Company Name: Costco Wholesale Corp.
Public Availability Date: October 31, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
September 25, 2007
Via Federal Express
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Costco Wholesale Corporation Commission File No. 000-20355
Ladics and Gentlemen:
This letter is to inform you that our client, Costco Wholesale Corporation
("Costco" or the "Company"), intends to omit from its proxy statement and form
of proxy for the 2008 annual meeting of the shareholders (the "2008 Proxy
Materials") a shareholder proposal (the "Proposal") and supporting statement
(the "Supporting Statement") received from Calvert Asset Management Company,
Inc., The Nathan Cummins Foundation and Boston Common Asset Management LLC (the
"Proponents"). The proposal requests that the Board of Directors "publish a
report to shareholders on the Company's policies on product safety, at
reasonable expense and omitting proprietary information, by December 2008. This
report should list product categories sold in Costco stores which contain
substances affected by the public health concerns described above, and discuss
any new initiatives or actions, aside from regulatory compliance, that
management is taking to respond to this public policy challenge." The Proposal
and Supporting Statement from each of the Proponents are identical, and are
attached to this letter as Exhibits A-1, A-2 and A-3.
On behalf of our client, we hereby respectfully request that the Staff of the
Division of Corporation Finance (the "Staff") of the Securities and Exchange
Commission (the "Commission") concur in our opinion that the Proposal and the
Supporting Statement may be excluded from the 2008 Proxy Materials. As discussed
more fully below, the Proposal and the Supporting Statement may properly be
excluded from the 2008 Proxy Materials under either Rule 14a-8(i)(3) because the
Proposal is vague, indefinite and misleading, or under Rule 14a-8(i)(7) because
the Proposal relates to the Company's "ordinary business operations,"
specifically Costco's policies concerning the selection of its products.
Pursuant to Rule 14a-8(j), enclosed are six (6) copies of this letter and its
attachments. Also in accordance with Rule 14a-8(j), a copy of this letter and
its attachments are being mailed on this date to each of the Proponents,
informing it of the Company's intention to omit the Proposal and the Supporting
Statement from the 2008 Proxy Materials. The Company intends to mail its
definitive 2008 Proxy Materials on or about December 17, 2007. Accordingly,
pursuant to Rule 14a-8(j), this letter is being filed with the Commission no
later than eighty calendar days prior to the Company's filing of its definitive
2008 Proxy Materials with the Commission.
The Proposal
The Proposal consists of a lengthy introduction, a request for a report on
Costco's policies on product safety and a one-sentence supporting statement. The
Proposal asks Costco's Board of Directors to "publish a report to shareholders
on the Company's policies on product safety, at reasonable expense and omitting
proprietary information, by December 2008. This report should list product
categories sold in Costco stores which contain substances affected by the public
health concerns described above, and discuss any new initiatives or actions,
aside from regulatory compliance, that management is taking to respond to this
public policy challenge." The introduction to the Proposal cites the existing
regulatory environment with respect to the inclusion of certain chemicals in
consumer products. The introduction also states that chemicals of concern are
lead found in polyvinyl chloride and jewelry, phthalates found in cosmetics and
added to polyvinyl chloride, brominated flame retardants and PFOA used to
produce stain and grease resistant coatings for carpets, cookware and food
packaging. The introduction also cites actions purportedly taken by Costco's
competitors (including Wal-Mart) to establish policies with respect to the
chemical content of products purchased by them.
Grounds for Exclusion
1. The Proposal is Vague, Indefinite and Misleading and is Excludable under
Rules 14a-8(i)(3) and 14a-9.
Rule 14a-8(i)(3) permits a company to omit from its proxy materials a
shareholder proposal and any statement in support thereof if the proposal or
supporting statement is contrary to any of the Commission's proxy rules,
including Rule 14a-9. Rule 14a-9 provides, in pertinent part, that:
(a) no solicitation subject to this regulation shall be made by means of any
proxy statement, form of proxy, notice of meeting or other communication,
written or oral, containing any statement which, at the time and in 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.
