Company Name: Wachovia Corp.
Public Availability Date: February 10, 2006
Document Sections:
LETTER OF INQUIRY
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[LETTER OF INQUIRY]
December 20, 2005
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Wachovia Corporation - Omission of Shareholder Proposal Submitted by SEIU
Master Trust and the Sisters of the Order of St. Dominic of Grand Rapids,
Michigan
Ladies and Gentlemen:
Wachovia Corporation, a North Carolina corporation ("Wachovia"), hereby notifies
the Securities and Exchange Commission (the "Commission") of its intent to omit
a shareholder proposal from its proxy statement and form of proxy for Wachovia's
2006 Annual Meeting of Shareholders (the "2006 Proxy Materials"), pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in connection therewith, respectfully requests the staff of the
Division of Corporation Finance (the "Staff") to indicate that it will not
recommend any enforcement action to the Commission.
The Proposal
The Service Employees International Union Master Trust (the "SEIU Master Trust")
and the Sisters of the Order of St. Dominic of Grand Rapids, Michigan
(collectively, the "Proponents") have submitted a proposal (the "Proposal") for
inclusion in Wachovia's 2006 Proxy Materials. The Proposal, including its
supporting statement, is attached as Exhibit A. The correspondence from the
Sisters of the Order of St. Dominic of Grand Rapids, Michigan, which indicates
that its Proposal is being filed in conjunction with the SEIU Master Trust, also
is included in Exhibit A.
The Proposal requests that "the Board of Directors report to shareholders by
October 2006 on the effect on our company's business strategy of the challenges
created by global climate change." The Proposal also states that the "report
should include, but need not be limited to, a discussion of the effects of (a)
rising public and regulatory pressures to limit the emission of greenhouse
gases, and (b) anticipated changes to our physical environment." In addition,
the Proponents provide that the "report should be prepared at reasonable cost
and omit proprietary information."
Summary of Wachovia's Position
As set forth more fully below, Wachovia believes that it may properly omit the
Proposal from its 2006 Proxy Materials pursuant to Rule 14a-8(i)(7), because the
proposal deals with a matter relating to the conduct of Wachovia's ordinary
business operations.
Rule 14a-8(i)(7)-Proposal Relates to the Conduct of Ordinary Business
Operations.
Rule 14a-8(i)(7) under the Exchange Act permits the exclusion of a shareholder
proposal if the proposal deals with the company's ordinary business operations.
The Commission has stated that whether a proposal falls under the ordinary
business exclusion rests on two considerations: (i) the subject matter of the
proposal, which takes into account whether the tasks are so fundamental to
management's ability to run a company on a day-to-day basis that they would not
be appropriate for shareholder oversight; and (ii) the degree to which the
proposal seeks to "micro-manage" the company by delving too deeply into complex
matters that the shareholders, as a group, would not be in position to make an
informed judgment. See Exchange Act Release No. 34-40018 (May 21, 1998).
Wachovia believes that the Proposal falls squarely within the scope of the above
considerations and may be excluded under Rule 14a-8(i)(7) because it relates to
its ordinary business operations.
