Company Name: Cincinnati Bell Inc.
Public Availability Date: December 1, 2007Document Sections:
INQUIRY LETTER
APPENDIX
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APPENDIX
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APPENDIX
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APPENDIX
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INQUIRY LETTER
STAFF
REPLY LETTER
[INQUIRY LETTER]
December 19, 2006
VIA OVERNIGHT COURIER
Office of Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Cincinnati Bell Inc. Request for a No-Action Letter
With Respect to Shareholder Proposals Submitted by Communications Workers
of America Representatives
Dear Ladies and Gentlemen:
On behalf of Cincinnati Bell Inc., an Ohio corporation
("CBI"), and pursuant to Rule 14a8(j), we are submitting this letter in
reference to CBI's intention to omit from its proxy statement and form of
proxy for its 2007 Annual Meeting of Shareholders (collectively, the "2007
Proxy Materials") the shareholder proposals described below (collectively,
the "Proposals") and statements in support thereof received from Timothy
M. Donoghue (the "Compensation Proponent") and Cynthia A. Cunningham (the
"Reputation Proponent") (the Compensation Proponent and the Reputation Proponent
are collectively referred to herein as the "Proponents"):
The proposal submitted by the Compensation Proponent,
a copy of which is attached hereto as Exhibit A, requests that CBI's Board
of Directors (the "Board") adopt a policy of receiving shareholder input
concerning the compensation of named executive officers as set forth in
the proxy statement each year (the "Compensation Proposal").
The proposal submitted by the Reputation Proponent,
a copy of which is attached hereto as Exhibit B, requests that the Board
report to the CBI shareholders about the potential damage to the brand name
and reputation of CBI that could result from CBI's outsourcing efforts (the
"Reputation Proposal") (the Compensation Proposal and the Reputation Proposal
are collectively referred to herein as the "Proposals").
In accordance with Rule 14a-8(f), CBI sent a letter on
December 1, 2006, a copy of which is attached hereto as Exhibit C, to Mr.
Tony Daley, who was identified in the cover letter to each Proposal as the
contact person for any issues relating to either Proposal, and each Proponent
(the "Objection Letter") identifying certain procedural deficiencies with
the Proposals.
We hereby notify the Division of Corporation Finance of
CBI's intention to exclude the Proposals from its 2007 Proxy Materials,
and we respectfully request that the staff of the Division of Corporation
Finance (the "Staff") concur in CBI's view that, on procedural grounds,:
the Proposals are excludable pursuant to Rule 14a-8(c)
as they violate the "one proposal" rule because each Proponent is an alter
ego of the Communication Workers of America (the "CWA"), and
the Proposals are excludable pursuant to Rule 14a-8(b)
as the CWA (and alternatively, both Proponents) failed to supply, within
14 days of receipt of CBI's request, documentary support sufficiently evidencing
that they satisfied the minimum ownership requirement for the one-year period
as of the date on which they submitted their respective Proposal,
or alternatively, that, on substantive grounds,
the Compensation Proposal is excludable pursuant to
Rule 14a-8(i)(11) as it is substantially duplicative of another shareholder
proposal received by CBI prior to its receipt of the Compensation Proposal,
and
the Reputation Proposal is excludable pursuant to Rule
14a-8(i)(7) as it pertains to CBI's ordinary business operations.
I. THE PROPOSALS.
The Compensation Proposal. The Compensation Proposal states:
RESOLVED, that shareowners of CBI request that the Board
adopt a policy of submitting the following question to a shareowners' vote
at each annual meeting in the future: "Is the compensation of CBI's named
executive officers as set forth in the proxy statement's Summary Compensation
Table: (a) excessive; (b) appropriate; or (c) too low?"
The Reputation Proposal. The Reputation Proposal states:
RESOLVED: The shareholders request that the Board establish
an independent committee to prepare a report on the potential damage to
the brand name and reputation of CBI that could result from CBI's outsourcing
efforts and make copies of the report available to shareholders of the Company
upon request.
II. ANALYSIS.
A. The Proposals May Be Excluded Under Rule 14a-8(c) as
a Violation of the One Proposal Per Proponent Rule.
Rule 14a-8(c) (formerly Rule 14a-8(a)(4)) provides that
a proponent may submit no more than one proposal and an accompanying supporting
statement to a company for a particular shareholders' meeting. If a proponent
submits more than one proposal, the registrant is required by Rule 14a-8(f)(1)
to provide the proponent the opportunity to reduce the items submitted to
the limit provided by the rule within 14 calendar days of notification by
the registrant to the proponent of the limitation. In adopting the rule,
the Securities and Exchange Commission (the "Commission") noted the possibility
that some proponents would attempt to evade the rule's limitations through
various maneuvers, but offered the issuance of "No-Action" letters as a
safeguard:
The Commission is aware of the possibility that some proponents
may attempt to evade the new limitations through various maneuvers, such
as having other persons whose securities they control submit two proposals
each in their own names. The Commission wishes to make it clear that such
tactics may result in measures such as the granting of requests by the affected
managements for a `No-Action' letter concerning the omission from their
proxy materials of the proposals at issue.
1
The Staff has consistently taken a no-action position
pursuant to Rule 14a-8(c) and its predecessor when an issuer provides reasonable
evidence of the use of such tactics.
2 Specifically, the Staff has indicated that multiple proponents
will be treated as one proponent for purposes of Rule 14a-8(c) when an issuer
meets its burden of establishing that one proponent is the "alter ego" of
another proponent, that one proponent possesses "control" over the shares
owned of record, or beneficially, by another proponent, or that one proponent
is acting on behalf of another proponent.
3
The Staff has found that the mere presence of influence
over proponents, even in the absence of explicit control or domination over
cooperating proponents, may be sufficient to justify the omission of multiple
proposals submitted by nominal proponents as part of an orchestrated scheme.
