Company Name: Wal-Mart Stores, Inc.
Public Availability Date: March 23, 2006
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
[INQUIRY LETTER]
January 23, 2006
OVERNIGHT DELIVERY VIA FEDERAL EXPRESS
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Wal-Mart Stores, Inc.Notice of Intent to Omit from Proxy Materials
Shareholder Proposal of People for the Ethical Treatment of Animals
Ladies and Gentlemen:
Wal-Mart Stores, Inc., a Delaware corporation (the "Company") files this letter
under Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to notify the Securities and Exchange Commission (the
"Commission") of the Company's intention to exclude a shareholder proposal (the
"Proposal") from the proxy materials for the Company's 2006 Annual Meeting of
Shareholders (the "2006 Proxy Materials"). The Proposal was submitted by People
for the Ethical Treatment of Animals (the "Proponent"). The Company asks that
the staff of the Division of Corporation Finance of the Commission (the "Staff")
not recommend to the Commission that any enforcement action be taken if the
Company excludes the Proposal from its 2006 Proxy Materials for the reasons
described below. A copy of the Proposal and all correspondence is attached to
this letter as Exhibit A. In accordance with Rule 14a-8(j), six copies of this
letter and its attachments are enclosed.
Due to the volume of proxy materials that the Company must produce and
distribute to its shareholders, the Company plans to commence the printing of
the 2006 Proxy Materials on or about April 11, 2006 so that it may commence
mailing the 2006 Proxy Materials by no later than April 14, 2006. Accordingly,
we would appreciate the Staff's prompt advice with respect to this matter.
The Proposal
The Company received the Proposal on or about December 14, 2005. The Proposal
requests that the Board of Directors of the Company "issue interim reports to
shareholders following the second, third, and fourth quarters of 2006 detailing
the progress made toward accelerating the implementation of "controlled
atmosphere killing" of poultry.
Grounds for Exclusion
The Company intends to omit the Proposal from its 2006 Proxy Materials on the
grounds that the Proposal is materially vague, false, and misleading in
violation of Rule 14a-9.
The Proposal is Vague, False, and Misleading and is Excludable Under Rules
14a-8(i)(3) and 14a-9
Rule 14a-8(i)(3) permits a company to omit from its proxy materials a
shareholder proposal and any statement in support thereof "[i]f the proposal or
supporting statement is contrary to any of the Commission's proxy rules,
including 17 C.F.R. §240.14a-9, which prohibits materially false or misleading
statements in proxy soliciting materials." Rule 14a-9 provides, in pertinent
part, that:
(a) No solicitation subject to this regulation shall be made by means of any
proxy statement, form of proxy, notice of meeting or other communication,
written or oral, containing any statement which, at the time and in the light of
the circumstances under which it is made, is false or misleading with respect to
any material fact, or which omits to state any material fact necessary in order
to make the statements therein not false or misleading....
The Staff has declared that it would concur in a company's reliance on Rule
14a-8(i)(3) to exclude a proposal where a company: (i) demonstrates objectively
that the proposal is materially false or misleading or (ii) if the resolution is
so inherently vague or indefinite that neither the stockholders nor the company
would be able to determine with any reasonable certainty exactly what actions or
measures the proposal requires. See Staff Legal Bulletin 14B (September 15,
2004) ("SLB 14B").
On January 17, 2006, the Company forwarded a letter to the Proponent, attached
as Exhibit B, advising the Proponent of statements in the Proposal that the
Company believes are materially false and misleading. By letter dated January
20, 2006, the Proponent submitted certain revisions to its Proposal but did not
provide any support for their statements that the Company believes are
misleading. The revised version of the Proposal has been attached hereto as
Exhibit C. However, the Company submits that certain statements retained in the
revised version of the Proposal cause it to be materially false and misleading:
1. The Fourth Whereas Clause refers to controlled atmosphere killing as an
"USDA-approved method of poultry slaughter" which is materially false and
misleading.
The fourth whereas clause refers to CAK as a method of poultry slaughter that
has been approved by the United States Department of Agriculture (the "USDA").
