Company Name: General Electric Co.
Public Availability Date: February 7, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 8, 2006
Direct Dial (202) 955-8671
Fax No. (202) 530-9569
Client No. C 32016-00092
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 CWA Members' Relief Fund Exchange Act of 1934Rule
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 purported
shareowner proposal and statements in support thereof (the "Submission")
received from CWA Members' Relief Fund (the "Proponent").
Pursuant to Rule 14a-8(j), we have:
enclosed herewith six (6) copies of this letter and its attachments;
filed this letter with the Securities and Exchange Commission (the
"Commission") no later than eighty (80) calendar days before 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 the
Proponent 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
We hereby respectfully request that the Staff concur in our view that the
Submission may be excluded from the 2007 Proxy Materials pursuant to Rule
14a-8(a) because it is not a proper subject for a shareowner proposal.
Alternatively, if the Staff does not concur that the Submission may be excluded
on this basis, GE requests the Staff's concurrence that the Submission may be
excluded pursuant to Rule 14a-8(i)(2), because implementation of the Submission
would violate state law, and Rule 14a-8(i)(3), because the Submission is
contrary to the Commission's proxy rules, namely Rule 14a-4(b)(1).
THE SUBMISSION
The Submission requests that the GE Board of Directors adopt a policy of
submitting the following question to a shareowners' vote at each annual meeting:
"Is the compensation of GE's named executive officers as set forth in the proxy
statement's Summary Compensation Table: (a) excessive; (b) appropriate; or (c)
too low?". The supporting statement describes the Submission as allowing
shareowners to "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."
A copy of the Submission and supporting statement, as well as related
correspondence from the Proponent, is attached to this letter as Exhibit A. On
behalf of our client, we hereby respectfully request that the Staff concur in
our view that the Submission may be excluded from the 2007 Proxy Materials for
the reasons described below.
ANALYSIS
I. The Submission May Be Excluded Under Rule 14a-8(a) Because It Seeks an
Advisory Vote.
The Submission is not a proposal for purposes of Rule 14a-8 because it does not
present a proposal for shareowner action but instead seeks to provide a
mechanism that would allow shareowners to express their views on a specified
topic. Under the Commission's rules, Staff responses to no-action requests under
Rule 14a-8(a) and other Staff precedent, such a vote is not a proper subject
under Rule 14a-8.
A. Requests for Advisory Votes Are Excludable under Commission Amendments to
Rule 14a-8.
The rulemaking history of Rule 14a-8 clearly demonstrates that requests for
advisory votes are not proper subjects for shareowner proposals and thus are
excludable. Rule 14a-8(a) states in relevant part:
Question 1: What is a proposal? A shareholder proposal is your recommendation or
requirement that the company and/or its board of directors take action, which
you intend to present at a meeting of the company's shareholders....
Rule 14a-8(a) (emphasis added).
Rule 14a-8(a) was adopted as part of the 1998 amendments to the proxy rules. In
the Commission's 1997 release proposing these amendments, the Commission noted:
The answer to Question 1 of revised rule 14a-8 would define a "proposal" as a
request that the company or its board of directors take an action. The
definition reflects our belief that a proposal that seeks no specific action,
but merely purports to express shareholders' views, is inconsistent with the
purposes of rule 14a-8 and may be excluded from companies' proxy materials. The
Division, for instance, declined to concur in the exclusion of a "proposal" that
shareholders express their dissatisfaction with the company's earlier
endorsement of a specific legislative initiative. Under the proposed rule, the
Division would reach the opposite result, because the proposal did not request
that the company take an action.
Proposing Release, Amendments to Rules on Shareholder Proposals, Exchange Act
Release No. 39093 (September 18, 1997) (emphasis added).
The Commission subsequently adopted this definition as proposed:
We are adopting as proposed the answer to Question 1 of the amended rule
defining a proposal as a request or requirement that the board of directors take
an action. One commenter objected to the proposal on grounds that the definition
appeared to preclude all shareholder proposals seeking information. In
formulating the definition, it was not our intention to preclude proposals
merely because they seek information, and the fact that a proposal seeks only
information will not alone justify exclusion under the definition.
Adopting Release, Amendments to Rules on Shareholder Proposals, Exchange Act
Release No. 40018 (May 21, 1998) (citations omitted).