4 There are numerous instances in which the Staff has issued a
no-action opinion based, not on the existence of outright "control," but
on evidence that the proponents acted in a coordinated, arranged, or manipulated
manner with the evident purpose of avoiding the "one proposal" rule.
5
In the instant case, CBI believes, based on the evidence
set forth below, that CWA has coordinated, orchestrated and "masterminded"
the submission of both Proposals and that the individuals who executed the
Proposals are merely nominal proponents who submitted the Proposals as alter
egos of CWA in an effort to evade the one proposal limitation. For example,
The Proposals are dated as of same date and employ an
identical font, format and style.
The Compensation Proposal was faxed to the Secretary
of CBI from a CWA fax machine at 11:26 A.M. on November 22, 2006 from (202)
424-1201, a Washington D.C. area code.
The Reputation Proposal was faxed to the Secretary of
CBI from the same CWA fax machine at 12:52 P.M. on November 22, 2006 from
the same fax number.
CWA's headquarters are located in Washington, D.C. while
the addresses of the Proponents are located in Cincinnati, Ohio.
The cover letters that accompanied each Proposal are
identical, except for the references to the names and addresses of the nominal
proponents, and instruct CBI to direct all communications relating to the
Proposals to Mr. Tony Daley at CWA headquarters.
Mr. Daley has served as CWA's contact person for other
shareholder proposals submitted directly by CWA entities and affiliates.
6
The Proposals identify each nominal proponent as representatives
of local CWA affiliates. The Compensation Proponent is the President of
CWA Local 4400 and the Reputation Proponent is the President of CWA Local
4401.
CWA has previously been involved in the submission of
a shareholder proposal that contained language almost identical to the Reputation
Proposal.
7 The proposal at issue in General Electric Co. was submitted
by the IUE-CWA Employee's Pension Fund and included several supporting statements
identical to those contained in the Reputation Proposal.
Given the similarities between the Proposals and CWA's
institutional focus on, and previous shareholder proposal submissions relating
to, the issues of executive compensation
8 and outsourcing
9, it is evident that CWA actually authored, prepared and submitted
both Proposals and, in so doing, is abusing the shareholder proposal process
by attempting to circumvent the Rule 14a-8(c) "one-proposal" limitation.
Although CBI received a letter from the Compensation Proponent dated December
6, 2006, a copy of which is attached hereto as Exhibit D, requesting that
all future communications regarding the Compensation Proposal be directed
to his attention rather than Mr. Daley's, CBI never received a reply to
the Objection Letter from either the CWA or the Proponents as to why the
Proponents should not be considered the alter ego of the CWA. Therefore,
CBI believes that both Proposals should be excluded.
We respectfully request confirmation that the Staff will
not recommend enforcement action to the Commission if CBI excludes the Proposals
from its 2007 Proxy Materials in reliance on the "one-proposal" requirement
set forth in Rule 14a-8(c).
B. The Proposals May Be Excluded Under Rule 14a-8(b) as
the Proponents Failed to Provide Sufficient Evidence to Satisfy the Minimum
Ownership Requirement.
Rule 14a-8(b)(1) establishes the minimum ownership requirement
for eligibility to submit a shareholder proposal. In order to submit a proposal
for consideration, a proponent "must have continuously held at least $2,000
in market value of the company's securities ... for at least one year by
the date" of the submission.
10
Although each cover letter accompanying the Proposals
contained a statement providing that each Proponent was a CBI shareholder
who met the Rule 14a-8(b)(1) eligibility requirements, the records of CBI's
transfer agent do not identify either Proponent as a record owner and neither
submission included documentary evidence sufficient to verify either Proponent's
eligibility. Therefore, CBI sent the Objection Letter to Mr. Daley at the
CWA, with copies to each Proponent, notifying them that they had each failed
to establish their eligibility to submit a shareholder proposal(s). The
Objection Letter, which included a copy of Rule 14a-8, requested that CBI
be furnished with evidence establishing ownership in the form required under
Rule 14a-8(b).
Rule 14a-8(b)(2)(i) provides that a proponent may verify
its stock ownership, if it is not a record owner, by submitting a written
statement from the record holder of the securities stating that the shareholder
has owned the securities continuously for one-year as of the date the proposal
was submitted. Staff Legal Bulletin No. 14 (Jul. 13, 2001) clarifies that
monthly, quarterly or other periodic investment statements do not sufficiently
demonstrate continuous ownership of securities to evidence eligibility.
11 Instead, the Staff stated that a shareholder must submit an
affirmative written statement from the record holder of its securities that
specifically verifies that the shareholder owned the securities continuously
for a period of one year as of the time of submitting the proposal.
12 Furthermore, in a number of no-action letters, the Staff has
concluded that an account summary or brokerage statement does not constitute
sufficient documentary evidence that the proponent satisfied the minimum
ownership requirement for a one-year period as of the date on which it submitted
his proposal.
13
On December 5, 2006, CBI received from the Compensation
Proponent a print-out of his Cincinnati Bell Inc. Savings and Security Plan
Retirement Savings Statement as of December 1, 2006, a copy of which is
attached hereto as Exhibit E, and on December 15, 2006, CBI received another
copy from the Compensation Proponent of his Cincinnati Bell Inc. Savings
and Security Plan Retirement Savings Statement for the period from September
30, 2005 to November 30, 2006, a copy of which is attached hereto as Exhibit
F. On December 14, 2006, CBI received from the Reputation Proponent a print-out
of her Cincinnati Bell Inc. Savings and Security Plan Retirement Savings
Statement as of November 30, 2006, a copy of which is attached hereto as
Exhibit G. None of the Retirement Savings Statements, which represent the
only documentary support submitted by the Proponents to evidence their satisfaction
of the Rule 14a-8(b) minimum ownership requirement, indicates how many shares
they owned on the respective dates on which they submitted their Proposal
or identifies the record holder of their CBI securities. Furthermore, no
Retirement Savings Statement contains an affirmative written statement from
the record holder of the securities that specifically verifies that the
shareholder owned the securities continuously for a period of one year as
of the time of submitting the proposal. In addition, CWA did not provide
any documentary evidence of ownership to CBI in response to the Objection
Letter.