The Company can find no such statement made either by the USDA or the Food
Safety and Inspection Service ("FSIS")the agency tasked with the enforcement of
the Humane Methods of Slaughter Act of 1958 (7 U.S.C. §§1901-1906). 9 C.F.R.
§300.2(b)(4) (2005). Although, the Company offered the Proponent the opportunity
to provide such support for its statements, it failed to do so.
There are two primary statutes regarding the humane slaughter of livestock and
poultry: the Humane Methods of Slaughter Act of 1958 (7 U.S.C. §1901-1906) ("HMSA")
and the Poultry Products Inspection Act (21 U.S.C. §§451-471) ("PPIA"). While
FSIS has officially declared that the administration of carbon dioxide gas is a
humane method for the slaughter of "sheep, calves, and swine" under the Humane
Methods of Slaughter Act, see 9 C.F.R. §313.5 (2005), the Company cannot find a
final rule published by USDA or FSIS regarding the application of carbon dioxide
gas (or similar methods) to poultry. Furthermore, the Humane Methods of
Slaughter Act applies to "cattle, calves, horses, mules, sheep, swine, and other
livestock." 7 U.S.C. §1902 (emphasis added). FSIS has defined "livestock" in
such a manner that does not include poultry. 9 C.F.R. §301.2 (2005) (defining
"livestock" as "cattle, sheep, swine, goat, horse, mule, or other equine"). In
fact, FSIS itself has stated that HMSA does not apply to poultry slaughter. 70
Fed. Reg. 56,624-56,625 (September 28, 2005).
Additionally, PPIA prohibits the slaughter of poultry unless it is in accordance
with the provisions of PPIA. 21 U.S.C. §458(a)(1). However, PPIA does not
expressly provide the approved methods of poultry slaughter and FSIS has only
stated that "live poultry be handled in a manner that is consistent with good
commercial practices, and that they not die from causes other than slaughter."
70 Fed. Reg. at 56,625. The Company is not aware of a statement, publication,
regulation, or other rule issued by USDA or FSIS stating that controlled
atmosphere stunning, controlled atmosphere killing, or the administration of
carbon dioxide gases is an accepted and approved method of poultry slaughter.
Therefore, the Company believes that any reference to CAK as an "USDA-approved
method of poultry slaughter" is materially false and misleading and thus
excludable as a violation of Rule 14a-8(i)(3) and Rule 14a-9.
2. The Fifth and Sixth Whereas Clauses of the Proposal refer to a certain report
commissioned by McDonalds Corporation and those references contain factual
statements that are materially misleading.
The fifth whereas clause of the Proposal states that "a report commissioned by
McDonald's ('the Report') concurred that CAK is ... the most humane method of
poultry slaughter ever developed." The Company has reviewed the Report and found
no such assertion that approaches the assertion made by the Proposal. See
"Report of the Corporate Responsibility Committee of the Board of Directors of
McDonald's Corporation Regarding the Feasibility of Implementing Controlled
Atmosphere Stunning for Broilers," attached as Exhibit D. In summary, we believe
that the Proposal inaccurately cites and materially overstates the conclusions
in the Report.
As reflected above, the Proposal contains false and materially misleading
statements and would require detailed and extensive editing in order to bring
the Proposal into compliance with Rule 14a-9. While the Staff will sometimes
permit a proponent to revise its proposal if it contains "specific statements
that may be materially false or misleading or irrelevant to the subject matter
of the proposal," see SLB 14, such revisions are permitted when a proposal
contains "relatively minor defects that are easily corrected" and the required
revisions "are minor in nature and do not alter the substance of the proposal."
See SLB 14. However, "when a proposal and supporting statement will require
detailed and extensive editing in order to bring them into compliance with the
proxy rules," the Staff has stated that it "may find it appropriate for
companies to exclude the entire proposal, supporting statement, or both, as
materially false or misleading." See SLB 14B; Staff Legal Bulletin 14 (July 13,
2001). Moreover, the Company has already requested that the Proponent make
changes to correct the misleading portions of the Proposal described above. The
Proponent did not address these issues in its revised version of the Proposal.