The Submission is exactly of the type addressed by the Commission in the
releases cited above, as the supporting statements in the Submission
acknowledge. Echoing the language in the Commission's rulemaking releases, the
supporting statement indicates that the purpose of the Submission is to "provide
the opportunity to express dissatisfaction with the amount of compensation that
has been awarded to senior executives" and to allow shareowners to "express
their views." Thus, under the clear language of Rule 14a-8(a), the Submission is
not a proper subject under Rule 14a-8.
B. The Submission Is Not a Proposal for Purposes of Rule 14a-8 Based on Staff
Precedent.
Following adoption of Rule 14a-8(a), the Staff has consistently confirmed that a
shareowner submission is excludable if it "merely purports to express
shareholders' views" on a subject matter. For example, in Sensar Corp. (avail.
Apr. 23, 2001), the Staff concurred that a submission seeking to allow a
shareowner vote to express shareowner displeasure over the terms of stock
options granted to management, the board of directors and certain consultants
could be omitted under Rule 14a-8(a) because it did not recommend or require any
action by the company or its board of directors. See also CSX Corp. (avail. Feb.
1, 1999) (concurring that a submission was excludable under Rule 14a-8(a) where
a shareowner submitted three poems for consideration but did not recommend or
require any action by the company or its board of directors).
The Submission parallels the submission in Sensar: it seeks an advisory vote on
the compensation of executives set forth in the Summary Compensation Table, and
the advisory vote merely allows shareowners to express their views on that
information. The Submission's supporting statement clearly demonstrates that
this is the Proponent's objective. For example, as noted above, the supporting
statement indicates that the purpose of the Submission is to "provide the
opportunity to express dissatisfaction with the amount of compensation that has
been awarded to senior executives" and to allow shareowners to "express their
views."
The Submission's formulation as a request that GE adopt a policy of submitting
an advisory vote to shareowners does not change the Submission's status for
purposes of Rule 14a-8(a). In Exchange Act Release No. 20091 (Aug. 16, 1983),
the Commission stated that the substance of a proposal and not its form is to be
examined in determining whether a shareowner proposal is a proper matter for a
shareowner vote under Rule 14a-8. As the text of the release explains:
In the past, the staff has taken the position that proposals requesting issuers
to prepare reports on specific aspects of their business or to form special
committees to study a segment of their business would not be excludable under
Rule 14a-8(c)(7). Because this interpretation raises form over substance and
renders the provisions of paragraph (c)(7) largely a nullity, the Commission has
determined to adopt the interpretative change set forth in the Proposing
Release. Henceforth, the staff will consider whether the subject matter of the
special report or the committee involves a matter of ordinary business; where it
does, the proposal will be excludable under Rule 14a-8(c)(7).
Adopting Release, Amendments to Rule 14a-8 Under the Securities Exchange Act of
1934 Relating to Proposals by Security Holders, Exchange Act Release No. 20091
(Aug. 16, 1983).
The Staff applies this same approach throughout Rule 14a-8. When evaluating a
proposal that requests that a company's board adopt a policy, the Staff has
consistently looked at the subject underlying the proposed policy to determine
whether a proposal is excludable under Rule 14a-8, and has not considered the
request to adopt a policy itself as the subject of the proposal. Likewise, when
a proposal has requested that management take a particular action, the Staff has
examined whether that action is a proper subject under Rule 14a-8. For example:
In letters where shareowners have requested companies to adopt a policy of
submitting the selection of auditors to a vote, the Staff has focused on the
subject of the policy (the manner of selecting auditors) in determining that the
proposal is excludable under Rule 14a-8(i)(7). See, e.g., Xcel Energy Inc.
(avail. Jan. 28, 2004). See also El Paso Corp. (avail. Feb. 23, 2005) (proposal
requesting that company adopt a policy of hiring a new independent auditor at
least every ten years excluded under Rule 14a-8(i)(7) based on the underlying
subject, "the method of selecting independent auditors.").
In determining whether a shareowner proposal asking that a company adopt a
policy would, if implemented, cause the company to violate the law for purposes
of Rule 14a-8(i)(2), the Staff examines whether implementation of the actions
that are the subject of the proposed policy would violate the law, not whether
adoption of the policy itself would violate the law. See, e.g., Mobil Corp.
(avail. Jan. 29, 1997) (proposal as originally submitted to the company asking
it to adopt a policy prohibiting executives from exercising options within six
months of a significant workforce reduction excludable pursuant to the
predecessor to Rule 14a-8(i)(2) because the subject matter of the policy would
require the company to breach existing contractual obligations).
