices." (Pilgrim's Pride Board Recommendation Against Previous Proposal). It is difficult to harmonize the Company's lofty words with its inaction in terms of the actual implementation of CAK. Conversely, the Previous Proposal asked Pilgrim's Pride to look at the big picture and take a very active and defined course of action in terms of requiring all of the Company's suppliers to implement CAK. The differences between the Proposal and the Previous Proposal are not subtle and when the substance of these resolutions is considered, they are not substantially similar. Accordingly, we urge the Staff not to concur with Pilgrim's Pride that the Proposal is substantially the same as the Previous Proposal. II. THE PROPOSAL DOES NOT DEAL WITH ORDINARY BUSINESS AND IS OTHERWISE NOT SUBJECT TO OMISSION AS IT RELATES TO MATTERS OF SIGNIFICANT SOCIAL, ECONOMIC AND PUBLIC POLICY. Pilgrim's Pride argues that the proposal involves the conduct of its "ordinary business" operations and seeks to "micro-manage" the Company. (No Action Letter, pp. 5-6.) The proposal under review involves corporate accountability and significant social policies including human health, animal welfare, workplace safety, and economic considerations. Implementation of CAK would improve the workplace environment and enhance food safety, in addition to eliminating a wide array of animal welfare abuses inherent in the Company's current slaughter method. With CAK, slaughterhouse workers are less likely to experience the panoply of injuries associated with the hanging, electrical immobilization, and cutting method of slaughter. Before slaughter, these terror-stricken animals are struggling to escape their captors. The results are frequent injuries to both the birds and the handlers who must hang each individual chicken, one-by-one, upside down in leg shackles, so they can proceed to the electrical immobilization bath prior to having their throats slit. CAK would reduce the potential for injury to workers and birds, eliminate the number of workers needed in the slaughterhouse, and advance the humane treatment of animals. The Staff has repeatedly found that proposals "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." Exchange Act Release No. 34-40018 (May 21, 1998). Similarly, the Staff has refused to uphold the ordinary business operations exclusion when the proposal falls within a range of issues with "significant policy, economic or other implications." Exchange Act Release No. 34-12999 (Nov. 22, 1976). The Staff in The Gillette Co. (Jan. 4 1996) found that Gillette could not omit a proposal requesting that the company issue a report on its efforts to eliminate all animal testing by a date certain. The Staff found that the resolution was not excludable under the predecessor to the current Rule 14a-8(i)(7). That ruling has applicability to the matter at hand. The Company concedes that the proposal implicates social policy issues but argues that its focus is not on animal welfare. The Company states that: While the Staff has found that proposals focusing on the humane treatment of animals and humane slaughter methods can raise "sufficiently significant social policy issues" see Wendy's Int'l Inc. (February 8, 2005) and Hormel Foods Corp. (November 10, 2005); the humane treatment of animals is not the focus of the Proposal at issue. Rather, the Proposal is similar to the proposal in Xcel Energy Inc. (April 1, 2003) in that it requests a report on management's evaluation of the risks and benefits of implementing a particular operational method of conducting an aspect of its business. (No Action Letter, p. 8.) As the Staff recognized in Wendy's Int'l Inc. and Hormel Foods Corp. forging change aimed at achieving a beneficial social policyin this case the promotion of improved working conditions and a more humane method of slaughter for the birdstranscends the day-to-day business operations of the Company, and the attendant ordinary business exception under the SEC regulations. Those rulings govern the outcome of this inquiry. For the foregoing reasons, PETA respectfully urges the Staff not to concur that Pilgrim's Pride may exclude the shareholder proposal pursuant to Rule 14a-8(i)(12) and 14a-8(i)(7) Very truly yours, /s/ Susan L. Hall Legal Counsel cc: Roger W. Bivans, Esq. (via e-mail to Roger.W.Bivans@BAKERNET.com) Matt Prescott (via e-mail)
[INQUIRY LETTER]
October 10, 2006 U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549 RE: Pilgrim's Pride CorporationShareholder Proposal Submitted by People for the Ethical Treatment of Animals Ladies and Gentlemen: This letter is filed on behalf of Pilgrim's Pride Corporation, a Delaware corporation (the "Company"), in response to the letter dated September 26, 2006, filed with the Securities and Exchange Commission (the "Commission") by People for the Ethical Treatment of Animals ("PETA"). As detailed in our previous letter filed with the Commission on September 21, 2006, the Company respectfully requests confirmation that the Staff will not recommend enforcement action if the Company excludes a proposal submitted by PETA (the "Proposal") from the proxy materials for the Company's 2007 Annual Meeting of Stockholders (the "2007 Proxy Materials") in reliance on Rules 14a-8(i)(12) and 14a-8(i)(7). We are of the view that PETA's arguments, as set forth in its September 26, 2006 letter, are flawed and do not adequately address our position in our September 21, 2006 letter. We therefore continue to respectfully submit that the Company may exclude the Proposal from the 2007 Proxy Materials because the Proposal is substantially the same proposal previously submitted by PETA, which was included in the Company's 2006 proxy materials (the "Previous Proposal") and resoundingly rejected by the Company's stockholders at the 2006 Annual Meeting, and the Proposal deals solely with ordinary business operations. I. The Proposal and the Previous Proposal deal with substantially the same subject matter for purposes of Rule 14a-8(i)(12) because both proposals request reports and involve the same substantive concern As detailed in our September 21, 2006 letter to the Commission, in order for the Company to properly exclude the Proposal as dealing with "substantially the same subject matter" as the Previous Proposal, the Proposal and the Previous Proposal do not have to recommend that the Company take the same action or require the Company to provide the same report. Rather, the Proposal may be properly excluded as long as it involves the same "substantive concerns" raised in the Previous Proposal. While the Staff initially seemed to take a very restrictive view of Rule 14a-8(i)(12) during the first few years after the rule was amended in 1983,