As the documentary support submitted by the Proponents
(and which the CWA declined to submit) to evidence their satisfaction of
the Rule 14a-8(b) minimum ownership requirement clearly fails to satisfy
the standards consistently imposed by the Staff in no-action letters and
guidance, we respectfully request confirmation that the Staff will not recommend
enforcement action to the Commission if CBI excludes the Proposals from
its 2007 Proxy Materials in reliance on Rule 14a-8(b).
C. The Compensation Proposal May Be Excluded Under Rule
14a-8(i)(11) as it is Substantially Duplicative of Another Shareholder Proposal
Received By CBI.
Rule 14a-8(i)(11) permits the exclusion from a company's
proxy materials any shareholder proposal that substantially duplicates another
shareholder proposal previously submitted by another proponent that will
be included in the company's proxy materials for the same meeting. The Staff
stated in the 1976 Release that Rule 14a-8(i)(11) was adopted, in part,
to eliminate the possibility that shareholders would have to consider two
or more substantially identical proposals submitted by proponents acting
independently of each other. We have concluded that the Compensation Proposal
may be properly omitted from the 2007 Proxy Materials pursuant to the provisions
of Rule 14a-8(i)(11) because it substantially duplicates another proposal
previously submitted to CBI by the California Public Employees' Retirement
System (the "CalPERS Proposal"), which will be included in the 2007 Proxy
Materials. The CalPERS Proposal is attached hereto as Exhibit G.
The CalPERS Proposal was sent by overnight mail on November
9, 2006 and received by the Secretary of CBI on November 10, 2006. The Compensation
Proposal was sent by overnight mail on November 21, 2006 and facsimile on
November 22, 2006 and received by the Secretary of CBI on November 22, 2006.
The Staff has previously indicated that a company does not have the option
of selecting between duplicative proposals but must include in its proxy
materials the first of such proposals.
14
The CalPERS Proposal requests that the Board "adopt a
policy that [CBI's] shareowners be given the opportunity at each annual
meeting of shareowners to vote on an advisory resolution ... to ratify the
compensation of the named executive officers set forth in the proxy statement's
Summary Compensation Table ...." The Compensation Proposal requests that
the Board "adopt a policy of submitting the following question to a shareowners'
vote at each annual meeting in the future: `Is the compensation of Cincinnati
Bell's named executive officers as set forth in the proxy statement's Summary
Compensation Table: (a) excessive; (b) appropriate; or (c) too low?'"
The Staff, in granting requests for no-action relief under
this rule, has consistently taken the position that proposals need not be
identical in terms and scope to be considered substantially duplicative.
The Staff has instead examined whether the proposals present the same "principal
thrust" or "principal focus." The Staff has also agreed on a number of occasions
that proposals addressing the same subject matter in different terms and
with broader or narrower scope of subject matter than a prior proposal may
be excluded under Rule 14a-8(i)(11).
15
In light of the Staff's past interpretations of Rule 14a-8(i)(11),
the Compensation Proposal is clearly substantially duplicative of the CalPERS
Proposal. The "principal thrust" or "principal focus" of both the Compensation
Proposal and the CalPERS Proposal is that CBI shareholders be given the
opportunity at each annual meeting to express whether they approve of the
compensation of CBI's named executive officers, as set forth in the proxy
statement's Summary Compensation Table. The Compensation Proposal substantially
duplicates the CalPERS Proposal because, although they contain nominally
different terms and scope, the principal thrust and focus of each of the
proposals is identical. Furthermore, the purpose of Rule 14a-8(i)(11) is
to prevent proponents from clogging up the proxy materials with several
versions of essentially the same proposal and to avoid shareholder confusion.
To allow both of these, substantially duplicative proposals to be included
in the 2007 Proxy Materials would frustrate the policy behind Rule 14a-8(i)(11).
For these reasons, we respectfully request confirmation
that the Staff will not recommend enforcement action to the Commission if
CBI excludes the Compensation Proposal from its 2007 Proxy Materials in
reliance on Rule 14a-8(i)(11).
D. The Reputation Proposal May Be Excluded under Rule
14a-8(i)(7) as it Pertains to CBI's Ordinary Business Operations.
Rule 14a-8(i)(7) permits the exclusion of a shareholder
proposal if the proposal "deals with a matter relating to the company's
ordinary business operations." According to the Exchange Act Release accompanying
the 1998 amendments to Rule 14a-8, the underlying policy of the ordinary
business exclusion is "to confine the resolution of ordinary business problems
to management and the board of directors, since it is impracticable for
shareholders to decide how to solve such problems at an annual shareholders
meeting."
16
In Staff Legal Bulletin No. 14C (Jun. 28, 2005) ("SLB
14C"), the Staff stated that, "[i]n determining whether the focus of these
proposals is a significant social policy issue, we consider both the proposal
and the supporting statement as a whole." While that statement was made
specifically with respect to proposals that address environmental or public
health issues, we understand that the statement reflects the standard generally
applied by the Staff in evaluating whether proposals may be excluded under
Rule 14a-8(i)(7).
The 1998 Release identifies the two "central considerations"
for the ordinary business exclusion. The first consideration is that certain
tasks are "so fundamental to management's ability to run a company on a
day to day basis" that they could not be subject to direct shareholder oversight.
The Commission cited "management of the workforce, such as the hiring, promotion,
and termination of employees, decisions on production quality and quantity,
and the retention of suppliers" as examples of such tasks. The second consideration
relates to "the degree to which the proposal seeks to `micro-manage' the
company by probing too deeply into matters of a complex nature upon which
shareholders, as a group, would not be in a position to make an informed
judgment."