In determining whether a shareowner proposal asking that a company adopt a
policy is vague and indefinite for purposes of exclusion under Rule 14a-8(i)(3),
the Staff looks at the subject matter of the proposed policy. See, e.g., Duke
Energy Corp. (avail. Feb. 8, 2002) (proposal urging the board to adopt a policy
to transition to a nominating committee composed entirely of independent
directors as openings occur was vague because the underlying action required
creation of a nominating committee, a fact not adequately disclosed in the
proposal or supporting statement).
In determining whether a shareowner proposal asking that a company adopt a
policy involves a personal grievance for purposes of Rule 14a-8(i)(4), the Staff
looks at the subject matter of the proposed policy. See, e.g., Intl. Business
Machines Corp. (avail. Dec. 18, 2002) (proposal urging the board to adopt a
policy to honor any written commitments from company executives to investigate
certain claims excluded because the subject matter of the proposed action
related to a personal claim or grievance).
In determining whether a shareowner proposal requesting a company to adopt a
policy is not significant to a company's business for purposes of Rule
14a-8(i)(5), the Staff looks to the subject matter of the proposed policy. See,
e.g., Proctor & Gamble Co. (avail. Aug. 11, 2003) (proposal requesting the
company to adopt a policy forbidding human embryonic stem cell research excluded
under Rule 14a-8(i)(5) when the company did not engage in the activity that was
the subject of the proposed policy); Intl. Business Machines Corp. (avail. Feb.
23, 1983) (proposal requesting the company to adopt a policy that its directors
require certain actions at other companies where they serve as directors
excluded under predecessor to Rule 14a-8(i)(5) because the subject matter of the
policy - the actions its directors were to take at other companies - did not
relate to the company's business).
When examining whether it is beyond a company's power to implement a
shareowner proposal requesting that the company adopt a particular policy for
purposes of Rule 14a-8(i)(6), the Staff looks at implementation of the actions
that are the subject of the proposed policy, not whether the company has the
power to adopt the policy itself. See, e.g., Catellus Development Corp. (avail.
Mar. 3, 2005) (proposal that the company adopt a policy relating to a particular
piece of property was beyond the company's power to implement because the
company no longer owned the property that was the subject of the proposed policy
and could not control the property's transfer, use or development); General
Electric Co. (avail. Jan. 14, 2005) (proposal that the company adopt a policy
that an independent director serve as chairman of the board excluded under Rule
14a-8(i)(6) because the company could not ensure that the subject of the
proposed policy would be satisfied - i.e., that the chairman retain his or her
independence at all times - and no mechanism was provided to cure a failure);
Ford Motor Co. (avail. Feb. 27, 2005) (same).
In determining whether a shareowner proposal conflicts with a company proposal
for purposes of Rule 14a-8(i)(9), the Staff looks at the subject matter of the
proposals, even if one requests the company to adopt a policy and the other is
implemented through a different process. See, e.g., Baxter International Inc.
(avail. Jan. 6, 2003) (proposal urging the board to adopt a policy prohibiting
future stock option grants to executive officers excludable because the
underlying subject of the proposed action conflicts with substance of the
company's proposal that shareowners approve a new executive incentive
compensation plan).
In determining whether a company has, for purposes of Rule 14a-8(i)(10),
substantially implemented a shareowner proposal asking the company to adopt a
policy, the Staff looks at the substance of the underlying subject of the
proposed policy compared with actions taken by the company. See, e.g., Intel
Corp. (avail. Feb. 14, 2005) (proposal requesting adoption of policy of
expensing stock options excluded under Rule 14a-8(i)(10) based upon the
company's mandatory expensing of stock options under SFAS 123(R)).
In determining whether one shareowner proposal substantially duplicates or
conflicts with another proposal for purposes of Rule 14a-8(i)(11), the Staff
looks at the subject matter of the proposals, even if one requests the company
to adopt a policy and the other does not. See, e.g., Merck & Co. (avail. Jan.
10, 2006) (proposal requesting that the company adopt a policy that a
significant portion of future stock option grants be performance-based
substantially duplicated the subject of another proposal requesting the company
to take the necessary steps so that no future stock options be awarded to
anyone).