Because the defects in the Proposal, as described above, would require extensive
editing of the Proposal, the Company requests the Staff concur that it may omit
the Proposal from its 2006 Proxy Materials in accordance with Rule 14a-8(i)(3).
Conclusion
Based on the foregoing representations, the Company hereby requests that the
Staff confirm that it will not recommend any enforcement action if the Proposal
is excluded from the Company's 2006 Proxy Materials. Should you disagree with
the conclusions set forth herein, we would appreciate the opportunity to confer
with you prior to the issuance of the Staff's response. Moreover, the Company
reserves the right to submit to the Staff additional bases upon which the
Proposal may properly be excluded from the 2006 Proxy Materials.
By copy of this letter, the Proponent is being notified of the Company's
intention to omit the Proposal from its 2006 Proxy Materials.
Please acknowledge receipt of this letter by date-stamping the accompanying
acknowledgment copy and returning it to the undersigned in the self-addressed
postage pre-paid envelope provided. Please call the undersigned at (479)
277-3302 if you require additional information or wish to discuss this
submission further.
Respectfully Submitted,
/s/
Samuel A. Guess
Enclosures
cc: People for the Ethical Treatment of Animals
ATTN: Matt Prescott
501 Front St.
Norfolk, VA 23510
[INQUIRY LETTER]
December 13, 2004
Thomas D. Hyde, Secretary
Wal-Mart Stores, Inc.
702 SW 8th St.
Bentonville, AR 72716
Dear Mr. Hyde:
Attached to this letter is a shareholder proposal submitted for inclusion in the
proxy statement for the 2006 annual meeting. Also enclosed is a letter from
People for the Ethical Treatment of Animals' (PETA) brokerage firm, Morgan
Stanley, confirming ownership of 66 shares of Wal-Mart Stores, Inc. common stock
acquired more than three years ago. PETA has held these shares continuously for
more than three years and intends to hold them through and including the date of
the 2006 annual shareholders meeting.
Please contact the undersigned if you need any further information. If Wal-Mart
Stores, Inc. 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.
Sincerely,
/s/
Matt Prescott
Senior Campaign Coordinator
Enclosures: Morgan Stanley letter, "Wal-Mart Stores, Inc., 2006 Shareholder
Resolution re Humane Poultry Slaughter"
Wal-Mart Stores, Inc., 2006 Shareholder Resolution re Humane Poultry Slaughter
[INQUIRY LETTER]
Submission Date: December 13, 2005
Submitted to:
Wal-Mart Stores; Inc.
Corporate Secretary
702 S.W. Eighth St.
Bentonville, AR 72716
Submitted by:
People for the Ethical Treatment of Animals (PETA)
501 Front St.
Norfolk, VA 23510
757-622-0457 (fax)
WHEREAS consumers consider animal welfare when choosing where to buy food
products; and
WHEREAS Wal-Mart Stores, Inc. ("Wal-Mart"), has recognized the need for treating
animals humanely in order to keep its competitive advantage within the cutthroat
food retail market, as shown by its support for the Food Marketing Institute's
standards; and
WHEREAS Wal-Mart purchases chickens from suppliers that use the outdated method
of electrical stunning, in which the birds' legs are forced into metal shackles
and the birds are shocked with an electric current, have their throats slit, and
are dropped into tanks of scalding-hot water, so that they are often still
conscious when they suffer this hideous cruelty; and
WHEREAS Wal-Mart has yet to make notable progress on implementing the new
USDA-approved method of poultry slaughter called "controlled-atmosphere killing"
(CAK), which replaces the oxygen that birds are breathing with inert gasses,
gently and effectively putting them to sleep; and
WHEREAS a report commissioned by McDonald's ("the report") concurred that CAK
is, as animal welfare experts have described it, the most humane method of
poultry slaughter ever developed and admitted that CAK "has advantages [over
electrical stunning] from both an animal welfare and meat quality perspective
... obviates potential distress and injury ... can expeditiously and effectively
stun and kill broilers with relatively low rates of aversion or other distress"
and would eliminate the pain of premature shocks and inadequate stunning that
are associated with electrical stunning; and
WHEREAS the report further concludes that McDonald's European suppliers that use
CAK have experienced improvements in bird handling, stunning efficiency, working
conditions, and meat yield and quality;1 and
WHEREAS it would help the company retain its competitive advantage if it
eliminated the worst abuses that chickens suffer during slaughter before ending
up on Wal-Mart's shelves and required its suppliers to phase in CAK; and
WHEREAS, although CAK is optimal for both the birds' well-being and for profit,
Wal-Mart has yet to implement it or show any signs of progress toward that end;
and
WHEREAS, while others companies continue to make progress toward adopting the
technology and it continues to be used in Europe (as it has been for nearly a
decade), Wal-Mart has yet to show its shareholders what it is doing to gain the
competitive advantage of adopting this humane slaughter technology;
NOW, THEREFORE, BE IT RESOLVED that shareholders request that the Board of
Directors issue interim reports to shareholders following the second, third, and
fourth quarters of 2006 detailing the progress made toward accelerating the
implementation of CAK.
