Company Name: Burlington Northern
Public Availability Date: January 31, 2007
Document Sections:
[INQUIRY LETTER]
December 28, 2006
Via UPS
Office of Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Burlington Northern Santa Fe CorporationStockholder Proposal
Submitted by Emil Rossi
Ladies and Gentlemen:
This letter is submitted by Burlington Northern Santa Fe Corporation, a
Delaware corporation ("BNSF"), pursuant to Rule 14a-8(j) under the Securities
Exchange Act of 1934 (the "Exchange Act") to notify the Securities and Exchange
Commission (the "Commission") of BNSF's intention to exclude from its proxy
materials for its 2007 annual meeting of stockholders (the "Annual Meeting") a
stockholder proposal, received on November 7, 2006 (the "Proposal") from Emil
Rossi ("Rossi"). For the reasons set forth below, BNSF intends to exclude the
Proposal pursuant to Rule 14a-8(i)(3) and Rule 14a-8(i)(7) on the grounds that
it is materially misleading in violation of the proxy rules and relates to the
ordinary business operations of the company. BNSF requests confirmation that the
staff of the Division of Corporation Finance (the "Staff") will not recommend
enforcement action to the Commission if BNSF excludes the Proposal from its
Annual Meeting proxy statement.
BNSF intends to file its definitive proxy materials for the Annual Meeting on
or about March 20, 2007. In accordance with Rule 14a-8(j), six copies of this
letter and its exhibits are enclosed, and BNSF has sent one copy to Rossi and
his proxy/designee, John Chevedden.
The Proposal
The Proposal, attached hereto as Exhibit A, provides:
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 Proposal also provides:
The policy should provide that appropriate disclosures will be made to ensure
that stockholders fully understand that the vote is advisory, will not affect
any person's compensation and will not affect the approval of any
compensation-related proposal submitted for a vote of stockholders at the same
or any other meeting of stockholders.
Discussion
1. BNSF May Exclude the Proposal in Reliance on Rule 14a-8(i)(3) on the
Basis that it is Materially Misleading in Violation of Rule 14a-9.
Rule 14a-8(i)(3) permits the exclusion of a stockholder proposal if either
the proposal or the supporting statement is contrary to any of the proxy
rulesincluding Rule 14a-9, which prohibits the inclusion of materially false or
misleading statements in proxy soliciting materials. The Proposal is excludable
under Rule 14a-8(i)(3) for three reasons: first, the Proposal is materially
misleading, second, the Proposal is materially vague and indefinite and
therefore misleading; and third, any action ultimately taken upon implementation
of the Proposal would be different from the type of action envisioned by
stockholders at the time that their votes were cast.
a. The Proposal is Materially False and Misleading
1. References to Compensation Committee Report
The Proposal is excludable on the grounds that it is materially false or
misleading under Rule 14a-8(i)(3). The supporting statement, which is intended
to provide the purpose and scope of the Proposal cites the practice in the
United Kingdom of submitting a directors' remuneration report to an advisory
stockholder vote. When read together with the resolved clause, the supporting
statement could lead one to the conclusion that the Proposal would allow
shareholders to vote on executive compensation matters.
We note that the compensation committee 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)(l) 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 implication that it would allow shareholders to express their
opinion about 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. The Staff took the
position that a proposal substantially similar to the Proposal was potentially
materially misleading in Sara Lee Corp. (September 11, 2006). In Sara
Lee Corp., the Staff permitted the proponent to revise the proposal noting
that the requirements for the Compensation Committee Report had been revised
following the deadline for submitting proposals. In the instant case, however,
the Proposal was submitted several months following the revision to the
Compensation Committee Report requirements.
In addition, even if Rossi was permitted to revise The Proposal to refer to
the Compensation Discussion and Analysis instead of the Compensation Committee
Report, the Proposal would continue to be vague and indefinite. The following
questions are at the forefront of the ambiguities raised by the Proposal: What
would BNSF shareholders be asked to vote upon if the Proposal was implemented?