In determining whether a shareowner proposal is substantially the same as
other proposals that have not received an adequate vote in prior years for
purposes of Rule 14a-8(i)(12), the Staff looks at the subject matter of the
proposals, even if one requests the company to adopt a policy and the other does
not. See, e.g., Eastman Chemical Co. (avail. Mar. 27, 1998) (proposal requesting
that the company adopt a policy not to manufacture cigarette filters until
certain research had been completed excluded because the subject of the proposed
policy was substantially the same as a prior proposal requesting that the
company take the necessary steps to divest its cigarette filter operations,
which earlier proposal had not received sufficient shareowner support).
Here, the Submission asks for adoption of a policy, but the subject matter of
the Submission concerns providing shareowners an advisory vote, a matter that is
not a proper subject of a shareowner proposal under Rule 14a-8(a). The Proponent
should not be able to avoid the application of Rule 14a-8(a) merely by asking
that GE adopt a policy on (or submit for a vote) a matter that, if proposed
directly by the shareowner, would not be a proper subject under Rule 14a-8(a).
Consistent with the Commission's decision that proposals should be assessed on
the basis of their substance and not their form, as stated in its prior Rule
14a-8 rulemaking discussed above, and consistent with the Staff's approach in
interpreting every other aspect of Rule 14a-8 as reflected in the precedent
above, the subject matter of the policy set forth under the Submission, and not
the policy itself or the form of the proposal, is to be evaluated for purposes
of assessing compliance with Rule 14a-8. Under those standards, the Submission
does not constitute a proposal for purposes of Rule 14a-8(a) and accordingly can
be excluded from GE's 2007 Proxy Materials.
C. A Request for Future Votes Is Not a Proper Form for a Shareowner Proposal and
Fails to Satisfy the Procedural Requirements of Rule 14a-8.
In addition to the bases for exclusion discussed above, the Submission is not a
proper form under Rule 14a-8 because it seeks to implement a policy that would
provide for a matter to be submitted for a shareowner vote each year, without
satisfying any of the procedural requirements of Rule 14a-8 with respect to
those future years. This form of proposal is substantively different from a
proposal that requests a company to take a particular action (such as
implementation of a charter amendment declassifying the board) or a proposal to
not take a particular action (such as adoption of a rights plan) without seeking
a shareowner vote. In those situations, the underlying subject of the proposal
is a specific corporate action and the future shareowner vote is incidental to
management taking the underlying action. Here, in contrast, the underlying
action sought by the Proponent is that a particular matter - an advisory
statement expressing the shareowners' sentiment - be placed before shareowners
for an annual vote. Rule 14a-8 prescribes the procedures that a shareowner is to
follow if it wishes a particular matter to be placed before shareowners at a
particular meeting;1 it is inconsistent with the structure and intent of Rule
14a-8 to allow a shareowner to propose that management submit the shareowner's
proposal to an annual vote at an indefinite number of future meetings.
If one looked only to what the Submission would accomplish in the current year,
and not to its effect in subsequent years, the purposes of the procedural
requirements under Rule 14a-8 could be evaded easily. For example, Rule 14a-8(b)
requires a shareowner to satisfy certain ownership requirements, a proponent
"must have continuously held at least $2,000 in market value, or 1%, of the
company's securities entitled to be voted on the proposal at the meeting for at
least one year by the date you submit the proposal" and "must continue to hold
those securities through the date of the meeting." 2 Rule 14a-8(c) limits a
proponent to submitting no more than one proposal for a particular shareowners'
meeting. Rule 14a-8(i)(9) and (i)(11) allow a proposal to be excluded when it
conflicts with a proposal submitted by the company or duplicates a topic that is
the subject of a previously submitted proposal. Allowing a shareowner to submit
a proposal calling for an annual vote on a specific topic for an indefinite
number of years in the future would allow proponents to circumvent these
important procedural requirements. Instead, the rules contemplate that a
proponent will submit the topic or proposal itself at each meeting at which it
is to be considered, and will demonstrate compliance with the requirements of
Rule 14a-8 with respect to that meeting. Because the Submission would allow the
Proponent to circumvent the requirements of Rule 14a-8, and the Proponent has
not sought to demonstrate that the requirements of Rule 14a-8 would be satisfied
with respect to future votes sought by the Submission, the Submission is
excludable under Rule 14a-8.
II. The Submission May Be Excluded Under Rule 14a-8(i)(2) Because Implementation
of the Submission Would Cause GE to Violate State Law.