-----FOOTNOTES-----
1 These are the same improvements that Hormel Foods recently touted in a letter
to PETA describing CAK.
[INQUIRY LETTER]
January 30, 2006
Office of the Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F St. N.E.
Washington, DC 20549
Via UPS and e-mail: cfletters@sec.gov
Re: Shareholder Proposal of People for the Ethical Treatment of Animals ("PETA")
for Inclusion in the 2006 Proxy Statement of Wal-Mart Stores, Inc.
Dear Sir or Madam:
This letter is filed in response to a letter dated January 23, 2006, submitted
to the SEC by Wal-Mart Stores, Inc. ("Wal-Mart" or "the company"). The company
seeks to exclude a shareholder proposal submitted by PETA based on Rules
14a-8(i)(3) and 14a-9, asserting that it is "vague, false, and misleading."
For the reasons that follow, PETA contends that its proposal is neither false
nor misleading, and we request that the SEC recommend enforcement action if
Wal-Mart does omit the proposal.1
I. Controlled-Atmosphere Killing (CAK) Is a USDA-Approved Method of Poultry
Slaughter
In its no-action letter, the company contends that the proposal is false and
misleading because Wal-Mart has no evidence indicating that
controlled-atmosphere killing (CAK) is a "USDA-approved" method of poultry
slaughter, as stated in the proposal. In fact, CAK has been reviewed by the
agency and is "USDA-approved."
In 2003, animal welfare scientist Adele Douglass wrote to the USDA and asked
that the Food Safety and Inspection Service (FSIS) explicitly include gas
killing of birds as an acceptable form of slaughter in the Poultry Products
Inspection Act (PPIA), which the FSIS is responsible for enforcing. In January
2004, the USDA replied to Douglass (copy enclosed) that:
The regulations that implement the PPIA do not prohibit the use of gas to kill
poultry and, therefore, the Agency does not see a need to modify the [PPIA] ....
Furthermore, at least three U.S. poultry plants currently use various CAK or
controlled-atmosphere stunning (CAS) systems, and two additional plants are
working to install such systems.
In short, because the killing of birds by CAK is permitted under USDA
regulations and is currently in use in the United States, the company may not
exclude the proposal under Rule 14a-9.
II. The McDonald's Report Does Conclude That CAK Is the Most Humane Way to Kill
Birds2
The company argues that "McDonald's Animal Welfare Feasibility Study [of]
Controlled Atmosphere Stunning for Broilers" ("the McDonald's report") does not
conclude, as one clause of the proposal states, that CAK is "the most humane
method of poultry slaughter ever developed." In its no-action letter, Wal-Mart
claims that the proposal "inaccurately cites and materially overstates the
conclusions in the Report."
In fact, the McDonald's report is, as is all the scientific evidence to date,
unequivocal in stating that CAK is the most humane method of poultry slaughter
ever developed. Under the "Areas of General Consensus" section, the McDonald's
report states:
When compared to stunning with a high-voltage AC current, CAS has advantages
from both an animal welfare and a meat quality perspective. CAS obviates
potential distress and injury resulting from the physical handling and shackling
of unstunned birds. Certain other potential causes of distress are eliminated,
e.g., premature shocks, cases of inadequate stunning.