The Staff has also stated that a shareholder proposal
requesting the dissemination of a report may be excludable under Rule 14a-8(i)(7)
if the substance of the report is within the ordinary business of the issuer.
17 In addition, the Staff has indicated that where "the subject
matter of the additional disclosure sought in a particular proposal involves
a matter of ordinary business ... it may be excluded under rule 14a-8(i)(7)."
18
For the reasons set forth below, the Reputation Proposal
relates to CBI's ordinary business operations as it seeks a report assessing
the risks and liabilities associated with an aspect of CBI's business operations
(i.e., employment decisions and workforce management). In well-established
and recently issued precedent, the Staff has concurred that this aspect
of similar proposals has implicated ordinary business matters, and, therefore,
such proposals have been excludable pursuant to Rule 14a-8(i)(7).
1. The Reputation Proposal and Supporting Statement Focus
on CBI Engaging in an Internal Assessment of the Risks and Liabilities That
CBI Faces as a Result of its Operations.
The Reputation Proposal requests that the Board prepare
a report assessing "the potential damage to the brand name and reputation"
of CBI as a result of its "outsourcing efforts" and the supporting statement
thereto provides that CBI's brand name "may be its most important asset."
In other words, the Reputation Proposal seeks an assessment or evaluation
of the financial risks posed to certain CBI assets (i.e., its brand name
and reputation) as a result of CBI's workforce management and employment
decisions (i.e., outsourcing), which represent fundamental tasks in management's
obligation to operate CBI on a day-to-day basis.
It is well established that shareholder proposals that
request detailed information on a company's assessment of the financial
risks and implications of certain aspects of its business operations do
not raise significant policy issues and instead delve into the minutiae
and details of the ordinary conduct of business.
19
The Staff has confirmed its position on this type of proposal
in SLB 14C. There, the Staff stated "to the extent that a proposal and supporting
statement focus on the company engaging in an internal assessment of the
risks or liabilities that the company faces as a result of its operations
..., we concur with the company's view that there is a basis for it to exclude
the proposal under rule 14a-8(i)(7) as relating to an evaluation of risk."
As with the no-action letters addressed in SLB 14C and
the no-action letters cited above, in requesting a report assessing the
potential damage to CBI's brand name and reputation as a result of its outsourcing
efforts, the Reputation Proposal focuses on "an internal assessment of the
risks or liabilities" that CBI faces as part of its day-to-day operating
decisions. Thus, CBI believes that the Reputation Proposal addresses its
ordinary business operations and is excludable pursuant to Rule 14a-8(i)(7)
and we respectfully request that the Staff concur with this conclusion.
2. The Reputation Proposal Involves Ordinary Business
Matters Because it Relates to Workforce Management, Employment Decisions
and Employee Relations.
The report requested by the Reputation Proposal would
primarily address issues involving "management of the workforce, such as
the hiring, promotion, and termination of employees" which the Commission
identified in the 1998 Release as relating to ordinary business operations.
Decisions regarding the location of employees and sourcing of goods and
services implicate the type of fundamental and complex matters that are
not proper for shareholder proposals because they involve tasks that are
fundamental to management's ability to run CBI on a day-to-day basis and
delve too deeply into the complex operations of CBI. Accordingly, as discussed
further below, the Staff has issued no-action relief under Rule 14a-8(i)(7)
with respect to proposals that address management of the workforce, which
includes outsourcing, as they involve ordinary business matters.
Very recently, the Staff agreed that a company could exclude
a shareholder proposal substantially similar to the Reputation Proposal
pursuant to Rule 14a-8(i)(7) as such proposal related to the company's "ordinary
business operations."
20 The proposal at issue in General Electric Co. (Jan. 13, 2006,
recon. denied Feb. 28, 2006) requested that the company's board of directors
establish an independent committee to prepare a report assessing the risk
of "damage to [the company's] brand name and reputation" as a result of
the company's outsourcing activities. The Staff has also recently agreed
that at least nine identical proposals could be excluded on Rule 14a-8(i)(7)
grounds as they each related to the companies' management of their workforce.
21 Each of these nine proposals requested that the companies issue
a "Job Loss and Dislocation Impact Statement" concerning the elimination
of jobs and relocation of jobs to foreign countries. Similarly, in International
Business Machines Corporation (Feb. 3, 2004; recon. denied Mar. 8, 2004),
a proposal requested that the company's board of directors "establish a
policy that IBM employees will not lose their jobs as a result of IBM transferring
work to lower wage countries." The Staff concurred with the exclusion of
the proposal under Rule 14a-8(i)(7), on the grounds that it related to "employment
decisions and employee relations." The Staff has in other circumstances
concurred that decisions relating to the selection of employees to fill
positions implicates a company's ordinary business.
22
As with each of the precedents cited above, the Reputation
Proposal and its supporting statement address exactly the same issue: workforce
management decisions. The Reputation Proposal's supporting statement provides
that outsourcing "decreases the control a company may exercise over individuals
(for instance, the contractors' employees) acting in its name" and causes
"higher turnover." The supporting statement also asserts that "the use of
contractors strains the relationship between customer and employee" and
"reduces the morale" of remaining employees.
As discussed above, the Staff confirmed in SLB 14C that,
"[i]n determining whether the focus of these proposals is a significant
social policy issue, we consider both the proposal and the supporting statement
as a whole." The statements quoted from the Reputation Proposal's supporting
statement clearly establish that, taken as a whole, the Reputation Proposal
and the supporting statement are focused on the issues of workplace management,
employment decisions and employee relations. Accordingly, CBI believes that
the Reputation Proposal may be properly excluded from the 2007 Proxy Materials
pursuant to Rule 14a-8(i)(7) and the precedent cited above and we respectfully
request that the Staff concur with this conclusion.
3. Regardless of Whether the Reputation Proposal Touches
Upon Significant Social Policy Issues, the Entire Proposal is Excludable
Due to the Fact That It Distinctly Addresses Ordinary Business Matters.