The Compensation Committee Report (or Compensation Discussion and Analysis) set
forth in the proxy statement? BNSF's executive officer compensation practices?
If the Compensation Committee Report (or Compensation Discussion and Analysis),
what then is the purpose of the Proposal? For example, what would it mean if
stockholders "disapprove" of the Compensation Committee Report (or Compensation
Discussion and Analysis)? Would that mean that they disapprove of the
disclosures therein, or that they object to the policies discussed?
Alternatively, if the Proposal seeks to require that stockholders be asked to
"approve" the compensation paid to BNSF's executive officers, how will that be
communicated to stockholders voting on the Proposal?
The Proposal, at best, is unclear on these points. The resolved clause
appears to suggest that the Proposal seeks a policy that would allow
stockholders to vote on the Compensation Committee Report, while the supporting
statement suggests that the Proposal seeks a stockholder vote on BNSF's
compensation practices. As a matter of law and practice, the Compensation
Committee Report (and now the Compensation Discussion and Analysis) simply
responds to the disclosure requirements of Regulation S-K and is not a proxy for
BNSF's compensation practices themselves.
In Sensar Corporation (Jul. 17, 2001), for example, the Staff agreed
with Sensar that it could exclude a proposal that provided that "The
shareholders wish to express displeasure over the terms of the options on 2.2
million shares of Sensar that were recently granted to management, the board of
directors, and certain consultants, and the shareholders wish to express
displeasure over the seemingly unclear or misleading disclosures relating to
those options." The Proposal, like the Sensar proposal, seeks to permit
stockholders to express their approval of compensation disclosures and not
compensation practices themselves. The Staff in Sensar agreed that this
provided a basis for excluding the proposal. We believe that the Staff should
take the same position here.
2. References to Shareholder Input
The fifth paragraph of the supporting statement provides that "Stockholders
do not have any mechanism for providing ongoing input at our Company." This
statement is inaccurate. As disclosed in BNSF's proxy statement, shareholders
may communicate with our Board, with non-management directors or one or more
Board members by mail to the address set forth in the proxy statement.
Shareholders considering the Proposal may be mislead into believing that an
advisory management resolution is the only way shareholders can communicate with
the Board regarding executive compensation.
The Staff has directed proponents to delete or correct inaccurate statements
concerning voting percentages in proposals or supporting statements. See The
Boeing Co. (Mar. 6, 2000); The Boeing Co. (Feb. 7, 2001); Northrop
Grumman Corp. (Feb. 16, 2001); and CenterPoint Energy, Inc. (Mar. 2,
2004). Further, the Staff has provided in Staff Legal Bulletin 14B that there
are certain circumstances where materially false and misleading statements in a
proposal may merit exclusion of the proposal.
3. References to Lead Director
The supporting statement also states that BNSF has no lead director. Again
this statement is inaccurate. BNSF's Corporate Governance Guidelines available
on its website provides that BNSF's Lead Director will rotate annually among the
chairs of the Audit Committee, the Directors and Corporate Governance Committee
or the Compensation and Development Committee. Again, shareholders considering
the Proposal may be mislead in considering the Proposal because Rossi's
supporting statement cites governance issues as a reason to support the
proposal.
As stated above, the Staff has concluded on numerous occasions that exclusion
or modification of a proposal is appropriate in circumstances where the proposal
contains materially false or misleading statements.
b. The Proposal is Materially Vague and Indefinite
The Staff has interpreted Rule 14a-8(i)(3) to permit the exclusion of a
stockholder proposal that it is vague, indefinite and therefore materially
misleading if "the resolution contained in the proposal is so inherently vague
or indefinite that neither the stockholders voting on the proposal, nor the
company in implementing the proposal (if adopted), would be able to determine
with any reasonable certainty exactly what actions or measures the proposal
requires." Staff Legal Bulletin No. 14B (Sep. 15, 2004). The Proposal is replete
with inherently vague and indefinite terms, and as a result, neither the
stockholders voting on the proposal, nor the company in implementing the
proposal would be able to determine with any reasonable certainty exactly what
actions or measures the Proposal requires.
