Company Name: General Electric Co.
Public Availability Date: January 16, 2007
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
STAFF REPLY LETTER
[INQUIRY LETTER]
December 8, 2006
Direct Dial (202) 955-8671
Fax No. (202) 530-9569
VIA HAND DELIVERY
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Shareowner Proposal of William Balyszak Exchange Act of 1934
Rule 14a-8
Dear Ladies and Gentlemen:
This letter is to inform you that our client, General Electric Company ("GE"),
intends to omit from its proxy statement and form of proxy for its 2007 Annual
Shareowners Meeting (collectively, the "2007 Proxy Materials") a shareowner
proposal and statements in support thereof (the "Proposal") received from
William Balyszak (the "Proponent") relating to a cost of living adjustment for
pension holders.
Pursuant to Rule 14a-8(j), we have:
enclosed herewith six (6) copies of this letter and its attachments;
filed this letter with the Securities and Exchange Commission (the
"Commission") no later than eighty (80) calendar days before GE files its
definitive 2007 Proxy Materials with the Commission; and
concurrently sent copies of this correspondence to the Proponent.
Rule 14a-8(k) provides that shareowner proponents are required to send companies
a copy of any correspondence that the proponents elect to submit to the
Commission or the staff of the Division of Corporation Finance (the "Staff").
Accordingly, we are taking this opportunity to inform the Proponent that if he
elects to submit additional correspondence to the Commission or the Staff with
respect to this Proposal, a copy of that correspondence should concurrently be
furnished to the undersigned on behalf of GE pursuant to Rule 14a-8(k).
BASES FOR EXCLUSION
The Proposal can be properly excluded from the 2007 Proxy Materials as it has
been from GE's and many other issuers' proxy materials in the past because it:
deals with a matter relating to GE's ordinary business operations within the
meaning of Rule 14a-8(i)(7); and
is designed to result in a personal benefit to the Proponent that will not be
shared by GE's other shareowners at large under Rule 14a-8(i)(4).
THE PROPOSAL
The Proposal states: "An Annual Cost of Living Adjustment (COLA) shall be
incorporated in all GE Pensions, effective January 1, 2007." A copy of the
Proposal and supporting statement is attached to this letter as Exhibit A, and a
version of the proposal initially submitted by the Proponent (the "Initial
Proposal") and other correspondence with the Proponent is attached to this
letter as Exhibit B.1 On behalf of our client, we hereby respectfully request
that the Staff concur in our view that the Proposal may be excluded from the
2007 Proxy Materials on the bases described below.
ANALYSIS
I. The Proposal May Be Excluded Under Rule 14a-8(i)(7) Because It Addresses
Retiree Benefits, a Matter Relating to GE's Ordinary Business Operations.
There is ample precedent for exclusion of shareowner proposals of this nature
under Rule 14a-8(i)(7). This Proposal deals with matters relating to GE's
ordinary business operations retiree benefitswhich the Staff has routinely
concluded are properly excludable. The design, maintenance, and administration
of pension benefits are part of a company's ordinary course of business
operations. In its day-to-day employee benefits administration, GE determines
the amount and timing of its pension distributions, as well as applicable
eligibility requirements for employees, retirees and others. A cost of living
adjustment is an issue that must be considered in tandem with all other factors
that affect GE's pension programs, and decisions regarding any cost of living
adjustment are best left to those who handle such decisions on a daily basis.