The McDonald's report offers no contradictory analysis of CAK (i.e., there is no
discussion in the report to suggest that any other method of slaughter might
compare favorably to CAK from an animal welfare perspective). Therefore, this
sentence does not make the proposal either false or misleading, and as such, the
proposal is not excludable under Rule 14a-9.
III. Editing the Proposal Would Not Require an Extensive Effort
In its no-action letter, the company points out that its staff permits revisions
to shareholder proposals if the revisions "are minor in nature and do not alter
the substance of the proposal." The company contends that revising PETA's
proposal would require "extensive editing" and that, consequently, the entire
proposal may be excluded from the proxy materials. Wal-Mart's entire argument
hinges on just one phrase contained in one clause of the supporting statement
("USDA-approved") and part of one sentence of another clause (that the
McDonald's report "concurred that CAK is ... the most humane method of poultry
slaughter ever developed").
While PETA maintains that the statements in question are entirely accurate, we
also believe that editing these few words out of the proposal would not in any
way alter the substance of the proposal.
IV. Conclusion
The company's position that PETA's resolution is excludable under Rules
14a-8(i)(3) and 14a-9 is insupportable for the foregoing reasons. As such, we
respectfully request that the SEC advise the company that it will take
enforcement action if Wal-Mart fails to include the proposal in its 2006 proxy
materials.
Please feel free to contact me if you have any questions or require further
information. I can be reached at MattPrescott@peta.org or 757-962-8264.
Very truly yours,
/s/
Matthew A. Prescott
Manager, Factory-Farming Campaigns
PETA
cc: Sam Guess
Enclosure: USDA letter to Adele Douglass regarding CAK as an approved method of
poultry slaughter
[INQUIRY LETTER]
March 22, 2006
VIA FACSIMILE (202.942.9525) AND OVERNIGHT DELIVERY VIA FEDERAL EXPRESS
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Wal-Mart Stores, Inc.Notice of Intent to Omit from Proxy Materials
Shareholder Proposal of People for the Ethical Treatment of Animals Regarding
Humane Poultry Slaughter
Ladies and Gentlemen:
Wal-Mart Stores, Inc., a Delaware corporation (the "Company"), files this letter
to supplement its letter filed on January 23, 2006 (the "Original Request
Letter") with the Securities and Exchange Commission (the "Commission") pursuant
to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Original Request Letter notified the Commission that the
Company intended to exclude a shareholder proposal (the "Proposal") submitted by
People for the Ethical Treatment of Animals (the "Proponent") from the proxy
statement for the Company's 2006 Annual Meeting of Shareholders (the "Proxy
Statement") and to seek the concurrence of the staff of the Division of
Corporation Finance of the Commission (the "Staff") that it would not recommend
to the Commission that any enforcement action be taken if the Company excludes
the Proposal from its Proxy Statement for the reasons described in the Original
Request Letter. A copy of the Original Request Letter is attached to this letter
as Exhibit A. In accordance with Rule 14a-8(j), six copies of this letter and
its attachments are enclosed.
In the Original Request Letter, the Company proposed to exclude the Proposal
from the Proxy Statement in accordance with Rule 14a-8(i)(3) on the ground that
the Proposal contained materially vague, false, and misleading statements in
violation of Rule 14a-9. In Wendy's International, Inc. (available February 24,
2006) (the "Wendy's Letter"), the Staff recently stated that it would not
recommend any enforcement action to the Commission if Wendy's International,
Inc. ("Wendy's") omitted from its proxy statement a proposal (the "Wendy's
Proposal") submitted by the Proponent that is very similar to the Proposal. The
resolution proposed for adoption in the Wendy's Proposal differs from the
Proposal only in its use of the phase "accelerating the implementation" rather
than "accelerating development," with regard to preparing a report on controlled
atmosphere killing ("CAK") of poultry.