The resolved clause contained in a stockholder proposal is the "action" item
- it tells stockholders voting on the proposal what the proposal intends to do.
It also serves as the blueprint for the board, contextualized by the supporting
statement, for the action the board is to take if the proposal is approved. The
resolved clause of the Proposal urges the board to adopt a policy that BNSF
shareholders be "given" the opportunity to vote on an "advisory management
resolution" to "approve" the report of the Compensation and Development
Committee set forth in the proxy statement (the "Compensation Committee
Report"). Key terms in the resolved clause - the terms "advisory management
resolution" and "approve," are undefined. Further, and perhaps most importantly,
the purpose of the policy and advisory management vote is unclear.
Additional ambiguities of the Proposal are raised by the statements that the
resolution will not affect "any person's" compensation and "will not affect the
approval of any compensation-related proposal submitted for a vote of
stockholders at the same or any other meeting of stockholders." These
statements undermine the Proposal and supporting statement. The supporting
statement suggests that the Proposal is intended to provide stockholders
influence over pay practices.
In fact, to the extent that BNSF adopts a policy that implements the Proposal
and seeks an advisory vote of stockholders, it may be materially misleading to
suggest that the advisory vote will not affect compensation practices. That is
because it is likely that BNSF's compensation practices and the compensation of
its executives will be affected if stockholders overwhelmingly disapprove of the
Compensation Committee Report. Further, stockholder disapproval of the
Compensation Committee Report likely will affect incentive plan and other
compensation proposals that BNSF subsequently will submit for stockholder
approval. As such, any statement that suggests that the vote will not affect
compensation practices will not only mislead stockholders, but also would
provide another basis for exclusionRule 14a-8(i)(2)on the grounds that if
implemented, the Proposal would cause BNSF to violate the antifraud provisions
of Rule 14a-9.
These ambiguities, particularly when coupled with the inconsistencies in the
Proposal and supporting statement, render the Proposal vague and indefinite and
therefore misleading.1
Further, these ambiguities are materialthere is a substantial likelihood that a
reasonable stockholder would consider the meaning of these termsparticularly
the scope and impact of the Proposal, to be important in deciding how to vote on
the Proposal. Accordingly, the Proposal falls squarely within parameters of
proposals that the Staff has agreed may be excluded in reliance on Rule
14a-8(i)(3).
On numerous occasions, the Staff has permitted the exclusion of stockholder
proposals that included inconsistencies and ambiguities that were analogous to
those presented by the Proposal, such as the Sensar Corporation no-action
letter cited above. The Staff's position in Sensar is consistent with
countless other no-action letters that involved proposals that, like the
Proposal, were materially vague and indefinite. See Puget Energy, Inc.
(Mar. 7, 2002) (excluding a proposal as vague and indefinite where the term
"improved corporate governance" was undefined and the supporting statement
discussed a range of corporate governance issues without elaborating on which of
those were considered "improved corporate governance"); CBRL Group (Sep.
6, 2001) (excluding a proposal requesting "full and complete disclosure of all
expenses relating to corporate monies being used for personal benefit of the
officers and directors and their friends" where none of the material terms were
adequately wdefined); see also IDACORP, Inc. (Jan. 9, 2001) (excluding a
proposal that required the company to determine the meaning of the phrase
"service area ... outside the United States" as overly vague and indefinite);
Bristol-Myers Squibb Co. (Feb. 1, 1999) (excluding a proposal requesting
"the Company adopt a policy not to test its products on unborn children or
cannibalize their bodies, but pursue preservation, not destruction, of their
lives").