The Staff has consistently determined that shareowner proposals involving cost
of living adjustments for pension plans may be omitted from proxy materials
pursuant to Rule 14a-8(i)(7). In shareowner proposals fundamentally identical to
the one offered by the Proponent, the Staff has concurred that companies could
exclude these proposals under Rule 14a-8(i)(7) as relating to a company's
ordinary business operations, namely "employee benefits." See, e.g., Tyco
International Ltd. (avail. Jan. 2, 2004)(agreeing that a proposal to provide an
annual cost of living allowance increase in the pension benefit based on the
Consumer Price Index could be omitted); DTE Energy Co. (avail. Jan. 22,
2001)(concluding that a proposal to "grant a full cost-of-living adjustment for
all existing retirees and their surviving spouses" was excludable);
International Business Machines Corp. (avail. Jan. 2, 2001) (concurring with the
exclusion of a proposal to add a cost of living allowance to pensions);
International Business Machines Corp. (avail. Dec. 30, 1999) (confirming that
IBM could omit a proposal to "adjust defined-benefit plan pensions to mitigate
the impact of increases in the cost of living for its retirees"); Avery Dennison
Corp. (avail. Nov. 29, 1999) (concluding that Avery Dennison could exclude a
proposal to provide a cost of living adjustment to pension participants
retroactively for ten years and prospectively); Cigna Corp. (avail. Dec. 21,
1998) (agreeing that a proposal to grant all retirees an annual cost of living
increase was excludable).
Additionally, the Staff has consistently concurred that companies may exclude
from their proxy materials shareowner proposals related to increasing pension
benefits. See, e.g., WGL Holdings, Inc. (avail. Nov. 17, 2006) (confirming that
WGL Holdings could exclude a proposal to provide a raise to retired employees);
ConocoPhillips (avail. Feb. 2, 2005)(concurring that proposal to "bring parity
to all existing pension plans" related to that company's ordinary business
operations); BellSouth Corp. (avail. Jan. 3, 2005) (agreeing that BellSouth
could omit a proposal "seeking increased pension benefits as a result of pension
plans being overfunded"); International Business Machines Corp. (avail. Dec. 20,
2004)(confirming that IBM could omit a proposal to "increase the amount of
pension benefits payable to its retirees"); Raytheon Co. (avail. Jan. 30,
2004)(concluding that Raytheon could exclude a proposal asking its board to
raise the pensions of certain pension plan participants in proportion to the
number of years such retirees had participated in the plan); Bell Atlantic Corp.
(avail. Oct. 18, 1999) (concurring that a proposal to increase retirement
benefits for retired management employees was excludable); Burlington
Industries, Inc. (avail. Oct. 18, 1999) (confirming that a proposal to reinstate
dental benefits for certain retirees and adopt a new retiree health insurance
plan offering HMOs and covering retirees that were forced out could be omitted);
Lucent Technologies, Inc. (avail. Oct. 4, 1999)(concluding that a proposal to
increase "vested pension" benefits could be excluded).
There is no distinction between the Proposal at issue here and the numerous
proposals discussed above. Accordingly, the Proposal is excludable under Rule
14a-8(i)(7).
II. The Proposal May Be Excluded Under Rule 14a-8(i)(4) Because It Is Designed
to Result in a Benefit to the Proponent and Further a Personal Interest Not
Shared by GE's Other Shareowners at Large.
The Proposal also is excludable from the 2007 Proxy Materials pursuant to Rule
14a-8(i)(4) because it is as an attempt by the Proponent to obtain a personal
benefit that will not be shared with the overwhelming majority of GE's
shareowners. Here, the Proponent is a pensioner seeking an increase in his
pension benefits. Under Rule 14a-8(i)(4), an issuer may exclude a shareowner
proposal "if it is designed to result in a benefit to [the proponent], or to
further a personal interest, which is not shared by the other shareholders at
large."
The Proponent sets forth facts demonstrating that he has a personal interest in
the Proposal as a GE pensioner. In the Initial Proposal, the Proponent expressly
labels himself a GE pensioner: "Resolved: I, as a GE pensioner and stockholder,
request that an annual Cost of Living Adjustment ... be incorporated in all GE
Pensions...." The Proposal as revised states: "Yes, it is we, the
pensionerswhen we were youngwho helped make GE what it is today."