In its original request letter to the Commission dated December 22, 2005,
Wendy's discussed at length how the words "accelerating" and "development"
lacked definition in the Wendy's Proposal and how the phrase "accelerating
development" was so inherently vague and indefinite and susceptible to numerous
interpretations that neither Wendy's nor its shareholders would be able to
determine "the precise objective that the [Wendy's] Proposal requests that
[Wendy's] report to the shareholders...." See Page 6 of the Wendy's Letter. The
Staff in the Wendy's Letter stated that there appeared to be some basis for
Wendy's view that it could exclude the Wendy's Proposal under Rule 14a-8(i)(3)
because the Wendy's Proposal was vague and indefinite and stated it would not
recommend any enforcement action to the Commission if the Wendy's Proposal were
to be omitted from the Wendy's International proxy materials.
The words used in the Proposal raise the same concerns of lack of definition,
uncertainty, and vagueness. The vague words in the Proposal, as with the Wendy's
Proposal, could mislead the Company's shareholders in their understanding of
what the report will require. The Proponent fails to make clear in the Proposal
the nature of the report the shareholders would be directing the Company to make
when it reports on "progress made toward accelerating the implementation of
CAK." That is, does the Proposal seek to have the Company report about the
implementation of CAK in poultry processing operations that it conducts, or does
the Proposal intend that the Company report on the adoption of CAK by poultry
suppliers so that shareholders can cause the Company not to use those suppliers
unless they implement CAK? The Proposal would require the shareholders to guess
at the Proponent's actual intent for the substance of the report the Company
would be required to produce. Whether the report that the Company would produce,
based on its interpretation of the Proposal, would meet the shareholders'
expectations is speculative.
The Company believes that handling animals in a humane manner is the right thing
to do. However, as can be seen from these examples of possible interpretations
of the Proposal, the Company's shareholders likely will not understand and will
be misled by the Proposal and, as a result, will not understand the effect of
their vote. The Company believes that Proposal presents issues of vagueness and
indefiniteness similar to those that appear to have led the Staff to conclude
that it would not recommend any enforcement action be taken by the Commission if
Wendy's excluded the Wendy's Proposal from its Proxy Statement in reliance on
Rule 14a-8(i)(3).
Conclusion
Based on the foregoing and the Company's the Original Request Letter, the
Company hereby requests that the Staff confirm that it will not recommend any
enforcement action if the Proposal is excluded from the Company's 2006 Proxy
Materials. Should you disagree with the conclusions set forth herein, we would
appreciate the opportunity to confer with you prior to the issuance of the
Staff's response.
Thank you for your consideration.
Respectfully Submitted,
/s/
Samuel A. Guess
Enclosures
cc: People for the Ethical Treatment of Animals
ATTN: Matt Prescott
501 Front St.
Norfolk, VA 23510
(757) 622-7382
[STAFF REPLY LETTER]
March 23, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Wal-Mart Stores, Inc. Incoming letter dated January 23, 2006
The proposal requests that the board issue interim reports to shareholders
detailing the progress made toward accelerating the implementation of
controlled-atmosphere killing.
We are unable to concur in your view that Wal-Mart may exclude the proposal
under rule 14a-8(i)(3). Accordingly, we do not believe that Wal-Mart may omit
the proposal from its proxy materials in reliance on rule 14a-8(i)(3).
Sincerely,
/s/
Gregory Belliston
Attorney-Adviser
-----FOOTNOTES-----
1 Although the company also includes the word "vague" in its no-action letter,
because there is no discussion or argument regarding this assertion, PETA will
focus its response on the areas discussed in the company's letter and will
assume that the company understands the proposal.
2 The difference between CAS and CAK is that CAS stuns birds by removing oxygen
from their atmosphere, while CAK goes one step further and renders the birds
completely brain-dead before they are taken out of the chamber. The McDonald's
report discusses both technologies (i.e., it covers all poultry slaughter that
uses a controlled atmosphere and removes oxygen as a part of the slaughter
process). The McDonald's report finds that all controlled-atmosphere systems,
whether or not they go all the way to CAK systems, are a vast improvement over
all current forms of poultry slaughter from an animal welfare perspective.
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