Company Name: Johnson & Johnson
Public Availability Date: January 31, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 21, 2006
Direct Dial
(202) 955-8653
Fax No.
(202) 530-9677
VIA HAND DELIVERY
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Shareholder "Proposal" of William Steiner, represented by John
Chevedden Exchange Act of 1934Rule 14a-8
Dear Ladies and Gentlemen:
This letter is to inform you that our client, Johnson & Johnson (the
"Company"), intends to omit from its proxy statement and form of proxy
for its 2007 Annual Shareholders Meeting (collectively, the "2007 Proxy
Materials") a purported shareholder proposal and statements in support
thereof (the "Submission") received from William Steiner, naming John
Chevedden as his designated representative (the "Proponent").
Pursuant to Rule 14a-8(j), we have:
enclosed herewith six (6) copies of this letter and its attachments;
filed this letter with the Securities and Exchange Commission (the
"Commission") no later than eighty (80) calendar days before the Company
files its definitive 2007 Proxy Materials with the Commission; and
concurrently sent copies of this correspondence to the Proponent.
Rule 14a-8(k) provides that shareholder proponents are required to send
companies a copy of any correspondence that the proponents elect to
submit to the Commission or the staff of the Division of Corporation
Finance (the "Staff"). Accordingly, we are taking this opportunity to
inform the Proponent that if he elects to submit additional
correspondence to the Commission or the Staff with respect to the
Submission, a copy of that correspondence should concurrently be
furnished to the undersigned on behalf of the Company pursuant to Rule
14a-8(k).
BASES FOR EXCLUSION
We hereby respectfully request that the Staff concur in our view that
the Submission may be excluded from the 2007 Proxy Materials pursuant
to:
Rule 14a-8(i)(3), because the Submission is materially misleading;
Rule 14a-8(a), because the Submission does not present a proposal for
shareholder action; and
Rule 14a-8(c) and 14a-8(f), because the Submission contains multiple
proposals.
THE SUBMISSION
The Submission requests that the Company's Board of Directors (the
"Board") adopt a policy of allowing shareholders "the opportunity to
vote on an advisory management resolution at each annual meeting to
approve the Compensation Committee Report in the proxy statement." The
Submission underscores that the vote is intended to be purely advisory,
and should not abrogate any employment agreement or affect the approval
of any compensation-related proposal submitted for a vote of
shareholders at the same or any other meeting of shareholders. The
Submission specifically requests disclosure of the percentage of total
executive pay and benefits that are performance-based. The supporting
statement describes the Submission as providing shareholders with a
"mechanism for providing ongoing input at [the] company."
A copy of the Submission and supporting statements, as well as related
correspondence from the Proponent, is attached to this letter as Exhibit
A. We hereby respectfully request that the Staff concur in our view that
the Submission may be excluded from the 2007 Proxy Materials for the
reasons described below.
ANALYSIS
I. The Submission May Be Excluded Under Rule 14a-8(i)(3) Because It Is
Materially False Or Misleading.
Under Rule 14a-8(i)(3), a company may omit a shareholder proposal if the
proposal is contrary to any of the Commission's proxy rules and
regulations, including Rule 14a-9. Rule 14a-9(a) provides that "[n]o
solicitation ... shall be made by means of any proxy statement ...
containing any statement which, at the time and in 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 Submission requests that the Board "adopt a policy
that shareholders be given the opportunity to vote on an advisory
management resolution ... to approve the Compensation Committee [R]eport
in the proxy statement."
The Staff recently addressed a nearly identical proposal in Sara Lee
Corp. (avail. Sept. 11, 2006). The proposal in Sara Lee requested the
company to adopt a policy that the company's shareholders "be given the
opportunity ... to vote on an advisory resolution ... to approve the
report of the Compensation and Employee Benefits Committee set forth in
the proxy statement." The Staff concurred that the proposal was
materially false or misleading under Rule 14a-8(i)(3), stating:
The proposal's stated intent to "allow stockholders to express their
opinion about senior executive compensation practices" would be
potentially materially misleading as shareholders would be voting on the
limited content of the new Compensation Committee Report, which relates
to the review, discussions and recommendations regarding the
Compensation Discussion and Analysis disclosure rather than the
company's objectives and policies for named executive officers described
in the Compensation Discussion and Analysis.
Like the proposal in Sara Lee, the Submission requests that the Company
submit for a shareholder vote an advisory resolution to approve the
Compensation Committee Report in the Company's proxy statement.
Moreover, as with the Sara Lee proposal, the Submission is materially
misleading because, following the Commission's adoption of new
compensation disclosure rules, the Compensation Committee Report will
not contain the information that the Submission indicates shareholders
will be voting on, namely, the Company's executive compensation
policies. See Adopting Release, Executive Compensation and Related
Person Disclosure, Exchange Act Release No. 8732A (August 29, 2006). If
a shareholder casts a vote "for" or "against" the Submission, such a
shareholder likely would believe, based on the representations in the
Submission, that the Submission is seeking the adoption of a policy that
would, if implemented, allow shareholders an advisory vote on the
Company's executive compensation policies. If the Submission is
implemented, however, shareholders would not be voting on executive
compensation policies, but instead on the limited content of the new
Compensation Committee Report. Consequently, the Submission's inclusion
in the 2007 Proxy Materials would be materially misleading to the
Company's shareholders.
While in Sara Lee the Staff permitted the proponent to revise its
proposal "to make clear that the advisory vote would relate to the
description of the company's objectives and policies regarding named
executive officer compensation," the Staff stated that it was doing so
"because the requirements for the Compensation Committee Report were
revised following the deadline for submitting proposals" to Sara Lee.