A shareowner proposal may be omitted from a company's proxy statement pursuant
to Rule 14a-8(i)(2) if implementation of the proposal would cause the company to
violate any state law. GE is incorporated under the laws of the State of New
York. The Submission states that GE's shareowners should vote at each annual
meeting on whether the compensation of the named executive officers is "(a)
excessive; (b) appropriate; or (c) too low". Under New York law, however, that
form of vote is not legally permitted.
Under Section 614(b) of the New York Business Corporation Law (the "NYBCL"), a
corporate action, other than the election of directors, shall be authorized "by
a majority of the votes cast in favor of or against such action at a meeting of
shareholders." The statutory language requiring approval in terms of "votes cast
in favor of or against" was added in 1997 via an amendment to Section 614(b).
See 1997 N.Y. Laws 449, §32. Prior to the 1997 amendment, Section 614(b) stated
that a matter was approved when "authorized by a majority of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote thereon." This
legislative history and the express language of Section 614(b) as revised make
clear that the amendments to the NYBCL require that GE's shareowners be afforded
only the opportunity to vote "in favor of or against" such matters. In contrast,
the Submission provides that GE should allow shareowners to vote as to whether
the compensation of GE's named executive officers is "(a) excessive; (b)
appropriate; or (c) too low." Further, neither GE's Certificate of Incorporation
nor its By-Laws permit GE's shareowners to vote in the manner requested by the
Submission.
As discussed above, although the Submission "requests" that the Board of
Directors adopt a policy, even a precatory proposal seeking a policy is
excludable if the action called for by it would, if implemented, violate state,
federal or foreign law. See, e.g., RadioShack Corp. (avail. Feb. 28, 2005)
(concurring that a proposal recommending amendment of the company's by-laws to
require certain limitations on executive compensation is excludable under Rule
14a-8(i)(2) as it would violate Delaware law if implemented). See also General
Electric Co. (avail. Jan. 12, 2005) (same result under New York law); Gencorp
Inc. (avail. Dec. 20, 2004) (concurring that a proposal requesting amendment of
the company's governing instruments to require implementation of all shareowner
proposals receiving a majority vote is excludable under Rule 14a-8(i)(2));
Badger Paper Mills, Inc. (avail. Mar. 15, 2000) (concurring that a proposal
requesting restoration of voting rights was improper under Wisconsin law and
therefore excludable); Pennzoil Corp. (avail. Mar. 22, 1993) (concurring that a
mandatory proposal, even if rephrased as precatory, was of questionable validity
under Delaware law and thus was excludable).
This letter also serves as confirmation for purposes of Rule 14a-8(i)(2) that,
as a member in good standing admitted to practice before courts in the State of
New York, I am of the opinion that the subject of the policy set forth in the
Submission is not a proper subject for action by GE's shareowners under the laws
of the State of New York. Therefore, we believe that the Submission is
excludable from GE's 2007 Proxy Materials under Rule 14a-8(i)(2) because it
would have GE conduct a vote in a manner not permitted under the laws of the
State of New York.
III. The Submission May Be Excluded Pursuant to Rule 14a-8(i)(3) Because the
Submission Is Contrary to the Commission's Proxy Rules, Specifically Rule 14a-4.
Rule 14a-8(i)(3) allows a proposal to be excluded "if the proposal or supporting
statement is contrary to any of the Commission's proxy rules." We believe that
the Submission is excludable pursuant to Rule 14a-8(i)(3) because it violates
the Commission's Rule 14a-4. Rule 14a-4 sets forth certain requirements with
respect to proxies. More specifically, Rule 14a-4(b)(1) states that "[m]eans
shall be provided in the form of proxy whereby the person solicited is afforded
an opportunity to specify by boxes a choice between approval or disapproval of,
or abstention with respect to each separate matter referred to therein as
intended to be acted upon, other than elections to office." Rule 14a-4(b)(1)
(emphasis added).
The Submission seeks to allow GE shareowners to indicate on their proxies
whether the compensation of GE's named executive officers is "(a) excessive; (b)
appropriate; or (c) too low." None of these three possible responses is
permitted by Rule 14a-4(b)(1). Instead, as noted above, Rule 14a-4(b) provides
that shareholders should be given "a choice between approval or disapproval of,
or abstention" on such matters. The Staff has in the past refused to provide
assurance that it would not recommend enforcement action if a company "cease[d]
to furnish the boxes specified by Rule 14a-4(b)(1) for abstention with respect
to matters, other than the election of directors, to be acted on...." See St.