In Exchange Act Release No. 20091 (Aug. 16, 1983), the Commission explained that
the purpose of Rule 14a-8(i)(4) is to ensure "that the security holder process
would not be abused by proponents attempting to achieve personal ends that are
not necessarily in the common interest of the issuers shareholders generally."
On this basis, the Staff has historically determined that proposals to increase
pension benefits may be omitted under Rule 14a-8(c)(4) (the predecessor to Rule
14a-8(i)(4)). See, e.g., International Business Machines Corp. (avail. Jan. 20,
1998) (concurring that IBM could exclude a proposal to increase the minimum
pension benefit to retirees where proponent was a retiree); General Electric Co.
(avail. Jan. 25, 1994)(agreeing that GE could omit a proposal to increase
pension benefits); International Business Machines Corp. (avail. Jan. 25, 1994)
(confirming that IBM could exclude a proposal to increase the minimum pension
benefit to retirees). Consistent with these precedents, because the Proposal is
designed to further the Proponent's personal interests, the Proposal is properly
excludable pursuant to Rule 14a-8(i)(4).
CONCLUSION
Based upon the foregoing analysis, we respectfully request that the Staff of the
Commission concur that it will take no action if GE excludes the Proposal from
its 2007 Proxy Materials. We would be happy to provide you with any additional
information and answer any questions that you may have regarding this subject.
In addition, GE agrees to promptly forward to the Proponent any response from
the Staff to this no-action request that the Staff transmits by facsimile to GE
only.
If we can be of any further assistance in this matter, please do not hesitate to
call me at (202) 955-8671 or David M. Stuart, GE's Senior Counsel, at (203)
373-2243.
Sincerely,
/s/
Ronald O. Mueller
ROM/eldc
Enclosures
cc: David M. Stuart, General Electric Company William Balyszak
-----FOOTNOTES-----
1 The Proponent subsequently submitted additional minor changes, included in
Exhibit B, that are not addressed herein, but which would not alter our
arguments. See Section E.2, Staff Legal Bulletin No. 14 (July 13, 2001) (stating
that "[i]f a company has received a timely proposal and the shareholder makes
revisions to the proposal before the company submits its no-action request," the
company is not required to accept such revisions).
[APPENDIX 1]
William Balyszak
6039 South Street Road
Auburn. NY 13021
Re: Shareowner Proposal
Mr. Brackett B. Denniston III
Secretary. General Electric Co.
3135 Faston Turnpike
Fairfield, CT 06828
Dear Mr. Denniston:
Kindly include the below Shareowner Proposal in the forthcoming GE "Notice of
2007 Annual Meeting and Proxy Statement."
"Whereas: Mr. Immelt stated that `GE is a multi-business growth company bound
together by common operating systems and initiatives, and a common culture with
strong values.'(1)
Furthermore, he stated that `One strength that is beyond value is our integrity.
Integrity takes work. It's more than saying the right things or signing the
right principles, it means creating a company that. in all situations, does what
is right.'(3a)
He further stated that `We maintained our financial strength, remaining one of
only seven Triple A-rated industrial companies. and GE's terrific people
prepared your company for success in the 21\st/ century.' Additionally, he said,
`I believe that our reputation for integrity and honorable dealings is our most
important asset.' (2)
Additionally. Mr. Immelt stated that `I am indebted to your commitment.
(Investors/Retirees) And you will be rewarded. We have created a high-tech,
services and financial enterprise that can grow faster with expanding returns.
build leadership in fast-growth markets and return cash to you.' (3)
And again, Mr. Immelt stated `Going forward, we should generate more than $10
billion of free cash flow each year. This is cash available after we have
invested back in the Company and paid your dividend.' (4)
'For 2005, GE had $150 billion in revenues (up by 11%); Net earnings were $18.3
billion (up by 12%) and cash flow was $21.6 billion (up by 42%). In all, GE
returned $14 billion to investors in 2005.' (4a) And the Company still wound up
with $21.6 billion in cash flow! This is truly amazing and all GE employees
should be proud of this magnificent performance.