Here, unlike in Sara Lee, the Submission was submitted well after the
adoption and public release of the SEC's new rules regarding executive
compensation disclosure. The Proponent submitted the Submission to the
Company on November 8, 2006, more than three months after the Commission
adopted the new rules on July 26, 2006. Moreover, the Proponent
submitted the Submission more than two months after the new rules were
publicly released on August 29, 2006. Consequently, the Submission is
excludable under Rule 14a-8(i)(3) because it is materially misleading,
and the Staff should not permit its revision.
II. The Submission May Be Excluded Under Rule 14a-8(a) Because It Seeks
An Advisory Vote.
The Submission is not a proposal for purposes of Rule 14a-8 because it
does not present a proposal for shareholder action but instead seeks to
provide a mechanism that would allow shareholders to express their views
on a specified topic. Under the Commission's rules, Staff responses to
no-action requests under Rule 14a-8(a) and other Staff precedent, such a
vote is not a proper subject under Rule 14a-8.
A. Requests for Advisory Votes Are Excludable Under Commission
Amendments To Rule 14a-8.
The rulemaking history of Rule 14a-8 clearly demonstrates that requests
for advisory votes are not proper subjects for shareholder proposals and
thus are excludable. Rule 14a-8(a) states in relevant part:
Question 1: What is a proposal? A shareholder proposal is your
recommendation or requirement that the company and/or its board of
directors take action, which you intend to present at a meeting of the
company's shareholders....
Rule 14a-8(a) (emphasis added).
Rule 14a-8(a) was adopted as part of the 1998 amendments to the proxy
rules. In the Commission's 1997 release proposing these amendments, the
Commission noted:
The answer to Question 1 of revised rule 14a-8 would define a "proposal"
as a request that the company or its board of directors take an action.
The definition reflects our belief that a proposal that seeks no
specific action, but merely purports to express shareholders' views, is
inconsistent with the purposes of rule 14a-8 and may be excluded from
companies' proxy materials. The Division, for instance, declined to
concur in the exclusion of a "proposal" that shareholders express their
dissatisfaction with the company's earlier endorsement of a specific
legislative initiative. Under the proposed rule, the Division would
reach the opposite result, because the proposal did not request that the
company take an action.
Proposing Release, Amendments to Rules on Shareholder Proposals,
Exchange Act Release No. 39093 (September 18, 1997) (emphasis added)
(citation omitted).
The Commission subsequently adopted this definition as proposed:
We are adopting as proposed the answer to Question 1 of the amended rule
defining a proposal as a request or requirement that the board of
directors take an action. One commenter objected to the proposal on
grounds that the definition appeared to preclude all shareholder
proposals seeking information. In formulating the definition, it was not
our intention to preclude proposals merely because they seek
information, and the fact that a proposal seeks only information will
not alone justify exclusion under the definition.
Adopting Release, Amendments to Rules on Shareholder Proposals, Exchange
Act Release No. 40018 (May 21, 1998) (citations omitted).
The Submission is exactly of the type addressed by the Commission in the
releases cited above as the supporting statements in the Submission
acknowledge. Echoing the language in the Commission's rulemaking
releases, the supporting statement indicates that the purpose of the
Submission is to give shareholders a "mechanism for providing ongoing
input at [the] company." Thus, under the clear language of Rule
14a-8(a), the Submission is not a proper subject under Rule 14a-8.
B. The Submission Is Not A Proposal For Purposes Of Rule 14a-8 Based On
Staff Precedent.
Following adoption of Rule 14a-8(a), the Staff has consistently
confirmed that a shareholder submission is excludable if it "merely
purports to express shareholders' views" on a subject matter. For
example, in Sensar Corp. (avail. Apr. 23, 2001), the Staff concurred
that a submission seeking to allow a shareholder vote to express
shareholder displeasure over the terms of stock options granted to
management, the board of directors and certain consultants could be
omitted under Rule 14a-8(a) because it did not recommend or require any
action by the company or its board of directors. See also CSX Corp.
(avail. Feb. 1, 1999) (concurring that a submission was excludable under
Rule 14a-8(a) where a shareholder submitted three poems for
consideration but did not recommend or require any action by the company
or its board of directors).
The Submission parallels the submission in Sensar: it seeks an advisory
vote on the Compensation Committee Report in the proxy statement, and
the advisory vote merely allows shareholders to express their views on
that information. The Submission's supporting statement clearly
demonstrates that this is the Proponent's objective. For example, as
noted above, the supporting statement indicates that advisory vote on
the Compensation Committee Report in the proxy statement will provide
shareholders with a "mechanism for providing ongoing input at [the]
company."
The Submission's formulation as a request that the Company adopt a
policy of submitting an advisory vote to shareholders does not change
the Submission's status for purposes of Rule 14a-8(a). In Exchange Act
Release No. 20091 (August 16, 1983), the Commission stated that the
substance of a shareholder proposal and not its form is to be examined
in determining whether the proposal is a proper matter for a shareholder
vote under Rule 14a-8. As the text of the release explains:
In the past, the staff has taken the position that proposals requesting
issuers to prepare reports on specific aspects of their business or to
form special committees to study a segment of their business would not
be excludable under Rule 14a-8(c)(7). Because this interpretation raises
form over substance and renders the provisions of paragraph (c)(7)
largely a nullity, the Commission has determined to adopt the
interpretative change set forth in the Proposing Release. Henceforth,
the staff will consider whether the subject matter of the special report
or the committee involves a matter of ordinary business; where it does,
the proposal will be excludable under Rule 14a-8(c)(7).