In Staff Legal Bulletin 14B, the Staff stated that it would concur in a
company's decision to exclude a proposal as inherently misleading if the
proposal, among other things, was so inherently vague or indefinite that neither
the shareholders nor the company would be able to determine with any reasonable
certainty exactly what actions or measures the proposal requires. The Proposal
requests that Costco prepare a report that lists "product categories sold in
Costco stores which contain substances affected by the public health concerns
described above..." From the introduction to the Proposal, it appears that these
public health concerns are a "wide range of toxic chemicals, especially those
that pose a hazard to fetuses, young children, pregnant women and other
particularly vulnerable populations." "Other particularly vulnerable
populations" is a completely vague and indefinite category that no reasonable
person could identify with any specificity. While the Proposal lists some
chemicals of concern, it does not limit the report to those chemicals, but seeks
a report on a "wide range of toxic chemicals", a standard that is virtually
without limit and one that the Company cannot have any possible way of knowing
what is requested. As a result, the Proposal is virtually unlimited in its
scope, and given the vagueness of the Proposal, neither the Costco shareholders
when voting on the Proposal nor Costco in attempting to implement the Proposal,
would be able to determine with any certainty the scope of the Proposal. We
would also point out that the Proposal permits the Company to exclude any
proprietary information and the requested report specifically excludes any
discussion of initiatives as a result of regulatory compliance. These exclusions
are also virtually limitless, further disabling shareholders from understanding
the impact of the Proposal. Accordingly, Costco believes it may exclude the
Proposal as vague, indefinite and materially misleading as to the scope and
content of the requested report.
2. The Proposal Relates to Costco's Ordinary Business Operations and is
Excludable under Rule 14a-8(i)(3).
Under Rule 14a-8(i)(7), a registrant may properly exclude a proposal dealing
with a matter relating to the conduct of the registrant's ordinary business
operations and not involving significant social policy issues. The policy
underlying Rule 14a-8(i)(7) is basically the same as the underlying policy of
most state corporation laws: "to confine the solution of ordinary business
problems to the management and the board of directors and to place such problems
beyond the competence and direction of stockholders since it is impracticable
for stockholders to decide how to solve such problems at an annual meeting." SEC
Rel. No. 34-40018 (May 21, 1998); see also Washington Business Corporation Act,
RCW $ 23B.08.010 ("All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation managed under the
direction of, its board of directors, subject to any limitation set forth in the
articles of incorporation."). This underlying policy rests on two central
considerations. First, certain tasks are so fundamental to management's ability
to run a company on a day-to-day basis that they are not proper subjects for
shareholder proposals. 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." SEC Rel. No. 34-40018 (May 21,
1998)(the "1998 Release"). A 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. Release No. 34-20091 (Aug. 16,
1983).
Costco believes that the Proposal is excludable under the ordinary business
exclusion in Rule 14a-8(i)(7) because it involves a matter of ordinary business,
namely the selection of products sold by Costco in its stores and an assessment
of business practices involved in the selection of these products. The staff has
recently considered similar shareholder proposals regarding the safety of
products in Walgreen Co. (avail. October 13, 2006) and Wal-Mart Stores, Inc.
(avail. March 24, 2006). In both instances, the staff permitted the proposals to
be excluded under the ordinary business operations exclusion. In the letter to
Walgreen Co., the staff permitted the exclusion of a shareholder proposal
requesting a report on chemicals contained in Walgreen's private label cosmetics
and personal care product lines and to describe options for new Walgreen's
policies which would proactively seek safer alternatives for these chemicals, on
the grounds that the proposal related to Walgreen's ordinary business
operations. In the letter to Wal-Mart Stores, the Staff permitted the exclusion
of a proposal requesting Wal-Mart to "publish a report evaluating Company
policies and procedures for systematically minimizing customers' exposure to
toxic substances in products, including, at a minimum, hormone disrupting
chemicals, persistent bioaccumulative toxicants, carcinogens, mutagens and
reproductive toxicants. The report should summarize the criteria used to
evaluate such chemicals, and include options for systematically identifying
toxic chemicals in stocked products, encouraging suppliers to reduce or
eliminate such chemicals and develop safer alternatives,..."