CBI believes that the well-established precedent set forth
above supports its conclusion that the Reputation Proposal addresses ordinary
business matters and therefore is excludable under Rule 14a-(i)(7). CBI
recognizes that the Staff has concluded that certain employment-related
proposals may focus on sufficiently significant social policy issues so
as to preclude exclusion in certain circumstances. Nevertheless, the Staff
has also consistently concurred that a proposal may be excluded in its entirety
when it addresses both ordinary and non-ordinary business matters.
23
Therefore, CBI does not believe that it is necessary to
consider whether the Reputation Proposal may also touch upon significant
policy issues, since the Reputation Proposal addresses ordinary business
issues: assessing the risks and liabilities that may result from CBI's management
of the workforce. Thus, regardless of whether aspects of the Reputation
Proposal are considered to implicate a significant policy issue, under well-established
precedent, the entire Proposal may be excluded because it also addresses
ordinary business matters within the scope of Rule 14a-8(i)(7).
Accordingly, based on the precedent referenced in this
Section II.D and the Reputation Proposal's emphasis on ordinary business
matters (i.e., assessing the risks and potential liabilities to CBI's assets
as a result of workforce management decisions), CBI believes that the Reputation
Proposal may be excluded in its entirety under Rule 14a-8(i)(7) and we respectfully
request that the Staff concur with this conclusion.
III. CONCLUSION
Based on the foregoing, we hereby respectfully request,
on behalf of CBI, that the Staff not recommend any enforcement action if
the Proposals are excluded from the 2007 Proxy Materials. Pursuant to Rule
14a-8(j), enclosed herewith are six copies of this letter and its attachments.
Pursuant to Rule 14a-8(j), this letter is being filed with the Commission
no later than 80 calendar days before CBI files its definitive 2007 Proxy
Materials with the Commission. We hereby agree to promptly forward to the
CWA and the Proponents any Staff response to this no-action request that
the Staff transmits by facsimile only to us or CBI.
Consistent with the provisions of Rule 14a-8(j), CBI will
concurrently provide copies of this correspondence to the CWA and the Proponents.
We recognize that the Staff has not interpreted Rule 14a-8 to require proponents
to provide CBI and its counsel a copy of any correspondence that they submit
to the Staff. Therefore, in the interest of a fair and balanced process,
we request that the Staff notify the undersigned and CBI if it receives
any correspondence on the Proposals from either Proponent, the CWA or other
persons, unless that correspondence has specifically confirmed to the Staff
that CBI or its undersigned counsel have timely been provided with a copy
of the correspondence. If we can provide additional correspondence to address
any questions that the Staff may have with respect to this no-action request,
please do not hesitate to call me at (513) 651-6712.
Sincerely,
FROST BROWN TODD LLC
By: /s/
Kevin L. Cooney
Enclosures
cc: Mr. Christopher J. Wilson, General Counsel of CBI
Mr. Tony Daley, CWA
Mr. Timothy M. Donoghue
Ms. Cynthia A. Cunningham
EXHIBIT LIST
Exhibit A - Compensation Proposal
Exhibit B - Reputation Proposal
Exhibit C - Objection Letter
Exhibit D - Donoghue Response
Exhibit E - Donoghue Retirement Statement #1
Exhibit F - Donoghue Retirement Statement #2
Exhibit G - Cunningham Retirement Statement
Exhibit H - CalPERS Compensation Proposal
-----FOOTNOTES-----
1 Exchange Act Release No. 34-12999 (Nov. 22, 1976) ("1976 Release");
See also Pacific Enterprises (Feb. 12, 1996).
2 See Drexler Technology Co. (June 14, 1999) (Staff permitted
omission of multiple proposals orchestrated and coordinated by a single
individual that were submitted by multiple nominal proponents); BankAmerica
Corporation (Feb. 8, 1996) (where different proponents submitted separate
proposals which had same telephone numbers, dates and format, the Staff
permitted omission of the proposals); Weyerhaeuser Co. (Dec. 20, 1995) (no-action
position taken where proponents had same address, were of same immediate
family and were working together); NMR of America, Inc. (May 11, 1993) (Staff
concluded that proposals were excludable where evidence showed that husband
had authored both proposals); Dominion Resources, Inc. (Feb. 24, 1993) (no-action
position taken where proposals were coordinated by single proponent); TPI
Enterprises, Inc. (Jul. 15, 1987) (no-action position taken where several
proposals were "masterminded" by single proponent); Texas Instruments Inc.
(proposals submitted by proponent, his daughter, corporation and foundation
were sufficiently related to be considered proposals of a single proponent).
3 See BankAmerica Corporation (Feb. 8, 1996); Stone & Webster,
Inc. (Mar. 3, 1995); Banc One Corp. (Feb. 2, 1993).
4 See International Business Machines Corp. (Jan 26, 1998); Banc
One Corp. (Feb. 2, 1993) (no-action position taken where nominal proponents
were recruited, but not controlled, by one proponent); TPI Enterprises (July
18, 1987) (proposals were excludable under Rule 14a-8(c) where submission
was apparently orchestrated by one person).
5 See Drexler Technology Corp. (June 19, 1999); Weyerhauser Co.
(Dec. 20, 1995); Dominion Resources, Inc. (Feb. 24, 1993).
6 See General Electric Co. (Jan. 13, 2006, recon. denied Feb 28,
2006) (IUE-CWA Employee's Pension Fund); AT&T Corp. (Mar 1, 2004) (CWA Joe
Bierne Foundation); International Business Machines Corp. (Jan. 23, 2003)
(CWA Member's Relief Fund).
7 See General Electric Co. (Jan. 13, 2006, recon. denied Feb 28,
2006).
8 See AT&T Corp. (Mar. 1, 2004); The Walt Disney Co. (Oct. 29,
1998) and Gannett Co., Inc. (Feb. 24, 1998) (where CWA Pension Fund sought
adoption of an executive compensation policy).