Adopting Release, Amendments to Rule 14 a-8 Under the Securities
Exchange Act of 1934 Relating to Proposals by Security Holders, Exchange
Act Release No. 20091 (August 16, 1983).
The Staff applies this same approach throughout Rule 14a-8. When
evaluating a proposal that requests that a company's board adopt a
policy, the Staff has consistently looked at the subject matter
underlying the proposed policy to determine whether a proposal is
excludable under Rule 14a-8, and has not considered the request to adopt
a policy itself as the subject of the proposal. Likewise, when a
proposal has requested that management take a particular action, the
Staff has examined whether that action is a proper subject under Rule
14a-8. For example:
In letters where shareholders have requested companies to adopt a
policy of submitting the selection of auditors to a vote, the Staff has
focused on the subject of the policy (the manner of selecting auditors)
in determining that the proposal is excludable under Rule 14a-8(i)(7).
See, e.g., Xcel Energy Inc. (avail. Jan. 28, 2004). See also El Paso
Corp. (avail. Feb. 23, 2005) (proposal requesting that company adopt a
policy of hiring a new independent auditor at least every ten years
excluded under Rule 14a-8(i)(7) based on the underlying subject, "the
method of selecting independent auditors.").
In determining whether a shareholder proposal asking that a company
adopt a policy would, if implemented, cause the company to violate the
law for purposes of Rule 14a-8(i)(2), the Staff examines whether
implementation of the actions that are the subject of the proposed
policy would violate the law, not whether adoption of the policy itself
would violate the law. See, e.g., Mobil Corp. (avail. Jan. 29, 1997)
(proposal as originally submitted to the company asking it to adopt a
policy prohibiting executives from exercising options within six months
of a significant workforce reduction excluded pursuant to the
predecessor to Rule 14a-8(i)(2) because the subject matter of the policy
would require the company to breach existing contractual obligations).
In determining whether a shareholder proposal asking that a company
adopt a policy is vague and indefinite for purposes of exclusion under
Rule 14a-8(i)(3), the Staff looks at the subject matter of the proposed
policy. See, e.g., Duke Energy Corp. (avail. Feb. 8, 2002) (proposal
urging the board to adopt a policy to transition to a nominating
committee composed entirely of independent directors as openings occur
was vague because the underlying action required creation of a
nominating committee, a fact not adequately disclosed in the proposal or
supporting statement).
In determining whether a shareholder proposal asking that a company
adopt a policy involves a personal grievance for purposes of Rule
14a-8(i)(4), the Staff looks at the subject matter of the proposed
policy. See, e.g., Intl. Business Machines Corp. (avail. Dec. 18, 2002)
(proposal urging the board to adopt a policy to honor any written
commitments from company executives to investigate certain claims
excluded because the subject matter of the proposed action related to a
personal claim or grievance).
In determining whether a shareholder proposal requesting a company to
adopt a policy is not significant to a company's business for purposes
of Rule 14a-8(i)(5), the Staff looks at the subject matter of the
proposed policy. See, e.g., Procter & Gamble Co. (avail. Aug. 11, 2003)
(proposal requesting the company to adopt a policy forbidding human
embryonic stem cell research excluded under Rule 14a-8(i)(5) when the
company did not engage in the activity that was the subject of the
proposed policy); Intl. Business Machines Corp. (avail. Feb. 23, 1983)
(proposal requesting the company to adopt a policy that its directors
require certain actions at other companies where they serve as directors
excluded under predecessor to Rule 14a-8(i)(5) because the subject
matter of the policythe actions its directors were to take at other
companiesdid not relate to the company's business).
When examining whether it is beyond a company's power to implement a
shareholder proposal requesting that the company adopt a particular
policy for purposes of Rule 14a-8(i)(6), the Staff looks at
implementation of the actions that are the subject of the proposed
policy, not whether the company has the power to adopt the policy
itself. See, e.g., Catellus Development Corp. (avail. Mar. 3, 2005)
(proposal that the company adopt a policy relating to a particular piece
of property was beyond the company's power to implement because the
company no longer owned the property that was the subject of the
proposed policy and could not control the property's transfer, use or
development); General Electric Co. (avail. Jan. 14, 2005) (proposal that
the company adopt a policy that an independent director serve as
chairman of the board excluded under Rule 14a-8(i)(6) because the
company could not ensure that the subject of the proposed policy would
be satisfiedi.e., that the chairman retain his or her independence at
all timesand no mechanism was provided to cure a failure); Ford Motor
Co. (avail. Feb. 27, 2005) (same).
In determining whether a shareholder proposal conflicts with a company
proposal for purposes of Rule 14a-8(i)(9), the Staff looks at the
subject matter of the proposals, even if one requests the company to
adopt a policy and the other is implemented through a different process.
See, e.g., Baxter International Inc. (avail. Jan. 6, 2003) (proposal
urging the board to adopt a policy prohibiting future stock option
grants to executive officers excluded because the underlying subject of
the proposed action conflicts with substance of the company's proposal
that shareowners approve a new executive incentive compensation plan).
In determining whether a company has, for purposes of Rule
14a-8(i)(10), substantially implemented a shareholder proposal asking
the company to adopt a policy, the Staff looks at the substance of the
underlying subject of the proposed policy compared with actions taken by
the company. See, e.g., Intel Corp. (avail. Feb. 14, 2005) (proposal
requesting adoption of policy of expensing stock options excluded under
Rule 14a-8(i)(10) based upon the company's mandatory expensing of stock
options under SFAS 123(R)).