As these recent letters point out, the Proposal is excludable because it seeks
to micromanage Costco's retail business practices and inventory of products. The
1998 Release states that proposals may be seen as attempting to micro-manage a
company "where the proposal involves intricate detail, or seeks to impose
specific time-frames or methods for implementing complex policies." While the
Proposal itself is more indirect in its request for specific detail found in
either the Walgreen or Wal-Mart proposals, the introduction to the Proposal goes
into considerable detail about recent regulatory requirements, the benefits
found by Costco's competitors through a product safety program and the listing
of specific chemicals of concern. The Proposal references the introduction in
requesting the report in a manner that makes clear that the thrust of the
requested report is the material found in the introduction. Those statements and
thus the Proposal itself are not distinguishable in any material way from the
requests that the Staff permitted to be excluded in Walgreen Co. and Wal-Mart
Stores.
In Staff Legal Bulletin 14C, the Staff stated that with respect to proposals
that focus on a company engaging in an internal assessment of the risks or
liabilities that the company faces as a result of its operations that may
adversely affect the environment or the public's health, it concurs that such
proposals may be excluded under Rule 14a-8(i)(7) as relating to an evaluation of
risk. The Proposal requests that the report "discuss any new initiatives or
actions...that management is taking to respond to this public policy challenge."
The longest paragraph in Proponents' introduction to the Proposal concludes with
the sentence: "Wal-Mart expects reputational benefits and cost savings from many
of these measures." As Wal-Mart is one of Costco's biggest competitors, there
can be little doubt that Proponents expect any report from Costco to include an
analysis of the risks or liabilities to which Costco is subject due to product
recalls and other liabilities from potential safety hazards. A request for such
an analysis places the Proposal squarely within the types of proposals that SLB
14C permits to be excluded.
Conclusion
Based on the foregoing, the Company hereby respectfully requests that the Staff
agree that it will not recommend any enforcement action if the Proposal is
omitted from the Company's 2008 Proxy Materials under either Rule 14a-8(i)(3) or
Rule 14a-8(i)(7).
Should you have any questions or comments regarding the foregoing, or should any
additional information be desired in support of the Company's position, please
contact the undersigned at (206) 389-4264. If the Staff is inclined to deny the
Company's request, we would appreciate the opportunity discuss such a
determination in advance of your formal written response.
Very truly yours,
/s/
David R. Wilson
Attachments
cc: John Sullivan (Costco Wholesale Corporation)
SE 2225250 v1
[INQUIRY LETTER]
August 13, 2007
Mr. Joel Benoliel
Secretary
Costco Wholesale Corporation
999 Lake Drive
Issaquah, WA 98027
Dear Mr. Benoliel:
The Nathan Cummings Foundation is an endowed institution with approximately F545
million of investments. As a private foundation, the Nathan Cummings Foundation
is committed to the creation of a socially and economically just society and
seeks to facilitate sustainable business practices by supporting the
accountability of corporations for their actions. As an institutional investor,
the Foundation believes that the way in which a company approaches major public
policy issues has important implications for long-term shareholder value.
It is with these considerations in mind that we submit this resolution for
inclusion in Costco Corporation's proxy statement under Rule 14a-8 of the
general rules and regulations of the Securities Exchange Act of 1934. At least
one representative of the filers will attend the stockholders' meeting to move
the resolution as required by the rules of the Securities and Exchange
Commission.
The Nathan Cummings Foundation is the beneficial owner of over $2,000 worth of
shares of Costco Corporation stock. Verification of this ownership, provided by
Northern Trust, our custodian bank, will follow under separate cover. We have
continuously held over $2,000 worth of the stock for more than one year and will
continue to hold these shares through the shareholder meeting.