Moritz Hotel Associates (avail. Apr. 29, 1983) (requesting the Staff's
concurrence that it could omit from its form of proxy the option for shareowners
to abstain in a consent solicitation with respect to matters other than
elections to office). For these reasons, the Submission is contrary to the
Commission's Rule 14a-4(b)(1) and, thus, may be excluded from the 2007 Proxy
Materials pursuant to Rule 14a-8(i)(3).
CONCLUSION
Based upon the foregoing analysis, we respectfully request that the Staff concur
that it will take no action if GE excludes the Submission 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
Enclosures
cc: David M. Stuart, General Electric Company Tony Daley, CWA Research
Department
-----FOOTNOTES-----
1 Allowing shareowners to submit a subject for vote at an indefinite number of
annual meetings is inconsistent with Rule 14a-8(c), which instructs shareowners
that "Each shareholder may submit no more than one proposal to a company for a
particular shareholders' meeting."
2 In this regard, by a letter dated November 15, 2006, pursuant to Rule
14a-8(f), GE notified the Proponent of its view that the Proponent would be
required to satisfy the requirements of Rule 14a-8(b) with respect to each
future year at which the advisory vote sought by the Submission would be voted
on. See Exhibit A. The Proponent did not respond to this request, which was
properly sent to the Proponent within 14 days of GE receiving the Submission.
Thus, the Submission may be excluded pursuant to Rule 14a-8(f) because the
Proponent did not satisfy Rule 14a-8(b)(1) in this regard.
[INQUIRY LETTER]
VIA Fax & Mail
November 2, 2006
Mr. Brackett Denniston
Senior Vice President, Corporate Secretary, and General Counsel
General Electric Company
3135 Easton Turnpike
Fairfield, Connecticut 06431
Dear Mr. Denniston:
Re: Submission of Shareholder Proposal
On behalf of the CWA Members' Relief Fund ("Fund"), we hereby submit the
enclosed Shareholder Proposal ("Proposal") for inclusion in the General Electric
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.
The Fund is a beneficial holder of General Electric common stock with market
value in excess of $2,000 held continuously for more than a year prior to this
date of submission.
The Fund intends to continue to own General Electric common stock through the
date of the Company's 2007 annual meeting. Either the undersigned 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, CWA Research Department, at 202-434-9515.
Sincerely,
/s/
Larry Cohen
President
Enclosures
[APPENDIX]
Shareowner Proposal
RESOLVED, that shareowners of "General Electric" ("GE") 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
GE'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 GE's senior executives is excessive.
According to the 2006 proxy statement, the five senior executives listed in the
Summary Compensation Table received "Total Annual Compensation" of $96.0 million
from 2003 through 2005. The "Total Annual Compensation" of Jeffrey Immelt, the
Chairman and CEO of GE, accounted for more than $19.5 million of that sum.
In addition, the five officers received another $68.5 million in "Long-Term
Compensation" (the market value of restricted stock units and Long-Term
Incentive Plan payouts).
The five officers received another $6.8 million in "All Other Compensation"
(payments relating to the employee savings plan, above-market earnings on
deferred compensation, and the value of supplemental life insurance premiums).
The total amount paid to the top five officers over three years was more than
$171 million. These five officers then exercised stocks options to realize a
gain of another $51 million.
In all, these five executives received over $223 million for the three years
covered by the 2006 proxy disclosures. In our view, this amount is excessive by
any definition.
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 focus 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.
[INQUIRY LETTER]
January 2, 2007
Via Express and Electronic Mail (cfletters@sec.gov)
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Request of the General Electric Company for a No-Action Letter With Respect
to the Shareholder Proposal of the CWA Members' Relief Fund
Ladies and Gentlemen:
I. Introduction
This letter is submitted in response to the claim of the General Electric
Company ("GE"), by letter dated December 8, 2006, that it may exclude the
shareholder proposal of the CWA Members' Relief Fund from its 2007 proxy
materials. As explained in more detail below, we submit that there is no merit
in any of the Company's claims.
Six copies of this letter are enclosed. Copies have also been sent to counsel
for GE and the proponent.
II. The Proposal
The Proposal requests "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 GE's named executive officers as set
forth in the proxy statement's Summary Compensation Table: (a) excessive; (b)
appropriate; or (c) too low?'" (emphasis added). If the proposal is adopted by
both the shareholders and the GE Board, the result would be a management
proposal in future proxy statements that would submit the prescribed question to
the shareholders for an advisory vote.