In determining whether one shareholder proposal substantially
duplicates or conflicts with another proposal for purposes of Rule
14a-8(i)(11), the Staff looks at the subject matter of the proposals,
even if one requests the company to adopt a policy and the other does
not. See, e.g., Merck & Co. (avail. Jan. 10, 2006) (proposal requesting
that the company adopt a policy that a significant portion of future
stock option grants be performance-based substantially duplicated the
subject of another proposal requesting the company to take the necessary
steps so that no future stock options be awarded to anyone).
In determining whether a shareholder proposal is substantially the
same as other proposals that have not received an adequate vote in prior
years for purposes of Rule 14a-8(i)(12), the Staff looks at the subject
matter of the proposals, even if one requests the company to adopt a
policy and the other does not. See, e.g., Eastman Chemical Co. (avail.
Mar. 27, 1998) (proposal requesting that the company adopt a policy not
to manufacture cigarette filters until certain research had been
completed excluded because the subject of the proposed policy was
substantially the same as a prior proposal requesting that the company
take the necessary steps to divest its cigarette filter operations,
which earlier proposal had not received sufficient shareowner support).
Here, the Submission asks for adoption of a policy, but the subject
matter of the Submission concerns providing shareholders an advisory
vote, a matter that is not a proper subject of a shareholder proposal
under Rule 14a-8(a). The Proponent should not be able to avoid the
application of Rule 14a-8(a) merely by asking that the Company adopt a
policy on (or submit for a vote) a matter that, if proposed directly by
the shareholder, would not be a proper subject under Rule 14a-8(a).
Consistent with the Commission's decisions that proposals should be
assessed on the basis of their substance and not their form, as stated
in its prior Rule 14a-8 rulemaking discussed above, and consistent with
the Staff's approach in interpreting every other aspect of Rule 14a-8 as
reflected in the precedent above, the subject matter of the policy set
forth under the Submission, and not the policy itself or the form of the
proposal, is to be evaluated for purposes of assessing compliance with
Rule 14a-8. Under these standards, the Submission does not constitute a
proposal for purposes of Rule 14a-8(a) and, accordingly, can be excluded
from the Company's 2007 Proxy Materials.
C. A Request For Future Votes Is Not A Proper Form For A Shareholder
Proposal And Fails To Satisfy The Procedural Requirements Of Rule 14a-8.
In addition to the bases for exclusion discussed above, the Submission
is not appropriate under Rule 14a-8 because it seeks to implement a
policy that would provide for a matter to be submitted for a shareholder
vote in each year, without satisfying any of the procedural requirements
of Rule 14a-8 with respect to those future years. This form of proposal
is substantively different from a proposal that requests a company to
take a particular action (such as implementation of a charter amendment
declassifying the board) or a proposal to not take a particular action
(such as adoption of a rights plan) without seeking a shareholder vote.
In those situations, the underlying subject of the proposal is a
specific corporate action and the future shareholder vote is incidental
to management taking the underlying action. Here, in contrast, the
underlying action sought by the Proponent is that a particular matteran
advisory statement expressing the shareholders' sentimentbe placed
before shareholders for an annual vote. Rule 14a-8 prescribes the
procedures that a shareholder is to follow if it wishes a particular
matter to be placed before shareholders at a particular meeting;1 it is
inconsistent with the structure and intent of Rule 14a-8 to allow a
shareholder to propose that management submit the shareholder's proposal
to an annual vote at an indefinite number of future meetings.
If one looked to the effect of the Submission in subsequent years, it is
clear that the purposes of the procedural requirements under Rule 14a-8
could be evaded easily. For example, Rule 14a-8(b) requires a
shareholder to satisfy certain ownership requirementsa proponent "must
have continuously held at least $2,000 in market value, or 1%, of the
company's securities entitled to be voted on the proposal at the meeting
for at least one year by the date [the proponent] submit[s] the
proposal" and "must continue to hold those securities through the date
of the meeting." 2 Rule 14a-8(c) limits a proponent to submitting no
more than one proposal for a particular shareholders' meeting. Rules
14a-8(i)(9) and (i)(11) allow a proposal to be excluded when it
conflicts with a proposal submitted by the company or duplicates a topic
that is the subject of a previously submitted proposal. Allowing a
shareholder to submit a proposal calling for an annual vote on a
specific topic for an indefinite number of years in the future would
allow proponents to circumvent these important procedural requirements.
Instead, the rules contemplate that a proponent will submit the topic or
proposal itself at each meeting at which it is to be considered, and
will demonstrate compliance with the requirements of Rule 14a-8 with
respect to that meeting. Because the Submission would allow the
Proponent to circumvent the requirements of Rule 14a-8, and the
Proponent has not sought to demonstrate that the requirements of Rule
14a-8 would be satisfied with respect to future votes sought by the
Submission, the Submission is excludable under Rule 14a-8.
III. The Submission May Be Excluded Under Rule 14a-8(c) and Rule
14a-8(f) Because It Consists Of Multiple Proposals.
Alternatively, if the Staff does not concur that the Submission is
excludable under Rule 14a-8(a), the Company believes that it may exclude
the Submission under Rule 14a-8(f) because it does not satisfy Rule
14a-8(c). Rule 14a-8(c) provides that "[e]ach shareholder may submit no
more than one proposal to a company for a particular shareholders'
meeting." As discussed below, despite proper notice of this procedural
deficiency from the Company, the Proponent submitted multiple
shareholder proposals for inclusion in the 2007 Proxy Materials.