If you have any questions or concerns about this resolution, please contact
Laura Shaffer at (212) 787-7300. Thank you for your time.
Sincerely,
/s/
Lance E. Lindblom
President and CEO
/s/
Laura J. Shaffer
Director of Shareholder Activities
cc: Interfaith Center on Corporate Responsibility Members and Associates
[INQUIRY LETTER]
August 10, 2007
Mr. James D. Sinegal, President & CEO
Costco Wholesale Corporation
999 Lake Drive
Issaquah, WA 98027
Re: Chemical Safety Policy and PracticesResolution
Dear Mr. Sinegal:
Please include the enclosed proposal in the Proxy Statement and Form of Proxy
relating to the 2008 Annual Meeting of the stockholders of Costco Wholesale
Corporation.
Boston Common Asset Management is the primary filer of this resolution on behalf
of its clients. As of August 10, 2007, Boston Common's clients hold a total of
43,230 shares of Costco. Verification of ownership will be submitted upon
request, We are submitting the enclosed shareholder proposal for inclusion in
the proxy statement for the 2008 Annual Meeting of Shareholders, in accordance
with Rule 14a-8 of the General Rules and Regulations of the Securities Exchange
Act of 1934 (the "Act"). Boston Common is the beneficial owner, as defined in
Rule 13d-3 of the Act, of the above-mentioned number of shares. Boston Common
has held at least $2,000 in market value of these securities for more than one
year at the time of the filing of this shareholder proposal and will continue to
hold at least the requisite number of shares for proxy resolutions through the
stockholders' meeting. A representative of the filers will attend the
stockholders' meeting to move the resolution as required.
Please view this as a friendly shareholder resolution filing. Given the deadline
for submitting a shareholder resolution for the 2008 annual meeting, we felt it
necessary to preserve our rights as shareholders by submitting the enclosed
shareholder resolution.
We appreciate your response to our July 9\th/ letter regarding Costco's approach
to chemical safety but felt there was not enough information or commitment for a
comprehensive dialogue on the issue at this time presented by the company. Given
recent events, we feel that chemical and product safety is a timely and material
issue that Costco should be pro-actively addressing through developing new
policies and procedures. We would welcome the opportunity to discuss this matter
with company management prior to the submission of Costco's Proxy Statement and
Form of Proxy to the SEC.
I can be reached directly via phone at (617)720-5557 or via e-mail at lcompere@bostoncommonasset.com.
We look forward to hearing from you.
Sincerely,
/s/
Lauren Compere
Director of Shareholder Advocacy
Cc: Mr. Jeffrey H. Brotman, Chairman
Mr. Richard D. DiCherchio, SEVP, COO, Global Operations, Distribution and
Construction
Mr. John Sullivan, Associate General Counsel
[INQUIRY LETTER]
October 17, 2007
Via Federal Express
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Costco Wholesale Corporation Commission File No. 000-20355
Ladies and Gentlemen:
On September 25, 2007, we submitted a letter to the Office of Chief Counsel on
behalf of our client, Costco Wholesale Corporation ("Costco" or the "Company")
seeking your concurrence that Costco could omit from its proxy statement and
form of proxy for the 2008 annual meeting of the shareholders a shareholder
proposal and supporting statement (together, the "Proposal") received from
Calvert Asset Management Company, Inc., The Nathan Cummins Foundation and Boston
Common Asset Management LLC (the "Proponents"). All of the Proponents have
advised Costco that they are withdrawing the Proposal and will not present the
Proposal at the Company's 2008 Annual Meeting. Accordingly, the Company hereby
withdraws its request to the staff.
If the staff has any questions or comments concerning the foregoing, please
contact the undersigned at 206-389-4264.