9 See General Electric Co. (Jan. 13, 2006, recon. denied Feb 28,
2006); AT&T Corp. (Mar. 1, 2004); General Electric Co. (Feb 3, 2004).
10 Rule 14a-8(b)(1).
11 See Question C.1(c)(2).
12 Id.
13 See American International Group (Mar. 15, 2006) (brokerage
account statement); General Motors Corp. (Mar. 6, 2005) (retirement savings
account statement); Sky Financial Group (Jan. 13, 2005 and Dec. 20, 2004)
(brokerage account statement); International Business Machines Co. (Jan.
11, 2005) (account statement from 401(k) plan); Sempra Energy (Dec. 23 and
22, 2004) (account statement from 401(k) plan); Bank of America (Feb. 25,
2004) (brokerage account statement); RTI International Metals, Inc. (Jan.
13, 2004) (brokerage account statement).
14 See Constellation Energy Group, Inc. (Feb. 19, 2004); Wells
Fargo & Company (Feb. 5, 2003).
15 See Constellation Energy Group, Inc. (Feb. 19, 2004) (proposal
requesting performance and time-based restricted stock grants for senior
executives in lieu of stock options substantially duplicates a broader prior
proposal requesting a "Commonsense Executive Compensation" program including
limitations on CEO salary, annual executive bonuses, form and amount of
long-term equity compensation and severance agreements, as well as performance
criteria); Abbott Laboratories (Feb. 4, 2004) ("Commonsense Executive Compensation"
proposal urging use of performance and time-based restricted shares in lieu
of options, as well as a range of additional limitations on compensation
and severance arrangements substantially duplicates a narrower prior proposal
urging prohibition of executive options); Siebel Systems, Inc. (April 15,
2003) (proposal urging use of performance-based options substantially duplicates
a broader prior proposal requesting a policy defining portions of equity
to be provided to employees and executives, requiring performance criteria
for options, and holding periods for shares received); Pacific Gas & Electric
Co. (Feb. 1, 1993) (proposal containing a different compensation limit,
different terms and a different scope than two earlier proposals substantially
duplicated the two earlier proposals).
16 Exchange Act Release No. 34-40018 (May 21, 1998) (the "1998
Release").
17 Release No. 34-20091 (Aug. 16, 1983).
18 Johnson Controls, Inc. (Oct. 26, 1999).
19 See General Electric Co. (Jan. 13, 2006, recon. denied Feb.
28, 2006) (where the Staff concurred that the company could exclude a shareholder
proposal requesting that the company's board of directors prepare a report
assessing the risk of "damage to [the company's] brand name and reputation"
as a result of the company's decision to outsource certain work as such
proposal related to the company's "ordinary business operations (i.e., evaluation
of risk)"); The Dow Chemical Company (Feb. 23, 2005) (where the Staff concurred
that the company could exclude a shareholder proposal requesting a report
describing the reputational and financial impact of the company's response
to pending litigation because it related to the company's ordinary business
operations (i.e., evaluation of risks and liabilities)); Abbot Laboratories
(Mar. 9, 2004) and Pfizer Inc. (Jan. 24, 2006) (where the Staff concurred
that the companies could exclude a proposal that requested that their board
of directors report on "the economic effects of HIV/AIDS, tuberculosis and
malaria pandemics on the company's business strategy" because it called
for an evaluation of risk); The Dow Chemical Company (Feb. 13, 2004) (where
the Staff concurred that the company could exclude a proposal requesting
a report related to certain toxic substances, including "the reasonable
range of projected costs of remediation or liability" because it related
to an evaluation of risks and liabilities); Wachovia Corp. (Feb. 10, 2006)
(where the Staff concurred with the exclusion of a proposal requesting a
report disclosing "the effects of (a) rising public and regulatory pressures
to limit the emission of greenhouse gases and (b) anticipated changes to
our public environment"); Newmont Mining Corp. (Feb. 4, 2004) (where the
Staff concurred that the company could exclude a proposal requesting that
the company's board of directors publish a report on the risk to the company's
"operations, profitability and reputation" arising from its social and environmental
liabilities on the basis that such an assessment pertained to the evaluation
of risk); Willamette Industries, Inc. (Mar. 20, 2001) (where the Staff permitted
the exclusion of a proposal relating to a request for a report on environmental
problems, including an estimate of "worst case financial exposure due to
environmental issues for the next ten years").
20 See General Electric Co. (Jan. 13, 2006, recon. denied Feb.
28, 2006)
21 See Bank of America Corp. (Feb. 4, 2005); JPMorgan Chase &
Co. (Feb. 4, 2005); Boeing Co. (Feb. 25, 2005); Citigroup Inc. (Feb. 4,
2005); Mattel, Inc. (Feb. 4, 2005); SBC Communications Inc. (Feb. 4, 2005);
Capital One Financial Corp. (Feb. 3, 2005); Fluor Corp. (Feb. 3, 2005);
General Electric Co. (Feb. 3, 2005).
22 See Merck & Co. Inc. (Mar. 7, 2002) (proposal requesting the
appointment of a council to review disputes regarding filling research and
development positions, inventorship, scientific priorities and ethical conduct
was excludable as relating to management of the workforce); Intel Corp.
(Mar. 18, 1999) (proposal recommending that the board implement an "Employee
Bill of Rights" was excludable as relating to management of the workforce).
23 See General Electric Co. (Feb. 10, 2000) (where the Staff concurred
that the entire proposal was excludable under Rule 14a-8(i)(7) because a
portion of it related to ordinary business matters); Wal-Mart Stores, Inc.
(Mar. 15, 1999) (where a proposal requesting a report to ensure that the
company did not purchase goods from suppliers using, among other things,
forced labor, convict labor and child labor was excludable in its entirety
because the proposal also requested that the report address ordinary business
matters).