On November 8, 2006, the Company received from the Proponent the
Submission for inclusion in the 2007 Proxy Materials. See Exhibit A.
Accordingly, in a letter dated November 17, 2006, which was sent to the
Proponent by e-mail at the Proponent's request, and also by express
mail, within 14 calendar days of the Company's receipt of the
Proponent's Submission, the Company informed the Proponent of the
requirements of Rule 14a-8 and how to cure various procedural
deficiencies (the "Deficiency Notice").3 See Exhibit B. Among other
things, the Deficiency Notice informed the Proponent that Rule 14a-8(c)
permits a shareholder to submit no more than one proposal for a
particular meeting, and requested that the Proponent modify the
Submission to reduce the number of proposals to one. Thus, the Company
satisfied its obligations under Rule 14a-8(f) by providing the Proponent
with a Deficiency Notice that was both sent to the Proponent in a timely
manner and provided clear instructions as to how the Proponent might
cure the procedural defects. The Company received no reply regarding the
Rule 14a-8(c) deficiency from the Proponent in response to the
Deficiency Notice.
The Submission consists of two separate and distinct shareholder
proposals that differ in both language and substance:
The first part of the Submission focuses on a shareholder advisory
vote on executive compensation and states, "shareholders ask our board
of directors to adopt a policy that shareholders be given the
opportunity to vote on an advisory management resolution at each annual
meeting to approve the Compensation Committee report in the proxy
statement" (the "First Proposal").
The second part of the Submission focuses on additional disclosures
and would require that the Company disclose "the percentage of total
executive pay and benefits that are performance-basedmeaning linked to
demonstrable performance criteria measured by our company's performance
compared to its peer companies" (the "Second Proposal").
The Staff consistently has taken the position that multiple unrelated
proposals are excludable, even if packaged as a single submission. See,
e.g., American Electric Power (avail. Jan. 2, 2001) (multiple proposals
regarding director tenure and compensation, and frequency of board
meetings excluded); IGEN Int'l, Inc. (avail. July 3, 2000) (multiple
proposals regarding the size of the company's board, the frequency of
board meetings, and ownership requirements to call shareholder meetings
excluded). Likewise, the Staff consistently has agreed that
substantially distinct business items within a single submission may not
be considered a single proposal for purposes of Rule 14a-8(c),
notwithstanding the fact that such items may relate to the same general
topic. See, e.g., Electronic Data Systems Corp. (avail. March 10, 1998)
(proposals to eliminate board and establish "independent lead director"
excluded); Allstate Corp. (avail. Jan. 29, 1997) (proposals instituting
cumulative voting for directors and prohibiting practices that could
impair the effectiveness of cumulative voting excluded). However, the
Staff has taken the position that multiple proposals constitute one
proposal for purposes of Rule 14a-8(c) (or its predecessor) if they
relate to a single, well-defined unifying concept. See Exchange Act
Release No. 12,999 (November 22, 1979). The Staff has, for example,
found such a well-defined unifying concept where a proposal sought,
through various means, to eliminate a company's anti-takeover defenses
or balance employee compensation levels. See, e.g., Computer Horizons
Corp. (avail. Apr. 1, 1993) (proposal recommending that the company
modify or terminate each plan, contract, or arrangement that would
discourage potential buyers of the company was not excludable under the
predecessor to Rule 14a-8(c)), Lockheed Corp. (avail. Mar. 11, 1994)
(proposal requesting that Management Incentive Compensation Plan be
suspended and employees be reinstated, and that until this is achieved,
compensation be tied to the prior year's compensation was not
excludable).
No clearly defined unifying concept exists with respect to the two parts
of the Submission. While at best it could be said that both requests
relate to executive compensation, this is a general and broad concept in
contrast to the narrow and well-defined concept of balancing employee
compensation levels that the Staff considered in Lockheed. Here, the
First Proposal would require the company to allow shareholders to vote
on "an advisory management resolution ... to approve the Compensation
Committee report" and, thus, is focused on an advisory vote. The Second
Proposal would require the Company to disclose, beyond what is currently
required under the rules governing the disclosure of executive
compensation, "the percentage of total executive pay and benefits that
are performance-based," and appears to focus on linking executive pay to
the performance of the company relative to its "peer" companies. The
Staff has permitted the exclusion of multiple unrelated proposals that
lack a unifying concept under similar circumstances. See, e.g.,
Fotoball, Inc. (avail. May 6, 1997) (concurring in the exclusion under
the predecessor to Rule 14a-8(c) of a submission that included proposals
setting forth minimum stock ownership requirements, recommending that
directors be paid in equity compensation, and prohibiting non-employee
directors from performing other services for the company for
compensation); HealthSouth Corp. (avail. March 28, 2006) (submission
containing proposals to grant shareholders the power to increase the
size of the board, and to fill any director vacancies created by such an
increase excluded); Torotel, Inc. (avail. Nov. 1, 2006) (six proposals
aimed at removing bylaws that "restrict shareholders from properly
presenting and acting upon matters at shareholder meetings," including
three addressing the number, election, and classification of directors
excluded); Exxon Mobil Corp. (avail. March 19, 2002) (concurring in the
exclusion of proposals increasing the number of board nominees and
establishing criteria for selecting new nominees); Enova Corp. (avail.
Feb. 9, 1998) (concurring in the exclusion of proposals to elect the
entire board annually and appoint an "independent lead director");
Allstate Corp. (avail. Jan. 29, 1997) (proposals to institute cumulative
voting in director elections and to prevent certain actions that might
impair its effectiveness excluded).