1 the recent no-action letters cited in our September 21, 2006 letter illustrate the Staff's current position that proposals involve substantially the same subject matter for purposes of Rule 14a-8(i)(12) as long as they involve the same "substantive concerns," even if the proposals recommend that the company take different actions or provide different reports as to some substantive concern. See Abbott Laboratories (February 28, 2006); Bank of America Corp. (February 14, 2006); Medtronic, Inc. (June 2, 2005); Bank of America Corp. (February 25, 2005); Dow Jones & Co., Inc. (December 17, 2004); Saks Inc. (March 1, 2004); Bristol-Meyers Squibb Co. (February 11, 2004); Bristol-Myers Squibb Co. (February 6, 1996); Gillette Co. (February 25, 1993). Here, the Proposal requests that the Company issue a report to shareholders on the Company's evaluations of controlled-atmosphere killing, while the Previous Proposal requested that the Company issue a report to shareholders on the feasibility of the Company requiring its chicken and turkey suppliers to phase in controlled-atmosphere killing. Both the Previous Proposal and the Proposal request reports addressing controlled-atmosphere killing and both deal with the same substantive concern and thus substantially the same subject matter for purposes of Rule 14a-8(i)(12)controlled-atmosphere killing. Furthermore, PETA's reliance on Cooper Industries, Inc. (January 14, 2002) and Bristol-Myers Squibb Company (March 7, 1991) is misplaced. In Cooper Industries, the later-submitted proposal requested a general report on sustainability while the earlier proposals requested reports on global standards on human rights, workplace safety, and the environment. The Staff concurred that although "there may be some minor overlap between a labor standards proposal and a sustainability proposal ... since labor practices or human rights concerns may be a small part of sustainability, the two proposals clearly have markedly different subject matters." Here, the Proposal and the Previous Proposal would not amount to a mere "minor overlap" in discussing different subject matters. Rather, both proposals request reports specifically regarding controlled-atmosphere killing. Moreover, in Bristol-Myers Squibb Company, the prior proposal requested a report on animal testing while the later proposal expressly requested that the company cease all animal testing not required by law and stop selling certain products that required animal testinga request for positive action beyond a mere report. There, the Staff concurred that the proposals in question did not deal with substantially the same subject matter because the later-submitted proposal recommended a very active and defined course of action while the prior proposal only asked for a passive course of action by supplying information to shareholders. Here, both the Proposal and the Previous Proposal request that the Company supply reports to shareholders regarding controlled-atmosphere killingsubstantially the same requested action regarding an identical topic. The Company's shareholders considered the Previous Proposal at the 2006 Annual Meeting and rejected it by an over 97% margin. Because both proposals involve the same substantive concern and request substantially the same action, and the other rule requirements are satisfied, the Proposal may be properly excluded from the 2007 Proxy Materials pursuant to Rule 14a-8(i)(12). II. The Proposal relates to the conduct of the Company's ordinary business operations and focuses on the Company's evaluation of the risks and benefits of controlled-atmosphere killing as an alternative method As detailed in our September 21, 2006 letter to the Company, the Proposal may be properly excluded from the 2007 Proxy Materials pursuant to Rule 14a-8(i)(7) because it relates to the conduct of the Company's ordinary business operations and requests a report evaluating controlled-atmosphere killing as an alternative method (i.e., an evaluation of risks and benefits of an alternative method). In its September 26, 2006 letter, PETA argues that the Proposal implicates social policy issues. However, PETA fails to address the Staff's recent guidance in Staff Legal Bulletin No. 14C (June 28, 2005) regarding the applicability of the ordinary business operations exclusion where the focus of the proposal is an evaluation of risks and benefits, as it is in the case at hand. The Company reaffirms its belief that the Proposal requests an evaluation of risks and benefits of implementing controlled-atmosphere killing as an operational method and is excludable as it involves ordinary business operations. Conclusion Based on the foregoing, the Company hereby respectfully requests your confirmation that the Staff will not recommend any enforcement action to the Commission if the Proposal is excluded from the 2007 Proxy Materials in reliance on Rules 14a-8(i)(12) and 14a-8(i)(7). If the Staff has any questions with respect to the foregoing, or if for any reason the Staff does not agree that the Company may exclude the Proposal from its 2007 Proxy Materials, please contact me at (214) 978-3095. I may also be reached by facsimile at (214) 978-3099 and would appreciate it if you would send your response to the Company by facsimile to that number. Very truly yours, Baker & McKenzie LLP /s/ Roger W. Bivans cc: People for the Ethical Treatment of Animals c/o Susan L. Hall 501 Front St. Norfolk, VA 2351 People for the Ethical Treatment of Animals c/o Matt Prescott 501 Front St. Norfolk, VA 2351 -----FOOTNOTES-----
1 The majority of no-action letters cited by PETA were issued in the 1980s, before the Staff departed from its earlier restrictive view.
[STAFF REPLY LETTER]
November 6, 2006 Response of the Office of Chief Counsel Division of Corporation Finance Re: Pilgrim's Pride Corporation Incoming letter dated September 21, 2006 The proposal requests that the board make transparent to shareholders the details of the company's evaluation of controlled-atmosphere killing. There appears to be some basis for your view that Pilgrim's Pride may exclude the proposal under rule 14a-8(i)(12)(i). Accordingly, we will not recommend enforcement action to the Commission if the Company omits the proposal from its proxy materials in reliance on rule 14a-8(i)(12)(i). In reaching this position, we have not found it necessary to address the alternative basis for omission upon which Pilgrim's Pride relies. Sincerely, /s/ Tamara M. Brightwell
Special Counsel | 
