Company Name: Raytheon Co.
Public Availability Date: January 25, 2006
Document Sections:
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 9, 2005
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: Raytheon CompanyFile No. 1-13699 Statement of Reasons for Omission of
Shareholder Proposal Pursuant to Rule 14a-8(i)(10).
Ladies and Gentlemen:
Raytheon Company ("Raytheon" or the "Company") has received a shareholder
proposal (the "Proposal") which is attached to this letter as Exhibit A, from
the City of New York Employees' Retirement System Funds (the "Proponent"), that
the Proponent wishes to have included in Raytheon's proxy materials for its 2006
annual meeting of shareholders.
The Proposal states as follows:
"Whereas:
Investors increasingly seek disclosure of companies' social and environmental
practices in the belief that they impact shareholder value. Many investors
believe companies that are good employers, environmental stewards, and corporate
citizens are more likely to be accepted in their communities and to prosper
long-term.
Sustainability refers to development that meets present needs without impairing
the ability of future generations to meet their own needs. It includes
"encouraging long lasting social well being in communities where [companies]
operate, interacting with different stakeholders (e.g. clients, suppliers,
employees, government, local communities, and non-governmental organizations)
and responding to their specific and evolving needs, thereby securing a
long-term 'license to operate,' superior customer and employee loyalty, and
ultimately superior financial returns." (Dow Jones Sustainability Group)
Globally, approximately 1,500 companies produce reports on sustainability issues
(Association of Chartered Certified Accountants, www.corporate register.com),
including more than half of the global Fortune 500 (KPMG International Survey of
Corporate Responsibility Reporting 2005).
Ford Motor Company states, "Sustainability issues are neither incidental nor
avoidablethey are at the heart of our business." American Electric Power has
stated, "management and the Board have a fiduciary duty to carefully assess and
disclose to shareholder appropriate information on the company's environmental
risk exposure."
Global expectations regarding sustainability reporting are changing rapidly. The
European Commission recommends corporate sustainability reporting, and listed
companies in Australia, South Africa and France must now provide investors with
information on their social and environmental performance.
RESOLVED: Shareholders request that the Board of Directors issue a
sustainability report to shareholders, at reasonable cost, and omitting
proprietary information, by September 1, 2005."
SUPPORTING STATEMENT
"The report should include the company's definition of sustainability, as well
as a company-wide review of company policies and practices related to long-term
social and environmental sustainability.
"We recommend that the company use the Global Reporting Initiative's
Sustainability Reporting Guidelines ("The Guidelines") to prepare the report.
The Global Reporting Initiative (www.globalreporting.org) is an international
organization with representatives from the business, environmental, human rights
and labor communities. The Guidelines provide guidance on report content,
including performance in six categories (direct economic impacts, environmental,
labor practices and decent work conditions, human rights, society, and product
responsibility). The Guidelines provide a flexible reporting system that permits
the omission of content that is not relevant to company operations. Over 700
companies use or consult the Guidelines for sustainability reporting."
Raytheon proposes to omit the Proposal and its supporting text because it is
excludable under Rule 14a-8(i)(10), since it has already been substantially
implemented by Raytheon.
Accordingly, we submit this statement of reasons for exclusion of the Proposal
from the 2006 proxy materials pursuant to Rule 14a-8(j) promulgated under the
Securities Exchange Act of 1934, as amended, and hereby request that the Staff
of the Division of Corporate Finance confirm that it will not recommend
enforcement action against Raytheon should it omit the Proposal from its 2006
proxy materials. Pursuant to Rule 14a-8(j)(2), filed herewith are six copies of
this letter as well as six copies of the Proposal. In addition, pursuant to Rule
14a-8(j)(1), Raytheon is notifying the Proponent of its intention to omit the
Proposal from the 2006 proxy and we have provided a copy of this submission to
the Proponent.
1. Raytheon Currently Publishes a Stewardship Report that Substantially
Implements the Written Objectives of the Proposal, and the Proposal Should
Therefore Be Excluded.
This Proposal requests that Raytheon issue a sustainability report to
shareholders, at reasonable cost, and omitting proprietary information, by
September 1, 2005. We assume that this is a typographical error by Proponent and
that Proponent meant to state "2006". In May 2005, Raytheon published its most
recent Stewardship Report. Raytheon has published five such reports since 1996.