[APPENDIX 1]
VIA Fax & Overnight Mail
November 21, 2006
Christopher J. Wilson
General Counsel and Secretary
Cincinnati Bell Inc.
201 East Fourth Street
Cincinnati. OH 45202
Dear Mr. Wilson:
Re: Submission of Shareholder Proposal
I hereby submit the enclosed Shareholder Proposal ("Proposal")
for inclusion in the Cincinnati Bell, Inc. ("Company") proxy statement to
be circulated to Company shareholders in conjunction with the next annual
meeting of shareholders in 2007. The Proposal is submitted under Rule 14(a)-8
of the U.S. Securities and Exchange Commission's proxy regulations.
I am a beneficial owner of Company common stock with market
value in excess of $2,000 and have held it continuously for more than a
year prior to this date of submission. I can supply proof of such holdings
upon request.
I intend to continue to own Company common stock through
the date of the Company's 2007 annual meeting. Either I or a designated
representative will present the Proposal for consideration at the annual
meeting of stockholders. Please direct all communications regarding this
matter to Mr. Tony Daley at CWA Headquarters:
Research Department
Communications Workers of America
501 3 rd St., N.W.
Washington, D.C. 20001
202-434-9515 (phone)
202-434-1201 (fax)
Sincerely,
/s/
Timothy M. Donoghue
Enclosure
[APPENDIX 2]
Shareowner Proposal
RESOLVED, that shareowners of Cincinnati Bell Inc. request
that the Board of Directors ("Board") adopt a policy of submitting the following
question to a shareowners' vote at each annual meeting in the future: "Is
the compensation of Cincinnati Bell's named executive officers as set forth
in the proxy statement's Summary Compensation Table: (a) excessive; (b)
appropriate; or (c) too low?"
Supporting Statement
We believe the compensation of Cincinnati Bell's senior
executives is excessive.
According to proxy statements from 2002 through 2006,
the five senior executives listed in the Summary Compensation Table received
"Total Annual Compensation" of $20.1 million from 2001 through 2005. The
"Total Annual Compensation" of John F. Cassidy, the President and CEO of
Cincinnati Bell, accounted for more than $5.8 million of that sum.
The top five officers received $9.4 million in "All Other
Compensation" (company contributions to savings, deferred compensation,
and exit pay) over the same period. They also received $0.2 million in long-term
compensation
The total amount paid to the top five officers over these
five years was more than $29.7 million. These five officers then exercised
stocks options to realize a gain of another $0.7 million.
In all, these five executives received over $30.4 million
for the five years covered by the proxy disclosures between 2002 and 2006.
In our view, this amount is excessive for a company of our size.
Finally, the 2006 proxy statement reports that the five
top officers were awarded $3.0 million in restricted shares in 2005, and
the held $5.8 million in unexercised options.
The major stock exchanges have adopted rules requiring
public companies to submit equity-based compensation plans for shareholder
approval. According to a recent academic analysis, however, these rules
have failed to provide shareowners "with substantial influence" because
the plans tend to be "broadly worded" (Lucian Bebchuk and Jesse Fried, Pay
Without Performance, 2004, p. 196). Shareowners can withhold votes for members
of the Compensation Committee who stand for reelection, but we view that
option as a blunt and insufficient instrument for registering dissatisfaction
with senior executive compensation.
In contrast, public companies in the United Kingdom allow
shareowners to cast an advisory vote on the "directors' remuneration report,"
which discloses executive compensation. Such a vote isn't binding, but gives
shareholders a clear voice that could help shape senior executive compensation.
We are proposing that the shareowners be permitted to
give the Compensation Committee a "report card." Through voting on the question
that is set forth in the Proposal, shareowners could express their views,
in an advisory referendum, on the question of whether the Company's senior
executives are being compensated at levels that are appropriate in amount.
This approach would provide the opportunity to express dissatisfaction with
the amount of compensation that has been awarded to senior executives, and
of focusing media attention on the issue in a manner that could assist in
bringing about change, while preserving the discretion of the Board to make
such changes as may be appropriate.
Please vote for this proposal.
[APPENDIX 3]
November 9, 2006
OVERNIGHT MAIL
Cincinnati Bell Inc.
201 East Fourth Street
Cincinnati, Ohio 45202
Attn: Christopher J. Wilson, Secretary
Re: Notice of Shareowner Proposal
Mr. Wilson:
The purpose of this letter is to submit our shareowner
proposal for inclusion in the proxy materials in connection with the company's
next annual meeting pursuant to SEC Rule 14a-8.1
Our submission of this proposal does not indicate that
CalPERS is closed to further communication and negotiation. Although we
must file now, in order to comply with the timing requirements of Rule 14a-8,
we remain open to the possibility of withdrawing this proposal if and when
we become assured that our concerns with the company are addressed.
If you have any questions concerning this proposal, please
contact me.
Very truly yours,
/s/
PETER H. MIXON
General Counsel
Enclosures
cc: Dennis Johnson, Senior Portfolio Manager - CalPERS
Phillip R. Cox, Chairman - Cincinnati Bell Inc.
Jack F. Cassidy, CEO - Cincinnati Bell Inc.
-----FOOTNOTES-----
1 CalPERS is the owner of approximately 800,000 shares of the
company. Acquisition of this stock has been ongoing and continuous for several
years. Specifically, CalPERS has owned shares with a market value in excess
of $2,000 continuously for at least the preceding year. (Documentary evidence
of such ownership is enclosed.) Furthermore, CalPERS intends to continue
to own such a block of stock at least through the date of the annual shareholders'
meeting.