The Proposal requests that Wachovia's Board of Directors prepare a report for
shareholders, within a specified time frame and containing at least certain
specified information, on the effects on Wachovia's business strategy of the
challenges created by global climate change. The Proposal and its supporting
statement are virtually identical to a proposal submitted to Wachovia last year
for inclusion in Wachovia's 2005 proxy materials by one of the Proponents, the
SEIU Master Trust (the "2005 Proposal"). The 2005 Proposal is attached as
Exhibit B. The 2005 Proposal requested that "the Board of Directors report to
shareholders by October 2005 on the effect on Wachovia's business strategy of
the risks created by global climate change." The Staff agreed with Wachovia that
the 2005 Proposal was excludable by Wachovia under Rule 14a-8(i)(7) because it
related to ordinary business operations "(i.e. evaluation of risk)". See
Wachovia Corporation (publicly available January 28, 2005). The Proposal
submitted by the Proponents this year is identical except that it replaces the
word "risk" with the word "challenges" in its request for a report on the
effects of global climate change on Wachovia's business strategy. Wachovia
believes that despite this slight change, the focus of the Proposal and its
supporting statement would require Wachovia to engage in an internal assessment
of the risks and liabilities that Wachovia may face as a result of global
climate change and is excludable under Rule 14a-8(i)(7) because, similar to the
2005 Proposal, it relates to Wachovia's ordinary business operations.
Wachovia is a diversified financial services holding company that provides a
wide range of financial services to its customers. Wachovia's services include,
among other things, commercial and retail lending, investment advisory,
investment banking, private equity investment, retail brokerage, insurance
brokerage and mortgage banking. Wachovia believes that any assessment of the
challenges of global climate change on Wachovia's business and prospects
necessarily involves an evaluation and assessment of a multitude of risks and
challenges relating to climate change, including the risk that climate change
will impact the revenues and cash flow of Wachovia's borrowers and companies in
its investment portfolio. The effects of global climate change, including the
effects on individual companies located in areas that may be impacted by global
climate change such as areas susceptible to frequent hurricanes and other severe
weather patterns influenced by global climate change, is one of many risks that
Wachovia must consider as part of its daily operations in conducting its various
lines of business, including its daily lending and private equity investment
operations. The risks or challenges associated with global climate change are
potential factors in the overall evaluation process in connection with
Wachovia's underwriting standards, policies and procedures, as well as in
establishing loan pricing policies and loan loss reserves. The evaluation of
challenges or risks also play a part in the context of the various financial
performance metrics that Wachovia utilizes in its daily lending activities,
including risk adjusted return on capital, which measures returns in relation to
the risks taken. In addition, the Proposal's requirement that the report include
a discussion of the effects of "rising public and regulatory pressures to limit
the emission of greenhouse gases" also deals with ordinary business activities,
including Wachovia's compliance function and its governance processes for
evaluating risks to Wachovia's reputation. In essence, the Proposal focuses on
matters that involve Wachovia's fundamental day-to-day business activities and
would require Wachovia to provide a detailed report that, in effect, summarizes
Wachovia's ordinary business operations. Thus, Wachovia believes that the
Proposal is precisely the type of report involving ordinary business activities
noted by the Commission in Exchange Act Release No. 34-40018 as falling within
the ordinary business exclusion, and is essentially no different from the 2005
Proposal that the Staff concluded was excludable by Wachovia under Rule
14a-8(i)(7). See Wachovia Corporation.
As was the case with the 2005 Proposal, Wachovia believes that the focus of the
Proposal, including its supporting statement, is to require Wachovia to engage
in an internal risk and liability assessment of what Wachovia faces as a result
of global climate change in its ordinary business operations. In our view, the
subtle change in the current Proposal of requesting a report on the effect on
Wachovia's business strategy of the "challenges created by global climate
change" rather than the "risks created by global climate change" as contained in
the 2005 Proposal does not change the primary focus of the Proposal of requiring
an internal assessment of the risks, liabilities and effects of global climate
change on Wachovia's business strategy. Any assessment or evaluation of the
challenges that Wachovia may face as a result of global climate change would
require the identical action by Wachovia as an assessment of the risks and
liabilities associated with global climate change. Wachovia believes that in
order to address the challenges of global climate change, Wachovia must assess
and evaluate the risks and potential liabilities of how global climate change
may impact Wachovia's ordinary business lending and investment operations.
Accordingly, since any evaluation of the challenges created by global climate
change is the same as an assessment of the risks created by global climate
change, the Proposal is the same as the 2005 Proposal, which the Staff concluded
involved an evaluation of risks relating to Wachovia's ordinary business
operations.