Raytheon intends to continue to publish its Stewardship Report periodically to
update its shareholders and other interested parties regarding its social,
environmental and community activities. The Stewardship Report contains detailed
information about Raytheon's policies, practices and performance in
substantially all of the areas suggested by the Proposal. Raytheon's Stewardship
Report addresses issues related to achieving its goal of being the most admired
aerospace and defense systems company through world-class people and technology.
The Stewardship Report focuses on Raytheon's guiding principles; people;
environmental issues, including reducing the Company's footprint on the
environment; integrating stewardship into the business; relationships and
partnering with external stakeholders, including customers and suppliers.
More specifically, the Stewardship Report addresses, among other things,
Raytheon's:
Board of Directors' oversight of stewardship matters;
Use of quarterly Environmental, Health and Safety (EHS) performance metrics,
which are reviewed by Raytheon's Board of Directors and the CEO;
Ethics Program;
Publication of a Commitment Letter with respect to six guiding principles of
environment, health and safety: reduction of injuries; prevention of pollution
and preservation of natural resources; continuous improvement of processes,
products and services; protection of facilities and equipment; employee
participation in community outreach; and demonstration of management leadership;
Establishment of an Environmental, Health and Safety Management System;
Policies relating to employee safety training, the creation of an injury-free
culture, and ergonomics;
Commitment to the health and wellness of its employees and their dependents,
demonstrated through the introduction of various initiatives;
Active support of diversity-related programs and creation of an inclusive
culture, including the existence of a Executive Diversity Council and Global
Diversity Director;
Prevention of pollution and preservation of natural resources through the
development of new technologies as well as recycling, conservation and other
waste-reduction strategies;
Commitment to generally integrating stewardship into its business through
enterprise-wide management leadership, communication, training, employee
ownership and cross-functional teams and councils;
Dedication to partnering with external stakeholders including local
communities, charitable programs, and partnering with customers and suppliers to
achieve the sustainability goals set forth in the Report; and
Supply Chain Diversity Program; and
Definition of sustainability (p. 31).
A copy of the Stewardship Report may be found on Raytheon's website (http://www.raytheon.com)
by selecting "Special Interest" and clicking on the link entitled
"05/2005Raytheon Stresses Good Stewardship in New Report".
Rule 14a-8(i)(10) allows for the exclusion of proposals "if the company has
already substantially implemented the proposal." The Staff has consistently
taken the position that shareholder proposals are moot under Rule 14a-8(i)(10)
when the procedures or policies addressed in the proposal have been
substantially implemented by the company. See, for example, Nordstrom Inc.
(February 8, 1995)(proposal that requested company's board of directors to
commit to a code of conduct to ensure that its overseas suppliers meet basic
standards of conduct held moot because company had issued conduct guidelines to
all of its vendors).
In order to make the determination that a procedure or policy has been
substantially implemented, the Commission does not require that a company
implement every aspect of the proposal in question. See SEC Release No. 34-20091
(August 16, 1983). See also, AMR Corporation (April 17, 2000), Masco Corp.
(March 29, 1999), Erie Indemnity Company (March 15, 1999), AutoNation Inc.
(March 5, 2003; request for reconsideration denied on March 20, 2003) and
AutoNation Inc. (February 10, 2004; request for reconsideration denied on April
1, 2004), where in each instance the Division concurred that an issuer may omit
a shareholder proposal from its proxy materials under Rule 14a-8(i)(10) where
the proposal was not implemented exactly as proposed. Rather, a company need
only have appropriately addressed the concerns underlying such a proposal. See,
for example, Texaco, Inc. (March 11, 1991)(company's environmental policies and
practices rendered the proposal moot despite some differences between the
company's policies and practices and the specific request of the proposal).
In recent no-action rulings that closely mirror Raytheon's request, the staff
permitted ConAgra Foods, Inc., Albertson's, Inc. and Lowe's Companies, Inc. to
omit proposals that are substantively identical to the proposal submitted to
Raytheon. The staff permitted the exclusions, noting ConAgra's, Albertson's and
Lowe's representations that they already prepare and publish equivalent reports.