And for 2006. GE is on target - again - to have double-digit growth in Sales of
approximately $165 billion and $20.5 billion in Net Earnings. Truly amazing
continuous performance. Kudos to one and all.
As everyone can see, GE is a very, very profitable company that has rewarded its
investors - year after year - by increasing its dividends. Additionally, the
Company has rewarded a great majority of all of its employees with above
inflation rate increases during all these years. Even the members of the Board
received a raise in their director fees.
But where have the yearly increases been for all of us GE Retirees? As the old
saying goes - the silence was and still is - deafening.
According to Mr. Immelt. `GE's global pension plans have more than $54 billion
in assets, a surplus of nearly $3 billion, and the Company expects to meet its
obligations to pensioners with no significant increase in funding for the
foreseeable future.' (4)
In fact, GE has not contributed to the pension plan since 1987 and as one can
see from the above. GE sees "... no significant increase in funding for the
foreseeable furture."
As published in various editions of The Wall Street Journal, GE moved the
following Pension Surpluses to their Income Statements: 1998 - $1.02 billion;
1999 - $1.38 billion; 2000- $1.7 billion; 2001 - $2.1 billion: 2002 - $1.55
billion or a total of $7.75 billion in these 5 short years.
Yet, we 500,000 plus pensioners and retirecs of GE. who made this Company what
it is today, didn't even get a yearly Cost Of Living Adjustment (COLA) increase
because the Company says it can't afford it?
I find that to be incongruous. considering just a recap of the above factors
alone. shows otherwise:
A - GE moved $7.75 billion from the Pension Plan to the GE Income Statement
(1998-2002);
B - The Pension Plan is over funded by $3.0 billion at the end of 2005;
C - GE has NOT contributed to the Pension Plan since 1987;
D - GE had $21.6 billion of Free Cash Flow at end of 2005 & at least $10 billion
in previous years.
In fact, if the $7.75 billion pension surpluses were not moved to the Income
Statements. this item alone would have been enough to pay the COLAs not only to
the existing 500.000 plus pensioners but to an additional 500,000 plus new
retirces - and in perpetuity.
So again, as one can see from the above, there is enough money left over on the
various GE books to help as all retirees and without jeopardizing the financial
stability of GE or the GE Pension Fund.
GE's past CEO, Jack Welch, has said that "The facts are, companies are not
bricks and mortar, but people, with blood and sweat and tears. That's why we
need to tell the people who have earned it...'Bravo.'" (5)
And Mr. Immelt, while being interviewed on CNBC by Maria Bartiromo, stated that
"The people at GE are his most important resources. which made this Company grow
in the past and will make it prosper in the future."
Based on the comments of Mr. Immelt and Mr. Welch, it would appear that wethe
retired people of GE, - should also be rewarded. As Mr. Immelt said, "...it
means creating a company that, in all situations, does what is right."
And what better way to do the right thing than, as a minimum, have all GE
pensions increased yearly via an equitable COLA. The funds are available and all
that is needed is the Corporate will for this to happen.
Yes, it is we - the pensioners - when we were young - who helped make GE what it
is today.
We don't ask for the world but we do ask that the Company we all helped build in
the past and handed off to next generation be not forgotten.
"Resolved: 1, as a GE pensioner and stockholder, request that an annual Cost of
Living Adjustment (COLA) - equal to or greater than the annual Social Security
COLA - he incorporated in all GE Pensions, effective January 1, 2007.
I strongly urge the Board of Directors to recommend a vote FOR this proposal.
And I ask all stockholders to vote YES and help the 500,000 plus retirees keep
their heads above water.