Although the Proposal's supporting statement makes some broad references to the
public policy issues relating to global climate change, in seeking a report on
the challenges created by global climate change, the Proponents primary focus is
on the impact to Wachovia of the possible risks associated with global climate
change. This is evident in the Proposal's supporting statement, which also is
substantially identical to the supporting statement contained in the 2005
Proposal. For example, in both the 2005 Proposal and the current Proposal, the
supporting statement acknowledges Wachovia's wide variety of businesses and the
belief of the difficulty that shareholders may have in determining the extent
that climate change policies and physical impacts will have on Wachovia's
long-term business strategy. Both the supporting statement in the 2005 Proposal
and the supporting statement in the current Proposal then state that "a
Board-level assessment of these effects would assist shareholders in evaluating
Wachovia's stock as a long-term investment." In essence, the Proponents are
requesting Wachovia to perform a detailed internal appraisal of the impact and
risks to Wachovia associated with global climate change. In this regard, the
Proposal is very similar to other proposals requesting an assessment of a
company's strategies to address the impact of climate change on a company's
business that the Staff has concluded may be excluded under Rule 14a-8(i)(7) as
relating to an evaluation of risk and ordinary business operations. For example,
in American International Group, Inc. (publicly available February 11, 2004),
the Staff ruled that a proposal requesting the board to prepare a report
providing a comprehensive assessment of the company's strategies to address the
impacts of climate change on its business related to the company's ordinary
business operations. See also The Chubb Corporation (publicly available January
25, 2004) (identical proposal regarding the assessment of the company's
strategies to address the impacts of climate change). In both American
International Group, Inc. and The Chubb Corporation the Staff found that an
assessment of a company's strategies to address the impact of climate change
necessarily requires an evaluation of risk and benefits and is related to
ordinary business operations. As noted above, Wachovia believes that the
Proposal's request for an extensive analysis of the effects of global climate
change on Wachovia's business involves probing into detailed operational
processes that are part of Wachovia's ordinary business operations involving
risk and liability assessment, and, therefore, is similar to American
International Group, Inc. and The Chubb Corporation. See also The Dow Chemical
Company (publicly available February 23, 2005) (proposal requesting a report
describing the impacts that outstanding Bhopal issues, if left unresolved, may
pose on the company, its reputation, its finances and its expansion in foreign
countries excludable under Rule 14a-8(i)(7) because it involves an evaluation of
risks and liabilities).
In addition, the Proposal is very similar to other proposals that have requested
a report on the effects of various risks facing a company and that the Staff
found involve ordinary business operations. For instance, in Xcel Energy Inc.
(publicly available April 1, 2003) the Staff found that a proposal urging the
board of directors to issue a report disclosing, among other things, the
economic risks associated with the company's past, present and future emissions
of carbon dioxide, sulfur dioxide, nitrogen oxide and mercury omissions related
to the company's ordinary business operations because it dealt with the
evaluation of risks and benefits. See also The Mead Corporation (publicly
available January 31, 2001) (proposal requesting the board to report on the
current status of the issues raised in a financial report as they affect the
company, including a description of the company's liability projection
methodology and an assessment of other major environmental risks, such as those
created by climate change, excludable under Rule 14a-8(i)(7) because it focuses
on the company's liability methodology and evaluation of risk). Similarly, in
American International Group, Inc. (publicly available February 19, 2004), the
Staff concluded that a proposal requesting the board to 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 under Rule
14a-8(i)(7) because it related to the company's ordinary business operations. In
finding that the proposal could be excluded under Rule 14a-8(i)(7), the Staff
stated that the proposal related to the company's ordinary business operations
"(i.e, evaluation of risks and benefits)." The Proposal, as in the above cases,
also would involve conducting an appraisal of the risks of global climate change
on Wachovia's business and prospects. See also Staff Legal Bulletin No. 14C
(CF), dated June 28, 2005, where the Commission made clear that a proposal and
its supporting statement that focus "on the company engaging in an internal
assessment of the risks or liabilities that the company faces as a result of its
operations that may adversely affect the environment or the public's health" is
the type of proposal that may be excluded under Rule 14a-8(i)(7) as relating to
ordinary business operations.