See, ConAgra Foods, Inc. (June 20, 2005) Albertson's, Inc. (March 23, 2005) and
Lowe's Companies, Inc. (March 21, 2005).
Raytheon does recognize that in Terex Corporation (March 18, 2005), the Staff
did not permit exclusion (on substantial implementation grounds) of a proposal
that was also substantively identical to the Proposal. Unlike Raytheon, Terex
claimed that it substantially implemented the proposal by including on its
website its views regarding corporate citizenship and making reference to a
variety of other public disclosures including filings made with the Securities
and Exchange Commission. Raytheon's claim of substantial implementation may be
distinguished from Terex's because Raytheon has prepared and published (in one
discrete document) a detailed Stewardship Report addressing the Company's social
and environmental practices (i.e., the actions requested by the Proposal).
Raytheon also is aware that in Burlington Resources, Inc. (February 4, 2005),
the Staff did not permit exclusion (on substantial implementation grounds) of a
proposal that was substantially identical to the Proposal. However, at the time
of that proposal, Burlington Resources, Inc. had not published any documents
that resembled a "sustainability report." While Burlington Resources, Inc. had
publicly disclosed that it had formally commissioned a Corporate Social
Responsibility ("CSR") initiative, and envisioned that a "CSR Report" would be
an outgrowth of that initiative, "the specific form and substance of the report
had not been decided." Conversely, in Raytheon's case, the Stewardship Report
has been published and continues to be available to its shareholders and the
public on Raytheon's website.
It is interesting to note that Raytheon's Stewardship Report, and some of the
Company's past Stewardship and Environmental, Health and Safety Reports, are
posted on a website that the Proponent cites as containing information regarding
the 1,500 companies that it claims produce such reports. It appears that the
Proponent is unaware that Raytheon has produced such Reports or that they are
publicly available on the web site that the Proponent cites as support for the
Proposal.
By the publication of its Stewardship Report, Raytheon has demonstrated that it
has policies and practices in place relating to the subject matter of the
Proposal, that it has published a report summarizing those practices and that it
has thus implemented the essential objectives of the Proposal. The Proposal has,
therefore, been substantially implemented.
2. Conclusion
For the foregoing reasons, we believe that the Proposal may be omitted from
Raytheon's 2006 proxy materials. Accordingly, we request the concurrence of the
Staff that it will not recommend enforcement action against Raytheon, should it
omit the Proposal from its 2006 proxy materials.
If you have any questions regarding this matter or require any additional
information, please contact the undersigned at 781-522-3036 or John Kapples at
781-522-3038. If the Staff disagrees with any of the conclusions set forth
above, please contact the undersigned prior to the issuance of a written
response. Please be advised that Raytheon intends to mail its definitive proxy
materials to shareholders around March 20, 2006, and that it will therefore be
sending these materials to a financial printer not later than March 6, 2006.
Very truly yours,
/s/
Jane E. Freedman
cc: Jay B. Stephens, Senior Vice President and General Counsel
John W. Kapples, Vice President and Corporate Secretary
Kenneth B. Sylvester
[APPENDIX]
Stockholder Proposal: Sustainability Reports
Whereas:
Investors increasingly seek disclosure of companies' social and environmental
practices in the belief that they impact shareholder value. Many investors
believe companies that are good employers, environmental stewards, and corporate
citizens are more likely to be accepted in their communities and to prosper
long-term.
Sustainability refers to development that meets present needs without impairing
the ability of future generations to meet their own needs. It includes
"encouraging long lasting social well being in communities where [companies]
operate, interacting with different stakeholders (e.g. clients, suppliers,
employees, government, local communities, and non-governmental organizations)
and responding to their specific and evolving needs, thereby securing a
long-term 'license to operate,' superior customer and employee loyalty, and
ultimately superior financial returns." (Dow Jones Sustainability Group)
Globally, approximately 1,500 companies produce reports on sustainability issues
(Association of Chartered Certified Accountants, www.corporate register.com),
including more than half of the global Fortune 500 (KPMG International Survey of
Corporate Responsibility Reporting 2005).