Very truly yours,
/s/
David R. Wilson
cc: John Sullivan (Costco Wholesale Corporation)
[INQUIRY LETTER]
October 26, 2007
Via Federal Express
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Costco Wholesale Corporation Commission File No. 000-20355
Ladies and Gentlemen:
On October 17, 2007, we submitted a letter to the Office of Chief Counsel on
behalf of our client, Costco Wholesale Corporation ("Costco" or the "Company")
withdrawing its request for a no-action letter from the staff regarding a
shareholder proposal as the proponents had withdrawn their request. Enclosed
herewith are letters from the proponents of the request acknowledging their
withdrawal.
If the staff has any questions or comments concerning the foregoing, please
contact the undersigned at 206-389-4264.
Very truly yours,
/s/
David R. Wilson
cc: John Sullivan (Costco Wholesale Corporation)
[INQUIRY LETTER]
October 24, 2007
Mr. John Sullivan
Associate General Counsel
Costco Wholesale Corporation
999 Lake Drive
Issaquah, WA 98027
Re: Chemical Safety Policy and PracticesResolution Withdrawal
Sent via fax to 425-427-3128
Dear Mr. Sullivan,
Calvert Social Investment Fund, Equity Portfollo, Calvert Social Index Fund, and
Calvert Variable Series, Calvert Social Equity Portfolio hereby withdrawal their
respective shareholder proposals submitted as co-filers with Boston Common to
Mr. James D. Sinegal on August 10, 2007.
Sincerely,
/s/
Ivy Wafford Duke
Assistant Vice President and Assistant Secretary
Copy:
Lauren Compere, Boston Common
Laura Schaffer, Nathan Cummings Foundation
[INQUIRY LETTER]
October 25, 2007
Mr. John Sullivan
Associate General Counsel
Costco Wholesale Corporation
999 Lake Drive
Issaquah, WA 98027
Re: Chemical Safety Policy and PracticesResolution Withdrawal
Sent via fax to 425-427-3128
Dear Mr. Sullivan,
Please accept this letter as formal notification of the Nathan Cummings
Foundation's withdrawal of the shareholder proposal on chemical safety Policy
and Practices submitted to Mr. Joel Benoliel on August 13, 2007.
Sincerely,
/s/
Laura J. Shaffer
Director of Shareholder Activities
[INQUIRY LETTER]
October 23, 2007
Mr. John Sullivan
Associate General Counsel
Costco Wholesale Corporation
999 Lake Drive
Issaquah, WA 98027
Re: Chemical Safety Policy and PracticesResolution Withdrawal
Sent via fax to 425-427-3128
Dear Mr. Sullivan,
Boston Common Asset Management withdraws its shareholder proposal submitted to
Mr. James D. Sinegal on August 10, 2007.
Sincerely,
/s/
Lauren Compere
Chief Administrative Officer
Copy:
Jules Frieder, Calvert
Laura Schaffer, Nathan Cummings Foundation
[STAFF REPLY LETTER]
October 31, 2007
David R. Wilson
Heller Ehrman White & McAuliffe LLP
701 Fifth Avenue, Suite 6100
Seattle, WA 98104-7098
Re: Costco Wholesale Corporation
Dear Mr. Wilson:
This is in regard to your letters dated October 17, 2007 and October 26, 2007
concerning the shareholder proposal submitted by Calvert Social Investment Fund,
Equity Portfolio; Calvert Social Index Fund; Calvert Variable Series, Calvert
Social Equity Portfolio; The Nathan Cummings Foundation; and Boston Common Asset
Management, LLC for inclusion in Costco's proxy materials for its upcoming
annual meeting of security holders. Your letters indicate that the proponents
have withdrawn the proposal, and that Costco therefore withdraws its September
25, 2007 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: Ivy Wafford Duke
Assistant Vice President and Assistant Secretary
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Bethesda, MD 20814
Laura J. Shaffer
Director of Shareholder Activities
The Nathan Cummings Foundation
475 Tenth Avenue
14th Floor
New York, NY 10018
Lauren Compere
Chief Administrative Officer
Boston Common Asset Management, LLC
84 State Street, Suite 1000
Boston, MA 02109
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