In sum, Wachovia believes that the Proposal focuses on Wachovia's fundamental
day-to-day business operations and involves a matter that requires an internal
assessment of the risks and liabilities regarding the daily operations of
Wachovia and its numerous lines of business. Moreover, the Proposal probes
"deeply into complex matters that the shareholders, as a group, would not be in
position to make an informed judgment." See Exchange Act Release No. 34-40018
(May 21, 1998). Accordingly, based on the foregoing and in view of the
consistent position of the Staff on prior proposals relating to similar issues,
including the 2005 Proposal, Wachovia believes that it may properly omit the
Proposal under Rule 14a-8(i)(7).
Conclusion
For the reasons set forth above, Wachovia respectfully submits that it may
properly omit the Proposal from its 2006 Proxy Materials and requests that the
Staff indicate that it will not recommend enforcement action to the Commission
if Wachovia omits such Proposal.
In accordance with Rule 14a-8(j), six copies of this letter, including Exhibits,
are enclosed, and a copy of this letter is being sent to each of the Proponents.
Wachovia hereby agrees to promptly forward to each of the Proponents any Staff
response to this no-action request that the Staff transmits to Wachovia only by
facsimile.
Please acknowledge receipt of this letter by stamping the enclosed copy of the
first page of the letter and returning it in the enclosed self-addressed,
stamped envelope. If you have any questions regarding this request, please call
the undersigned at (704) 383-4901. My facsimile number is (704) 715-4494.
Very truly yours,
/s/
Anthony R. Augliera
Senior Vice President and Deputy General Counsel
cc: Steve Abrecht Executive Director, SEIU Master Trust
Mary Brigid Clingman OP Councilor of Mission and Advocacy Sisters
of the Order
of St. Dominic
Enclosures
[APPENDIX]
2006 - Wachovia Corp.
RESOLVED that shareholders of Wachovia Corporation request that the Board of
Directors report to shareholders by October 2006 on the effect on our company's
business strategy of the challenges created by global climate change. The report
should include, but need not be limited to, a discussion of the effects of (a)
rising public and regulatory pressures to limit the emission of greenhouse
gases, and (b) anticipated changes to our physical environment. This report
should be prepared at reasonable cost and omit proprietary information.
SUPPORTING STATEMENT
Global climate change threatens to affect companies across a wide variety of
industries. Numerous reports from respected scientific bodies, such as the
Intergovernmental Panel on Climate Change and the National Academy of Sciences,
confirm that climate change is real and will cause a variety of profound
alterations to the earth's natural systems if not arrested.
Regulatory responses to climate change have been adopted, and many more are
likely. The Kyoto Protocol now requires signatory nations to reduce greenhouse
gas emissions on average 5.2% below 1990 levels. U.S. states, including
California, have proposed emissions-reduction initiatives.
Changes to our physical environment from climate change may pose serious
consequences to real estate investments, companies in the tourism industry
(which could be affected as climate change impairs recreational opportunities
like skiing and water sports), and insurance premiums. A water shortage would
have broad impacts on manufacturing, agriculture, forestry, and other types of
operations. And an increase in dramatic weather patterns could lead to energy
volatility and disease pandemic concerns.
According to the company's latest 10-K (2004), Wachovia and its subsidiaries
provide a variety of corporate and retail banking, lending, asset management,
mortgage, insurance, and other financial services in 49 U.S. states and numerous
countries. Because of the complexity of Wachovia's assets and businesses, it is
difficult for shareholders to determine the extent that climate change policies
and physical impacts will have on the company's long-term business strategy. We
believe that a Board-level assessment of these effects would assist shareholders
in evaluating Wachovia's stock as a long-term investment.
Wachovia currently provides no substantial guidance to its investors on the
impacts of this important issue, either in its annual report, on its website,
nor any other financial filings. Yet key competitors, including JPMorgan Chase,
Bank of America, and Citigroup, have addressed this public policy concern
through written climate change policies, sustainable development project
guidance, forest protection initiatives, resource and emissions reductions
analysis, improved disclosure to investors on climate change, and executive or
Board oversight for climate change policy implementation--clear signs that the
banking industry is taking climate change seriously as a public policy issue.
With Wachovia's paucity of reporting on this increasingly important issue to our
business, investors have no way of knowing what our company is doing to address
this escalating global concern and the public policy impacts that will emerge
from it.