Ford Motor Company states, "Sustainability issues are neither incidental nor
avoidable - they are at the heart of our business." American Electric Power has
stated, "management and the Board have a fiduciary duty to carefully assess and
disclose to shareholder appropriate information on the company's environmental
risk exposure."
Global expectations regarding sustainability reporting are changing rapidly. The
European Commission recommends corporate sustainability reporting, and listed
companies in Australia, South Africa and France must now provide investors with
information on their social and environmental performance.
RESOLVED: Shareholders request that the Board of Directors issue a
sustainability report to shareholders, at reasonable cost, and omitting
proprietary information, by September 1, 2005.
Supporting Statement
The report should include the company's definition of sustainability, as well as
a company-wide review of company policies and practices related to long-term
social and environmental sustainability.
We recommend that the company use the Global Reporting Initiative's
Sustainability Reporting Guidelines ("The Guidelines") to prepare the report.
The Global Reporting Initiative (www.globalreporting.org) is an international
organization with representatives from the business, environmental, human rights
and labor communities. The Guidelines provide guidance on report content,
including performance in six categories (direct economic impacts, environmental,
labor practices and decent work conditions, human rights, society, and product
responsibility). The Guidelines provide a flexible reporting system that permits
the omission of content that is not relevant to company operations. Over 700
companies use or consult with Guidelines for sustainability reporting.
[INQUIRY LETTER]
January 11, 2006
BY EXPRESS MAIL
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Raytheon Company; Shareholder Proposal submitted by the New York City
Pension Funds
To Whom It May Concern:
I write on behalf of the New York City Pension Funds (the "Funds") in response
to the December 9, 2005 letter submitted to the Securities and Exchange
Commission (the "Commission") by Jane E. Freedman, Senior Counsel of Raytheon
Company ("Raytheon" or the "Company"), which seeks assurance that the Staff of
the Division of Corporation Finance of the Commission (the "Staff") will not
recommend any enforcement action if the Company excludes from its proxy
statement for the 2006 annual meeting the Funds' shareholder proposal (the
"Proposal"). I have reviewed the Proposal, as well as the December 9, 2005
letter. Based upon that review, as well as a review of Rule 14a-8, it is my
opinion that the Proposal may not be omitted from the Company's 2005 Proxy
Materials. Accordingly, the Funds respectfully request that the Commission deny
the relief that the Company seeks.
I. The Proposal
Following its "Whereas" Clause, which states that a founding principle of this
country's capital markets is the disclosure of key information, the Proposal
discusses the growing interest of both private and professional investors in
sustainability issues - companies' social and environmental practices and the
belief that those practices impact shareholder value. The Proposal explains
that, according to the Dow Jones Sustainability Group, "sustainability"
includes:
Encouraging long lasting social well being in communities where [companies]
operate, interacting with different stakeholders (e.g. clients, suppliers,
employees, government, local communities, and non-governmental organizations)
and responding to their specific and evolving needs, thereby securing a
long-term 'license to operate,' superior customer and employee loyalty, and
ultimately superior financial returns.
The Proposal's "Resolved" clause states:
That shareholders request that the company issue a sustainability report to
shareholders ,at reasonable cost, and omitting proprietary information, by
September 1, 2006.
II. DISCUSSION
The Company has challenged the Proposal on the grounds that Rule 14a-8(i) (10)
has been (substantially implemented). For the reasons set forth below, the Funds
submit that the Company has failed to meet its burden of proving its entitlement
to "no-action" relief.
A. The Proposal Has Not Been Substantially Implemented
Raytheon argues that under Rule 14a-8 (i) (10) it has "substantially
implemented" the Funds' Proposal requesting a sustainability report because it
has published and posted, on its website, a Stewardship Report "(Report"). (This
web page can be reached by going to www.Raytheon.com, clicking on "special
interest" and clicking on the link entitled "05/2005 Raytheon Stresses Good
Stewardship in New Report"). While the Report highlights topics such as
"Structure and Guiding Principles", "Putting People First" and "Partnering with
External Stakeholders," it simply lacks the objective data and critical analysis
that would enable shareholders to assess the Company's efforts and progress in
the area of sustainability. While the Proposal does give the Company much
flexibility in preparing a sustainability report, a subjective marketing
presentation, lacking in both data and analysis, cannot suffice to substantially
implement the Proposal.