/s/
William Balyszak
(1) Jeffrey R. Immelt, GE 2003 Annual Report. pg. 2
(2) Jeffrey R. Immelt, GE 2002 Annual Report, pg. 5
(3) Jeffrey R. Immelt, GE 2004 Annual Report, pg. 2: (3a) JRI, GE Leaders Report
on Co. Operations
(4) Jeffrey R. Immelt, GE 2005 Annual Report, pg. 5: (4a) Inside cover of GE
2005 Annual Report
(5) October 30, 2003The `But' Economy (Op-ed)- The Wall Street Journal, By Jack
Welsh
APPENDIX 2]
December 29, 2006
6039 South Street Road
Auburn, NY 13021
Re: Shareowner Proposal of William Balyszak of GE no-action request (CaseC
32016-00092)
Office of Chief Counsel
Div. of Corp. Finance - SEC
100 F Street, N.E.
Washington, DC 20549
Dear Ladies and Gentlemen:
This is to inform the SEC that I completely disagree with GE's 12/8/06 letter to
you requesting that you approve their No-Action Request in my COLA Shareowner
Proposal.
GE bases its request for exclusion under two untested in the courts reasons:
1 - That it "deals with a matter relating to GE's ordinary business
operations..." and
2 - That it "is designed to result in a personal benefit to the Proponent that
will not be shared by other shareowners at large..."
As for Item 1, what shareholder proposal does not `deal with a matter relating
to GE's ordinary business operations?' This GE Corporation is one of - if not
the - best organized and run in the world. And how does a giant like GE get to
be the best in everything they do but if not `deal with all matters relating to
their ordinary business operations?' They leave no stone unturned - or process
untested - before they decide to go forward and it doesn't make a difference
what area or specialty is involved.
And as for Item 2, `that will not be shared by other shareowners at large' is
completely erroneous. Of course I hope to benefit from this proposal but GE has
over 523,000 people that at the end of 2005 will be entitled to pension benefits
in the future. And that's only the people who were enrolled in the GE "Principal
Pension Plans." There were an additional 105,000 people enrolled in GE's "Other
Pension Plans." So now we're up to 628,000 Pension Plan Participants. (Page 77,
GE 2005 Annual Report)
These huge numbers begs to ask the question: Are over 628,000 people not enough
"... shareowners at large?" These represent employees - past and present - who
belong to various GE pension and 401(k) plans and who own GE stock and made - or
make - this corporation `tick.'
Even the IRS annually updates the Standard Deduction, Mileage Rates, etc., and
the Social Security Adm. annually updates SS benefits to account for the eroding
factor that inflation has on trying to live on old, outdated and inequitable
constant dollars. And everybody doesn't use the Standard Deduction, Mileage
Rates or collect Social Security but they do help `other taxpayers at large.'
And considering that this overwhelming majority (90%+), are enrolled in various
GE pension and 401(k) plans plus outside holdings, one would say that yes, this
proposal, if passed, would benefit and "be shared by other shareowners at
large."
I believe that prior SEC staff rulings should be revisited with a complete
review of prior decisions relative to COLA proposals because of their
detrimental impact on the lives of current and future pensioners of GE and other
companies.
I therefore ask that you deny their request and let this proposal go forward and
let all GE shareholders decide its merits and not just the GE Corporate
hierarchy.
Sincerely,
/s/
William Balyszak
STAFF REPLY LETTER]
Response of the Office of Chief Counsel Division of Corporation Finance
Re: General Electric Company Incoming letter dated December 8, 2006
The proposal relates to an annual cost-of-living adjustment for all GE pension
plans, effective January 1, 2007.
There appears to be some basis for your view that GE may exclude the proposal
under rule 14a-8(i)(7), as relating to its ordinary business operations (i.e.,
employee benefits). Accordingly, we will not recommend enforcement action to the
Commission if GE omits the proposal from its proxy materials in reliance on rule
14a-8(i)(7). In reaching this position, we have not found it necessary to
address the alternative basis for omission upon which GE relies.
Sincerely,
/s/
Rebekah J. Toton
Attorney-Adviser
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