In summary, despite clear and timely notice from the Company regarding
the requirements of Rule 14a-8(c) and how to correct the Submission, the
Proponent submitted two separate and distinct shareholder proposals; one
requesting an advisory vote and one requesting the Company to make
additional disclosures. Accordingly, consistent with the positions taken
by the Staff in Fotoball; Exxon Mobil, Enova, and elsewhere, we believe
that the Submission may be excluded pursuant to Rule 14a-8(c) and Rule
14a-8(f).
CONCLUSION
Based upon the foregoing analysis, we respectfully request that the
Staff concur that it will take no action if the Company excludes the
Proposal from its 2007 Proxy Materials. We would be happy to provide you
with any additional information and answer any questions that you may
have regarding this subject. In addition, the Company agrees to promptly
forward to the Proponent any response from the Staff to this no-action
request that the Staff transmits by facsimile to the Company only.
If we can be of any further assistance in this matter, please do not
hesitate to call me at (202) 955-8653 or Steven M. Rosenberg, the
Company's Corporate Secretary, at (732) 524-2452.
Sincerely,
/s/
Amy L. Goodman
Enclosures
cc: Steven M. Rosenberg, Johnson & Johnson
John Chevedden
-----FOOTNOTES-----
1 Allowing shareholders to submit a subject for vote at an indefinite
number of annual meetings is inconsistent with Rule 14a-8(c), which
instructs shareholders that "[e]ach shareholder may submit no more than
one proposal to a company for a particular shareholders' meeting."
2 In this regard, by a letter dated November 17, 2006, pursuant to Rule
14a-8(f), the Company notified the Proponent of its view that the
Proponent would be required to satisfy the requirements of Rule 14a-8(b)
with respect to each future year at which the advisory vote sought by
the Submission would be voted on. See Exhibit B. The Proponent did not
provide the information requested by the Company in the letter, which
was properly sent to the Proponent within 14 days of Johnson & Johnson
receiving the Submission. Thus, the Submission may be excluded pursuant
to Rule 14a-8(f) because the Proponent did not satisfy Rule 14a-8(b)(1)
in this regard.
3 The Company sent the Deficiency Notice via e-mail pursuant to the
Proponent's request in the letter accompanying his Submission, that
Johnson & Johnson "communicate via email" "[i]n the interest of saving
company expenses."
[INQUIRY LETTER]
William Steiner
112 Abbottsford Gate
Piermont, NY 10968
Mr. William C. Weldon
Chairman of the Board
Johnson & Johnson (JNJ)
1 Johnson & Johnson Plaza
New Brunswick, NJ 08933
Rule 14a-8 Proposal
Dear Mr. Weldon,
This Rule 14a-8 proposal is respectfully submitted in support of the
long-term performance of our company. This proposal is submitted for the
next annual shareholder meeting. Rule 14a-8 requirements are intended to
be met including the continuous ownership of the required stock value
until after the date of the respective shareholder meeting. This
submitted format, with the shareholder-supplied emphasis, is intended to
be used for definitive proxy publication. This is the proxy for Mr. John
Chevedden and/or his designee to act on my behalf in shareholder
matters, including this Rule 14a-8 proposal for the forthcoming
shareholder meeting before, during and after the forthcoming shareholder
meeting. Please direct all future communication to Mr. Chevedden at:
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278
T: 310-371-7872
olmsted7p (at) earthlink.net
(In the interest of saving company expenses please communicate via
email.)
Your consideration and the consideration of the Board of Directors is
appreciated in support of the long-term performance of our company.
Please acknowledge receipt of this proposal by email.
Sincerely,
/s/
William Steiner
Date 10/12/06
cc: Michael H. Ullmann
Corporate Secretary
T: 732 524-0400
F: 732-524-2185
[INQUIRY LETTER]
JOHN CHEVEDDEN
2215 Nelson Avenue, No. 205
Redondo Beach, CA 90278 310-371-7872
January 29, 2007
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Johnson & Johnson (JNJ)
Shareholder Position on Company No-Action Request Rule 14a-8 Proposal:
Shareholder Vote on Executive Pay William Steiner
Ladies and Gentlemen:
This is an initial response to the company December 21, 2006 no action
request. A second response will be forwarded soon addressing any
remaining rule 14a-8 issues raised by the company.
The Staff said in Sara Lee Corporation (September 11, 2006) in regard to
permitting to a similarly worded rule 14a-8 proposals to be updated:
"Accordingly, a proposal that is revised to replace the phrase `report
of the Compensation and Employee Benefits Committee' with the phrase
`the Compensation Discussion and Analysis' may not be omitted under rule
14a-8 (i) (3)."
Thus it appears that the Sara Lee precedent shows that the topic of this
proposal is a valid rule 14a-8 topic and sets a precedent to update the
text of rule 14a-8 proposals in conformance with recent rule changes. I
believe that such an opportunity to update rule 14a-8 proposal text
should apply to at least proposals submitted for the 2007 proxy season
most of which were required to already be submitted and were thus
submitted within 3-months of the Sara Lee definitive proxy date of
September 22, 2006.
In discussing Rule 14a-8 (i) (3) SLB 14B states:
"We have had, however, a long-standing practice of issuing no-action
responses that permit shareholders to make revisions that are minor in
nature and do not alter the substance of the proposal. We adopted this
practice to deal with proposals that comply generally with the
substantive requirements of rule 14a-8, but contain some minor defects
that could be corrected easily."