For example, the section entitled "Executive Leadership" recites that "Action
Plans" are implemented, by the Company's CEO, if certain performance metrics are
unsatisfactory. However, Report does not describe the terms of the so called
"Action Plans," and the Company provides no data or statistics concerning either
expectations as to performance or whether performance metrics have met all of
those expectations.
The section on "Reporting Concerns" emphasizes that employees are "encouraged to
raise issues or concerns", but provides only very general information as to the
types of concerns raised by employees, and no information concerning what
corrective measures are taken, or the effectiveness of the various means of
reporting. Further, the section on "Building an Inclusive Culture" extols that
Raytheon is a supporter of Affirmative Action and is an Equal Opportunity
Employer, and in 2004 the Company realized 'across-the-board growth" in their
minority employee base. But no facts were provided on workforce composition,
composition of management, results or efforts concerning recruitment, training,
and promotion of minority candidates and employees. Self-promotion without
meaningful data or analysis cannot constitute a sustainability report.
Finally, the section entitled "Reducing our Environmental Footprint" boasts that
the Company is actively evaluating processes and operations in order to reduce
waste and recycle material "to the greatest extent possible". Once again, this
section quantifies little and does not provide information concerning any
actions that adversely affect the environment, how much energy the Company
consumes or any objective goals for environmental performance.
Raytheon argues that its Report contains detailed information about the
Company's policies, practices, and performance. (Company Letter at Page 3).
However, like the cursory website statements in Terex Corporation (March 18,
2005) as to which the Staff denied noaction relief under 14a-8(i)(10),
Raytheon's Report is broad and incomplete. It fails to include basic objective
data concerning the environment, human rights and corporate responsibility.
That lack distinguishes Raytheon's Report from that in Albertson's Incorporated
(March 10, 2005), cited by the Company in support of its position. Raytheon's
Report has even less detail than did Albertson's.* We believe that a Staff
review of Raytheon's Report would demonstrate its facial inadequacy.
In sum, while the Funds' Proposal allows Raytheon to decide how to report on its
social and environmental performance, the shareholders, must be given adequate
information to assess Company performance in those areas. Raytheon's Report,
though perhaps a god marketing tool, provides very little objective data, no
historical data and no analysis that enable shareholders to be adequately
informed.
Recent Staff decisions under Rule 14a-8(i) (10) on substantial implementation of
proposals calling for the preparation of reports other than sustainability
reports, confirm that Raytheon has not substantially implemented the proposal.
See e.g., Wendy's International, Inc. (Feb.8, 2005) (rejecting company argument
that posting various statements and guidelines on company website substantially
implemented a proposal for report on method of animal slaughter) and Exxon
Mobile Corp. (March 19, 2004) (rejecting company argument that its 21 page
report on global warming substantially implemented a proposal calling for
release of all research data relevant to the company's stated position on the
science of climate change). There is no substitute for a full report on the
subjects a proposal specifies.
As the Funds' Proposal has not been substantially implemented, the Staff should
reject the Company's request for relief on that ground.
III. Conclusion
For the reasons set forth above, the Funds respectfully request that the
Company's request for "no-action" relief be denied.
Thank you for your consideration.
Sincerely,
/s/
Alexandra Dolce
Cc: Jane E. Freedman, Esq.
Senior Counsel
Raytheon Company
870 Winter Street
Waltham, MA 02451-1449
-----FOOTNOTES-----
* The result in Lowe's Companies(March 21, 2005) also provides no guidance, as
noaction relief in Lowe's was granted in the absence of any reply to the Staff
from the Funds; Lowe's request for no-action relief was not internally forwarded
to our counsel office for reply.
[STAFF REPLY LETTER]
January 25, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Raytheon Company Incoming letter dated December 9, 2005
The proposal requests that the board issue a sustainability report to
shareholders.
There appears to be some basis for your view that Raytheon may exclude the
proposal under rule 14a-8(i)(10). Accordingly, we will not recommend enforcement
action to the Commission if Raytheon omits the proposal from its proxy materials
in reliance on rule 14a-8(i)(10).
Sincerely,
/s/
Geoffrey M. Ossias
Attorney-Adviser
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