Therefore, we urge shareholders to vote FOR this proposal.
[INQUIRY LETTER]
November 10, 2005
Mark C. Treanor
Senior Executive Vice President, General Counsel, and Secretary
Wachovia Corporation
301 South College Street
Charlotte, NC 28288-0013
Dear Mr. Treanor:
On behalf of the SEIU Master Trust ("the Trust"), I write to give notice that,
pursuant to the 2005 proxy statement of Wachovia Corp. (the "Company"), the
Trust intends to present the attached proposal (the "Proposal") at the 2006
annual meeting of shareholders (the "Annual Meeting"). The Trust requests that
the Company include the Proposal in the Company's proxy statement for the Annual
Meeting. The Trust has owned the requisite number of Wachovia Corp. shares for
the requisite time period. The Trust intends to hold these shares through the
date on which the Annual Meeting is held.
The Proposal is enclosed. I represent that the Trust or its agent intends to
appear in person or by proxy at the Annual Meeting to present the Proposal. I
declare that the Trust has no "material interest" other than that believed to be
shared by stockholders of the Company generally. Please contact me at
(202)639-7612 if you have any questions.
Sincerely,
/s/
Steve Abrecht
Executive Director
SEIU Master Trust
SA:TR:bh
Enclosure
cc: Anthony Augliera Sr. Vice President and Assistant General Counsel at
Fax #
704-715-4494
[INQUIRY LETTER]
November 14, 2005
G. Kennedy Thompson CEO
Wachovia Corp.
301 S. College St.
Charlotte, NC 28288-0013
RE: STOCKHOLDER RESOLUTION ON CLIMATE WARMING
Dear Mr. Thompson,
The Sisters of the Order of St. Dominic of Grand Rapids, Michigan are the
beneficial owners of at least $2,000 of shares of stock of Wachovia Corporation.
A letter of verification is enclosed will be sent under separate cover.
I am authorized to inform you of our intention to present the enclosed
resolution requesting a report to shareholders by October 2006 on the effect on
our company's business strategy of the challenges created by global climate
change. We file in conjunction with Service Employees International Union
(Tracey C. Rembert - Washington DC) and other ICCR shareholders for
consideration and action by stockholders at the next annual meeting. I therefore
submit it for inclusion in the proxy statement in accordance with rule 14a8 of
the general rules and regulations of the Securities Exchange Act of 1934. We
shall continue ownership of at least $2,000 of shares through the date of the
annual meeting.
Sincerely,
/s/
Mary Brigid Clingman OP
Councilor of Mission and Advocacy
Sisters of the Order of St. Dominic
Cc: Tracey C. Rembert: Service Employees International Union Leslie Lowe: ICCR
[INQUIRY LETTER]
January 25, 2006
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Attention: Chief Counsel, Division of Corporation Finance
Re: Request by Wachovia Corporation to omit shareholder proposal submitted by
the Service Employees International Union Master Trust
Dear Sir/Madam,
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, the Service
Employees International Union Master Trust (the "Trust") submitted a shareholder
proposal (the "Proposal") to Wachovia Corporation ("Wachovia"). The Proposal
asks Wachovia's Board of Directors to report to shareholders by October 2006 on
the effect on Wachovia's business strategy of the challenges created by global
climate change. The Proposal recommends that the report should include, but need
not be limited to, a discussion of the effects of (a) rising public and
regulatory pressures to limit the emission of greenhouse gases, and (b)
anticipated changes in the physical environment.
By a letter dated December 20, 2005, Wachovia stated that it intends to omit the
Proposal from the proxy materials to be sent to shareholders in connection with
the 2006 annual meeting of shareholders and asked for assurance that the Staff
would not recommend enforcement action if it did so. Wachovia claims that it is
entitled to exclude the Proposal in reliance on Rule 14a-8(i)(7) as relating to
Wachovia's ordinary business operations. As discussed more fully below, because
the Proposal does not ask for a risk assessment, and because climate change is a
significant policy issue, Wachovia has not met its burden of proving that it is
entitled to exclude the Proposal on ordinary business grounds.