Like Sara Lee this rule 14a-8 proposal should thus be allowed to conform
to the new disclosure rules because the change is minor in nature and
does not alter the substance of the proposal.
The company seems to incorrectly suggest that in drafting a rule 14a-8
proposal a shareholder should be as currently informed on company
executive compensation disclosure rules as a company securities lawyer.
The company does not claim that the significance of Sara Lee Corporation
(September 11, 2006) was widely reported. The company does not claim
that one proxy season has elapsed since the new CD&A reporting
requirement.
The company does not claim that the proponent of the Sara Lee rule 14a-8
proposal was given any special consideration because it was a small
entity that does not regularly retain attorneys.
The company does not claim that "only" prefaced this text in Sara Lee
Corporation (September 11, 2006) : "because the requirements for the
Compensation Committee Report were revised following the deadline for
submitting proposals, we believe that the proposal may similarly be
revised to make clear that the advisory vote would relate to the
description of the company's objectives and policies regarding named
executive officer compensation that is included in the Compensation
Discussion and Analysis."
Excluding this topic by disallowing an update of five words would seem
to be counter to the increasing interest of the Securities and Exchange
Commission in addressing excessive executive pay as highlighted in this
article, "SEC puts bosses' pay in spotlight," which includes a quote by
SEC Chairman Christopher Cox:
"SEC puts bosses' pay in spotlight
"10 Jan 2007
"Compensation & Benefits. CSR & Governance.
Investors in American corporations are to get a much clearer idea of the
sorts of rewards being lavished on top executives, and whether they are
worth it, under new disclosure rules.
"The pay and perks of America's top executives are to come under much
closer scrutiny following the agreement of new rules by the Securities
and Exchange Commission.
"The new system of disclosure is expected to show more clearly, and in
much greater detail, what sort of compensation, salaries and bonuses
senior executives in listed companies are taking home.
"The scorecard disclosures, outlined in annual reports and proxy
statements, will come closer than ever to a full accounting of total
compensation for companies' top two executives and the next three
highest-paid executives, said the Associated Press.
"'The new disclosure requirements will be easier for companies to
prepare and for investors to understand,' said SEC Chairman Christopher
Cox.
"'The SEC, in a very short amount of time for a regulator, has pushed
through very sweeping pay disclosures that, for the first time, will
give investors a very clear picture of CEO pay,' added Amy Borrus,
deputy director of the Council of Institutional Investors. `The big
picture is a very big win for investors.'
"Investors wondering whether top executives are earning their pay have
always been able to look for evidence in annual reports and proxies but
key parts of this information often were buried in footnotes. S"
The full text of the Sara Lee Staff Response Letter is:
September 11, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Sara Lee Corporation Incoming letter dated June 29, 2006 The
proposal urges the board to adopt a policy that stockholders be given
the opportunity at each annual meeting to vote on an advisory resolution
to approve the report of the Compensation and Employee Benefits
Committee.
There appears to be some basis for your view that the proposal may be
materially false or misleading under rule 14a-8(i)(3). In arriving at
this position, we note that the Board's Compensation Committee Report
will no longer be required to include a discussion of the compensation
committee's "policies applicable to the registrant's executive officers"
(as required previously under Item 402 (k) (1) of Regulation S-K) and,
instead, will be required to state whether: (a) the compensation
committee has reviewed and discussed the Compensation Discussion and
Analysis with management; and (b) based on the review and discussions,
the compensation committee recommended to the board of directors that
the Compensation Discussion and Analysis be included in the company's
annual report on Form 10-K and, as applicable, the company's proxy or
information statement. The proposal's stated intent to "allow
stockholders to express their opinion about senior executive
compensation practices" would be potentially materially misleading as
shareholders would be voting on the limited content of the new
Compensation Committee Report, which relates to the review, discussions
and recommendations regarding the Compensation Discussion and Analysis
disclosure rather than the company's objectives and policies for named
executive officers described in the Compensation Discussion and
Analysis. However, because the requirements for the Compensation
Committee Report were revised following the deadline for submitting
proposals, we believe that the proposal may similarly be revised to make
clear that the advisory vote would relate to the description of the
company's objectives and policies regarding named executive officer
compensation that is included in the Compensation Discussion and
Analysis. Accordingly, a proposal that is revised to replace the phrase
"report of the Compensation and Employee Benefits Committee" with the
phrase "the Compensation Discussion and Analysis" may not be omitted
under rule 14a-8 (i) (3).
We are unable to concur in your view that Sara Lee may exclude the
proposal under rule 14a-8(i) (2). Accordingly, we do not believe that
Sara Lee may omit the proposal from its proxy materials in reliance on
rule 14a-8 (i) (2).
We are unable to concur in your view that Sara Lee may exclude the
proposal under rule 14a-8 (i) (7). Accordingly, we do not believe that
Sara Lee may omit the proposal from its proxy materials in reliance on
rule 14a-8 (i) (7).
Sincerely,
/s/
Ted Yu
Special Counsel
Since 1992, the Staff has consistently taken the position that proposals
dealing with the compensation of "senior executives" may not be omitted
in reliance on the ordinary business exclusion.
The following company precedents, including precedents on poetry
publication and on shareholder displeasure, seem to speak for themselves
as not applicable:
CSX Corp.
WSB No.: 020199045
Public Availability Date: Monday, February 1, 1999
Abstract:
A shareholder proposal, which consists of three poems, may be omitted
from the company's proxy material under rule 14a-8 (a) because it does
not recommend or require that the company or its board of directors take
an action.
Sensar Corp.