As was the case in each of those letters, neither the stockholders voting on
the Proposal nor BNSF in implementing the Proposal will be able to determine
with any reasonable certainty exactly what actions or measures the proposal
requires. Based on this possibility, the Proposal falls squarely within the
parameters of Rule 14a-9 and may be omitted in reliance on Rule 14a-8(i)(3).
c. Any Action Ultimately Taken upon Implementation of the Proposal Would
Be Different from the Type of Action Envisioned by Stockholders at the Time That
Their Votes Were Cast
The Commission long has recognized that a stockholder proposal is materially
misleading where "any actions ultimately taken by the company upon
implementation of th[e] proposal could be significantly different from the
action(s) envisioned by shareholders voting on the proposal." Occidental
Petroleum Corp. (Feb. 11, 1991) (excluding a proposal that requested that
"stockholders have the right to vote on present as well as future shares that
are issued and outstanding in regard to buyback of shares"); Southeast
Banking Corporation (Feb. 8, 1982) (excluding a proposal that requested that
the company "refrain from any activities which may lead to its acquisition by
other corporations or by which it acquires other corporations including
acquisitions by way of mergers"). In this case, inconsistencies between the
Proposal and supporting statement make it likely that any actions ultimately
taken by the company upon implementation of the Proposal could be significantly
different from the actions envisioned by the stockholders upon voting on the
Proposal.
While it is not entirely clear, the resolved clause of the Proposal appears
fairly circumscribedit requests the adoption of a policy that would allow
stockholders to vote on an advisory management resolution approving the
Compensation Committee Report. If a stockholder casts a vote regarding the
Proposal based exclusively on the resolved clause, such stockholder likely would
interpret the Proposal as seeking the adoption of a policy that would, if
implemented, allow stockholders to vote on a resolution from BNSF seeking
"approval" of the Compensation Committee Report.
Stockholders, however, will not be voting exclusively on the resolved clause
- the Proposal is accompanied by a supporting statement, which read in
conjunction with the resolved clause, renders the Proposal materially
misleading. Based on the supporting statement, stockholders likely would believe
that approval of the Proposal would offer them direct and binding influence on
the compensation practices of BNSF's Compensation and Development Committee. In
reality, not only will the vote of the stockholders advocated by the Proposal be
merely advisory, but it will apply to the compensation of executives for the
last completed fiscal year, making any stockholder input on the disclosed
compensation packages and practices not only non-binding, but moot.
The inconsistencies between the Proposal and the supporting statement make it
likely that the action ultimately taken upon the implementation of the Proposal
could be quite different from the action envisioned by the stockholders at the
time their votes were castproviding a basis for exclusion under Rule
14a-8(i)(3).
An example of an instance in which the Staff permitted the exclusion of a
stockholder proposal that included inconsistencies and ambiguities that were
analogous to those presented by the Proposal is Wal-Mart Stores (Apr. 2,
2001). In that letter, the Staff agreed with Wal-Mart that it could exclude a
stockholder proposal requesting that the company report on the use of
genetically modified "products." From the language of the proposal, it appeared
that the proposal encompassed all forms of genetically modified products, such
as plastics and other products manufactured by the company. The supporting
statement, however, suggested that the proposal only was directed at genetically
modified foods. Based on the inconsistency between the proposal and its
supporting statement, the Staff agreed with Wal-Mart that the action ultimately
taken upon the implementation of the proposal could be quite different from the
action envisioned by the stockholders at the time their votes are cast.
Accordingly, it granted relief under Rule 14a-8(i)(3).
The Staff's position in Wal-Mart reflects a long line of no-action
letters in which the Staff has agreed that Rule 14a-8(i)(3) is available where
the action ultimately taken upon the implementation of a stockholder proposal
could be quite different from the action envisioned by the stockholders at the
time their votes were cast. See, e.g., Philadelphia Electric Company
(Jul. 30, 1992) (excluding a proposal to establish a committee of stockholders
to present a plan "that will in some measure equate with the gratuities bestowed
on Management, Directors, and other employees"); NYNEX Corporation (Jan.
12, 1990) (excluding a proposal requiring the corporation to "not interfere in
the government policy of any foreign government"). Much like the proposals in
each of those letters, the action ultimately taken upon the implementation of
the Proposal could be quite different from the action envisioned by the
stockholders at the time their votes were cast. As a result, BNSF may omit the
Proposal from its proxy materials in reliance on Rule 14a-8(i)(3).