Wachovia argues that the Proposal relates to ordinary business operations
because it deals with risk assessment, compliance and governance processes, all
of which are ordinary business activities according to Wachovia. Wachovia spends
the bulk of its request contending that the Proposal would require it to conduct
an assessment of risks and liabilities. Last year, the Trust submitted a
substantially similar proposal to Wachovia, which asked Wachovia to report on
the effect on the company's business of the risk created by global climate
change. To emphasize that the Trust is not seeking a risk assessment, but rather
a board-level report focusing on corporate strategy, the Trust substituted
"challenge" for "risk" in this year's Proposal.
The Proposal now closely resembles other proposals that the Staff has determined
are not excludable on ordinary business grounds, such as Waste Management Inc.
(Mar. 11, 2002) (finding that proposal asking the company to report on the
effect on its business strategy of measures to oppose privatization of waste
collection, disposal and recycling services was not excludable on ordinary
business grounds); Unocal Corporation (Feb. 23, 2004) (declining to allow
exclusion of proposal asking Unocal to report on "how the company is responding
to rising regulatory, competitive, and public pressure to significantly reduce
carbon dioxide and other greenhouse gas emissions"); Reliant Resources Inc.
(Mar. 5, 2004) (same). Unlike the Xcel, Mead and Dow Chemical proposals cited by
Wachovia, the Proposal does not ask for an evaluation of risks or liabilities
facing the company.
Wachovia relies on two Staff determinations regarding proposals submitted to
insurers American International Group (Feb. 11, 2004) and The Chubb Corporation
(Jan. 25, 2004). But insurance companies occupy a unique position when it comes
to reporting on the effect of climate change on corporate strategy. Although all
companies evaluate risks of various kinds, insurers do little else. As AIG
stated in its request to omit a proposal asking it to "provid[e] a comprehensive
assessment of AIG's strategies to address the impacts of climate change on its
business," AIG's "core business" is "the underwriting of risk." (The same
proposal was submitted to Chubb.) Chubb explained that producing the report
requested by the proposal would require the company to discuss actuarial methods
and assumptions as well as the pricing of its insurance products. For this
reason, the Staff has allowed insurers to exclude climate-change-related
proposals which are otherwise not excludable when submitted to non-insurers.
Contrast Exxon Mobil Corporation (Mar. 23, 2005) (declining to allow omission of
proposal asking Exxon Mobil to report on how it plans to meet greenhouse gas
emission reduction targets in markets where it operates that have adopted the
Kyoto Protocol).
It is by now well-established that global climate change is a "significant
policy issue" and that proposals dealing with it may not be omitted in reliance
on the ordinary business exclusion. Wachovia has not met its burden of showing
that the Proposal is nonetheless excludable. It does not fall within the narrow
category of exceptions carved out for insurance companies because Wachovia has a
wide range of financial services. The Proposal does not ask Wachovia to assess
risks or liabilities, or to conduct a cost-benefit analysis. Accordingly,
Wachovia's request for no-action relief should be denied.
* * * *
If you have any questions or need anything further, please do not hesitate to
call me at (202) 639-7612. The Trust appreciates the opportunity to be of
assistance to the Staff in this matter.
Very truly yours,
/s/
Steve Abrecht
Executive Director of Benefit Funds
cc: Anthony R. Augliera Senior Vice President and Assistant General Counsel
Fax#
704-715-4494
[STAFF REPLY LETTER]
February 10, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Wachovia Corporation Incoming letter dated December 20, 2005
The proposal requests that the board prepare a report on the effect on
Wachovia's business strategy of the challenges created by global climate change.
There appears to be some basis for your view that Wachovia may exclude the
proposal under rule 14a-8(i)(7), as relating to Wachovia's ordinary business
operations (i.e., evaluation of risk). Accordingly, we will not recommend
enforcement action to the Commission if Wachovia omits the proposal from its
proxy materials in reliance on rule 14a-8(i)(7).
Sincerely,
/s/
Gregory Belliston
Attorney-Adviser
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