WSB No.: 0423200109
Public Availability Date: Monday, April 23, 2001
Abstract:
...A shareholder proposal, which expresses shareholder displeasure over
matters relating to stock options, may be omitted from the company's
proxy material under rule 14a-8 (a), where it does not recommend or
require that the company or its board of directors take any action.
Furthermore in the Sara Lee precedent, the proponent did not even ask
for the opportunity "to make revisions" in accordance with SLB 14B, yet
the proponent was granted the opportunity.
For the above reasons it is respectfully requested that concurrence not
be granted to the company. And if necessary an opportunity be granted to
make revisions" as in Sara Lee Corporation (September 11, 2006) and in
accordance with SLB 14B. It is also respectfully requested that the
shareholder have the last opportunity to submit material in support of
including this proposal since the company had the first letter.
Sincerely,
John Chevedden
cc:
William Steiner
Steven Rosenberg <srosenb@corus.jnj.com>
[INQUIRY LETTER]JOHN CHEVEDDEN
2215 Nelson Avenue, No. 205
Redondo Beach, CA 90278 310-371-7872
January 30, 2007
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Johnson & Johnson (JNJ)
# 2 Shareholder Position on Company No-Action Request Rule 14a-8
Proposal: Shareholder Vote on Executive Pay
William Steiner
Ladies and Gentlemen:
This is an second response to the company December 21, 2006 no action
request.
On page 5 the company introduces Sensar Corp. (April 23, 2001) as its
first step in a false-premise 4-page argument segment. On page 6 the
company states that this pending rule 14a-8 proposal "parallels the
submission in Sensar." Yet this is clearly not the case because the
Staff Reply Letter in Sensar said that the Sensar rule 14a-8 proposal
"does not recommend or require that Sensar or its board of directors
take any action."
To the contrary this proposal calls for the directors to act by stating:
"RESOLVED, shareholders ask our board of directors to adopt a policy
that shareholders be given the opportunity to vote on an advisory
management resolution at each annual meeting to approve the Compensation
Committee report in the proxy statement."
The following is the Sensor Staff Reply letter that includes the Staff
text that the Sensar rule 14a-8 proposal "does not recommend or require
that Sensar or its board of directors take any action."
[STAFF REPLY LETTER]
April 23, 2001
Response of the Office of Chief Counsel
Division of Corporation Finance
Re: Sensar Corporation
Incoming letter dated April 11, 2001
The proposal expresses shareholder displeasure over matters relating to
stock options.
There appears to be some basis for your view that Sensar may exclude the
proposal under rule 14a-8 (a) because it does not recommend or require
that Sensar or its board of directors take any action. Accordingly, we
will not recommend enforcement action to the Commission of Sensar omits
the proposal from its proxy materials in reliance on rule 14a-8 (a) . In
reaching this position, we have not found it necessary to address the
alternative basis for omission upon which Sensar relies.
Sincerely,
Jonathan Ingram
Special Counsel
Then the company inappropriately uses the Exchange Act Release No.
20091.
Since 1992, the Staff has consistently taken the position that proposals
dealing with the compensation of "senior executives" may not be omitted
in reliance on the ordinary business exclusion. Yet the company does not
attempt to explain how the compensation of senior executives could be
considered a business segment addressed by Exchange Act Release No.
20091.
Hence the company has not provided a sound foundation for its laundry
list of purported precedents following its citing of Exchange Act
Release No. 20091.
Contrary to the company argument Rule 14a-8 was never intended to limit
a company from including an item on its ballot annually. Contrary to the
company argument this proposal does not seek to have management submit a
rule 14a-8 proposal annually.
This proposal is one topic. For example this proposal could be rephrased
(and retain the same meaning) to further emphasize that it is one topic:
RESOLVED, shareholders ask our board of directors to adopt a policy that
shareholders be given the opportunity to vote on an advisory management
resolution at each annual meeting to approve the Compensation Committee
report in the proxy statement with disclosure of the percentage of total
executive pay and benefits that are performance-based.
The "single, well-defined unifying concept" of the proposal is to seek
an opportunity to vote on executive pay with a consideration of the
incentive factors that could have a key role in evaluating such
executive pay.
Shareholders should have a meaningful opportunity to vote on executive
pay based on whether such pay has significant incentives or virtually no
incentives.
For the above reasons and the reasons in the January 29, 2007
shareholder letter it is respectfully requested that concurrence not be
granted to the company. And if necessary an opportunity be granted to
make revisions as in Sara Lee Corporation (September 11, 2006) and in
accordance with SLB 14B.
It is also respectfully requested that the shareholder have the last
opportunity to submit material in support of including this proposal
since the company had the first letter.
Sincerely,
John Chevedden
cc:
William Steiner
Steven Rosenberg<srosenb@corus.jnj.com>
[STAFF REPLY LETTER]
January 31, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Johnson & Johnson Incoming letter dated December 21, 2006
The proposal asks the board to adopt a policy that shareholders be given
the opportunity at each annual meeting to vote on an advisory management
resolution to approve the report of the Compensation Committee in the
proxy statement.
There appears to be some basis for your view that Johnson & Johnson may
exclude the proposal under rule 14a-8(i)(3), as materially false or
misleading under rule 14a-9. Accordingly, we will not recommend
enforcement action to the Commission if Johnson & Johnson omits the
proposal from its proxy materials in reliance on rule 14a-8(i)(3). In
reaching this position, we have not found it necessary to address the
alternative bases for omission upon which Johnson & Johnson relies.
Sincerely,
/s/
Gregory Belliston
Attorney-Adviser |