2. BNSF May Exclude the Proposal in Reliance on Rule 14a-8(i)(7) on the
Basis that it Relates to Ordinary Business Matters
Rule 14a-8(i)(7) permits a company to exclude a stockholder proposal if it
relates to "a matter relating to the company's ordinary business operations." We
respectfully submit that the Proposal relates to BNSF's ordinary business
matters. While we recognize that the Staff generally has taken the position that
stockholder proposals relating to senior executive compensation may not be
excluded in reliance on Rule 14a-8(i)(7), the Proposal does not address senior
executive compensationinstead it relates to ordinary business disclosures,
which is an ordinary business matter.
As the supporting statement attempts to make clear, the Proposal will not
affect any person's compensation or the approval of any compensation-related
proposal submitted for a vote of stockholders at the same or any other meeting
of stockholders. It simply is limited to the approval of the Compensation
Committee Report, and not the underlying compensation practices of BNSF,
providing yet another basis for exclusion under Rule 14a-8(i)(7). The Staff has
taken the position that decisions with respect to the content and presentation
of standard company reports are matters constituting "ordinary business
operations." See Long Island Lighting Company (Feb. 22, 1996) (excluding
a proposal that the company expand its proxy statement disclosures as a matter
within the ordinary business of the company, "i.e., presentation of disclosure
in the Company's reports to shareholders").
BNSF and the members of its Compensation and Development Committee are
responsible for the full, timely and accurate disclosure of the compensation
information required by Item 402 of Regulation S-K. The completion and filing of
the Compensation Committee Report is one of the requirements of Item 402. How
the committee and the company present the requisite information in the
Compensation Committee Report (and on a go-forward basis, the Compensation
Discussion and Analysis) is a matter within the ordinary business of the company
and not appropriately subject to the approval or disapproval of the company's
stockholders. See ConAgra, Inc. (Jun. 10, 1998) (excluding a proposal
requiring the company to supplement its Form 10-K and other periodic reports as
relating to the ordinary business operations of the company); Southwest Gas
Corporation (May 6, 1996) (excluding a proposal that the company expand its
proxy statement disclosures as a matter within the ordinary business of the
company).
Further, to the extent that the Proposal seeks to ensure that the
Compensation and Development Committee's disclosures are complete and comply
with Item 402, BNSF may exclude the Proposal in reliance on the grounds that it
relates to legal compliance. Halliburton Company (Mar. 10, 2006)
(proposal requesting a report on the policies and procedures adopted and
implemented to reduce or eliminate the reoccurrence of violations and
investigations discussed in the proposal and the potential damage to the
company's reputation and stock value, excludable as relating to a legal
compliance program); Allstate Corporation (Feb. 16, 1999) (proposal
requesting the investigation of illegal activity at Allstate, excludable as
relating to the general conduct of a legal compliance program).
The fact that the Proposal would require stockholder approval of the
Compensation Committee Report does not change any of the analysis above. On
numerous occasions, the Staff has taken the position that Rule 14a-8(i)(7)
permits the exclusion of stockholder proposals seeking to require stockholder
approval of ordinary business matters. See, e.g., Chevron Corporation
(Feb. 24, 2006) (excluding proposal requesting stockholder approval of all
contributions, gifts, grants or any other form of withdrawal of corporate funds
for special purposes which exceed $100,000); AmSouth Bancorporation (Jan.
12, 2006) (excluding proposal requesting that significant percentage of future
awards of restricted stock be tied to specific performance metrics and, that
future awards of restricted stock not be prematurely released or substantially
altered without stockholder approval).
Based on the foregoing, we respectfully submit that BNSF may omit the
Proposal from its proxy materials in reliance on Rule 14a-8(i)(7).
Conclusion
As discussed above, the Proposal is materially misleading in violation of
Rule 14a-9 of the proxy rules and further, it relates to the ordinary business
operations of BNSF. As a result, and based on the facts and the no-action letter
precedent discussed above, BNSF intends to exclude the Proposal from its proxy
materials in reliance on Rule 14a-8(i)(3) and Rule 14a-8(i)(7). By this letter,
I request confirmation that the Staff will not recommend enforcement action to
the Commission if BNSF excludes the Proposal from its Annual Meeting proxy
materials in reliance on Rule 14a-8(i)(3) and Rule 14a-8(i)(7).