[APPENDIX 4]
SHAREOWNER PROPOSAL
RESOLVED, that shareowners of Cincinnati Bell Inc. (the
"Company") urge the board of directors to adopt a policy that the Company's
shareowners be given the opportunity at each annual meeting of shareowners
to vote on an advisory resolution, to be proposed by the Company's management,
to ratify the compensation of the named executive officers ("NEOs") set
forth in the proxy statement's Summary Compensation Table (the "SCT") and
the accompanying narrative disclosure of material factors provided to understand
the SCT (but not the Compensation Discussion and Analysis). The proposal
submitted to shareowners should make clear that the vote is non-binding
and would not affect any compensation paid or awarded to any NEO.
SUPPORTING STATEMENT
Investors are increasingly concerned about mushrooming
executive compensation which sometimes appears to be insufficiently aligned
with the creation of shareowner value. Additionally, recent media attention
to questionable dating of stock options grants by companies has raised related
investor concerns.
New SEC rules, with record support from investors, require
companies to disclose additional information about compensation and perquisites
for top executives. In establishing the rules, the SEC has made it clear
that it is the role of market forces, not the SEC, to provide checks and
balances on compensation practices.
We believe that existing U.S. corporate governance arrangements,
including SEC rules and stock exchange listing standards, do not provide
shareowners with sufficient mechanisms for providing input to boards on
senior executive compensation. In contrast to U.S. practices, in the United
Kingdom, public companies allow shareowners to cast an advisory vote on
the "directors' remuneration report," which discloses executive compensation.
Such a vote isn't binding, but gives shareowners a clear voice that could
help shape senior executive compensation.
Currently U.S. stock exchange listing standards require
shareowner approval of equity-based compensation plans; those plans, however,
set general parameters and accord the compensation committee substantial
discretion in making awards and establishing performance thresholds for
a particular year. Shareowners do not have any mechanism for providing ongoing
feedback on the application of those general standards to individual pay
packages. (See Lucian Bebchuk & Jesse Fried, Pay Without Performance 49
(2004).)
Similarly, performance criteria submitted for shareowner
approval to allow a company to deduct compensation in excess of $1 million
are broad and do not constrain compensation committees in setting performance
targets for particular senior executives. Withholding votes from compensation
committee members who are standing for reelection is a blunt and insufficient
instrument for registering dissatisfaction with the way in which the committee
has administered compensation plans and policies in the previous year.
Accordingly, we urge the Company's board to allow shareowners
to express their opinion about senior executive compensation at the Company
by establishing an annual referendum process. The results of such a vote
would, we think, provide the Company with useful information about whether
shareowners view the company's senior executive compensation, as reported
each year, to be in shareowners' best interests.
Please vote for this proposal.
[INQUIRY LETTER] January 10, 2007
VIA OVERNIGHT DELIVERY (UPS)
Office of Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Withdrawal of No-Action Request by Cincinnati Bell
Inc. for Shareholder Proposals
Ladies and Gentlemen:
Per my letter dated December 19, 2006 ("No-Action Request"),
on behalf of Cincinnati Bell Inc. (the "Company"), we requested that the
Staff concur in the opinion that the Company may omit from its proxy statement
and form of proxy for the Company's 2007 Annual Meeting of Shareholders
(collectively, the "2007 Proxy Materials") (i) a shareholder proposal regarding
executive compensation and statement in support thereof (the "Compensation
Proposal") submitted by Mr. Timothy Donoghue and (ii) a shareholder proposal
regarding the Company's reputation and statement in support thereof (the
"Reputation Proposal") submitted by Ms. Cynthia Cunningham. A copy of that
No-Action Request without exhibits is attached as Exhibit A.
Mr. Donoghue has notified the company via a letter dated
December 21, 2006 that he has decided to withdraw the Compensation Proposal.
In addition, Ms. Cunningham has notified the Company via letter dated December
22, 2006 that she has decided to withdraw the Reputation Proposal. A copy
of Mr. Donoghue's correspondence is attached as Exhibit B and a copy of
Ms. Cunningham's correspondence is attached as Exhibit C.
Since Mr. Donoghue has voluntarily withdrawn the Compensation
Proposal and Ms. Cunningham has voluntarily withdrawn the Reputation Proposal
and therefore have rendered the matters moot, we are informing you that
it is unnecessary for the Staff to respond to the No-Action Request. Please
withdraw our No-Action Request.
Kindly acknowledge receipt of this letter by stamping
the enclosed photocopy and returning the same to me in the enclosed self-addressed
envelope. Should you have any questions or comments regarding the foregoing,
please contact the undersigned at (513) 651-6712
FROST BROWN TODD LLC
/s/
Kevin L. Cooney
KLC:jss
Encls.
cc: Christopher J. Wilson, General Counsel of Cincinnati
Bell Inc.
Mr. Timothy M. Donoghue
Ms. Cynthia A. Cunningham
Mr. Tony Daley, Communication Workers of America
Attachments:
Exhibit A - No- Action Request
Exhibit B - Mr. Donoghue's Withdrawal Letter
Exhibit C - Ms. Cunningham's Withdrawal Letter
[STAFF REPLY LETTER] January 12, 2007
Kevin L. Cooney
Frost Brown Todd LLC
2200 PNC Center
201 East Fifth Street
Cincinnati, OH 45202-4182
Re: Cincinnati Bell Inc.
Dear Mr. Cooney:
This is in regard to your letter dated January 10, 2007
concerning the shareholder proposals submitted by Timothy M. Donoghue and
Cynthia A. Cunningham-Manning for inclusion in Cincinnati Bell's proxy materials
for its upcoming annual meeting of security holders. Your letter indicates
that the proponents have withdrawn the proposals, and that Cincinnati Bell
therefore withdraws its December 19, 2006 request for a no-action letter
from the Division. Because the matter is now moot, we will have no further
comment.
Sincerely,
/s/
Ted Yu
Special Counsel
cc: Timothy M. Donoghue
CWA Local 4400
2300 Montana Ave., Suite 101
Cincinnati, OH 45211
Cynthia A. Cunningham-Manning
3418 Mayfair Ave.
Cincinnati, OH 45211
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