If you have any questions regarding this request or desire additional
information, please contact me at (817) 352-3466.
Very truly yours,
/s/
Jeffrey T. Williams
cc: Emil Rossi
John Chevedden
-----FOOTNOTES-----
1 It should be noted that revision of the Proposal or
supporting statement in this instance would be inappropriate as the ambiguity
relates to core terms and involves the interaction between the Proposal and the
supporting statement as a whole. Allowing the proponent to revise the Proposal
would not be merely a matter of omitting a few sentencesany revisions that may
be suggested would fundamentally alter the Proposal. See Staff Legal Bulletin
14B (clarifying that revisions are appropriate when the challenged proposal
contains "some minor defects that could be corrected easily" but not if the
proposal would require "detailed and extensive editing in order to bring it into
compliance with the proxy rules").
[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
Burlington Northern Santa Fe Corporation (BNI) Shareholder Position on
Company No-Action Request Rule 14a-8 Proposal: Shareholder Vote on Executive Pay
Emil Rossi
Ladies and Gentlemen:
This is an initial response to the company December 28, 2006 no action
request. Shareholder receipt was delayed until January 3, 2007 because the
company would only spend 87-cents to mail it.
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
In regard to the company argument in "References to Shareholder Input,"
shareholders have no material mechanism for providing ongoing input at the
company. To mail a letter to an address in the proxy statement is not a material
mechanism for providing ongoing input for shareholders who have $26 billion
invested in the company.
In regard to the company argument in "References to Lead Director," the
company has a rotating presiding director still not a lead director.
Perhaps a rotating presiding director could lean toward being called a lead
director if the Chairman rotated as often as the rotating presiding director
did. Under the company's rotating presiding director system, as soon as a
rotating director gets up to speed on his job he rotated out.
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 purported precedents do not have the same key focus on
the compensation of "senior executives" as the pending rule 14a-8 proposal:
Long Island Lighting Co.
WSB No.: 022696020
Public Availability Date: Thursday, February 22, 1996
Abstract:
A shareholder proposal, which requests that this company expand the
disclosure in its proxy statement to include data on stock price, the consumer
price index, the common stock dividend, average company worker salary and total
CEO compensation, may be omitted from the company's proxy material under rule
14a-8 (c) (7).
ConAgra, Inc.
WSB No.: 061598005
Public Availability Date: Wednesday, June 10, 1998
Abstract:
A shareholder proposal, which urges this company's board of directors to
establish a political contribution program and publish those guidelines, as well
as comprehensive disclosure on the recipient of such contributions, in the
company's annual report to shareholders and Form 10-K, may be omitted from the
company's proxy material under rule 14a-8 (c) (7) . The staff particularly notes
that the proposal would involve matters relating to the company's ordinary
business operations since it requires the company to supplement the disclosures
made in its annual report on Form 10-K and other periodic reports.
Southwest Gas Corp.
WSB No.: 050696011
Public Availability Date: Monday, May 6, 1996
Abstract:
A shareholder proposal, which mandates that this company expand the executive
compensation disclosure in the proxy statement to include data on share price,
net earnings, common share dividend, average nonexecutive worker salary, and
total CEO compensation, may be omitted from the company's proxy material under
rule 14a-8 (c) (7).
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. 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.
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:
Emil Rossi
Jeffrey T. Williams <Jeffrey.williams@bnsf.com>
STAFF REPLY LETTER]
January 31, 2007
Response of the Office of Chief Counsel Division of Corporation
Finance
Re: Burlington Northern Santa Fe Corporation Incoming letter dated
December 28, 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 BNSF 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 BNSF 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 basis for omission upon which BNSF relies.
Sincerely,
/s/
Gregory Belliston
Attorney-Adviser
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