III. Standard of Review: GE Is Required to Prove "That It Is Entitled to Exclude
the Proposal"
In promulgating Rule 14a-8, 17 CFR 240.14a-8, the Commission has established a
general rule that "a company must include a shareholder's proposal in its proxy
statement." The grounds for exclusion that are cited by GE are exceptions to
this general rule. Accordingly, the cited grounds for exclusion are to be
interpreted narrowly, and any doubts must be resolved in favor of the proponent.
In order to emphasize the general rule that "a company must include a
shareholder's proposal in its proxy statement," Rule 14a-8(g) provides that "the
burden is on the company to demonstrate that it is entitled to exclude a
proposal." (emphasis added). For the reasons set forth below, we submit that GE
has failed to meet this burden of proof by making the required showing that "it
is entitled to exclude" the instant Proposal (emphasis added).
IV. Contrary to the Claims of GE, The Proposal for a New Board "Policy" With
Respect to Executive Compensation Is An Appropriate Subject for a Shareholder
Vote
A. The Subject of the Proposal Is Executive Compensation
The text of the instant Proposal is explicit. The subject of the Proposal is
"the compensation of GE's named executive officers as set forth in the proxy
statement's Summary Compensation Table."
If the Proposal is adopted and implemented by the GE Board, it could provide
valuable information with respect to "the compensation of GE's named executive
officers" in the form of a considered judgment by the shareholders as to whether
that compensation is "(a) excessive; (b) appropriate; or (c) too low." In
addition, in cases where the amount of compensation may be excessive, this
information could serve as an important "reality check."
The Staff has recognized, within the past four months, that a similar proposal
presented an appropriate subject for a shareholder vote. Sara Lee Corporation
(Sept. 11, 2006). In that case, the proposal urged "the board of directors to
adopt a policy that Sara Lee stockholders be given the opportunity at each
annual meeting of stockholders to vote on an advisory resolution, to be proposed
by Sara Lee's management, to approve the report of the Compensation and Employee
Benefits Committee set forth in the proxy statement." The Staff was "unable to
concur ... that Sara Lee may exclude the proposal under rule 14a-8(i) (7)" on
the theory that it related to "ordinary business matters," or under rule
14a-8(i) (2) on the premise that it "would cause the company to violate
applicable law" (although the Staff did require certain changes in terminology).
We submit that there is no substantive difference between the instant Proposal
and the one that was at issue in Sara Lee for purposes of determining whether it
deals with an appropriate subject for a shareholder vote.
Since 1992, the Staff has consistently taken the position that shareholder
proposals that relate exclusively to the compensation of "senior executives" are
an appropriate subject for shareholder proposals, and therefore, may not be
omitted in reliance upon rule 14a-8(i) (7). The Staff has repeatedly stated that
"proposals relating to senior executive compensation no longer can be considered
matters relating to a registrant's ordinary business" (emphasis added). See e.g.
Reebok International Ltd. (Jan. 16, 1992); Battle Mountain Gold Company (Feb.
13, 1992); Eastman Kodak (Feb. 13, 1992); International Business Machines Corp.
(Feb. 13, 1992); Sprint Corp. (March 9, 1993).
As the Staff declared in Xerox Corporation (March 25, 1993):
"The Commission continues to regard issues affecting CEO and other senior
executive and director compensation as unique decisions affecting the nature of
the relationships among shareholders, those who run the corporation on their
behalf and the directors who are responsible for overseeing management
performance."
B. There Is No Merit to GE's Claim That the Proposal "May Be Excluded Under Rule
14a-8(a) Because It Asks the Board to Schedule An Advisory Vote
GE contends that the Proposal presents an improper subject for a shareholder
proposal, but it does so on a premise that is demonstrably false. In this
context, it begins by citing the Commission's definition of a proposal as "your
recommendation ... that the ... board of directors take action ..." and then
implies that the instant proposal, in the words of the Commission release that
proposed Rule 14a-8(a), is one that "seeks no specific action, but merely
purports to express shareholder's views...." (p. 3; emphasis in original).
The truth, as noted above, is that the proposal contains an express request that
the board of directors take a "specfic action." It explicitly asks "that the
Board ... adopt a policy of submitting ..." the prescribed question on executive
compensation to an advisory shareholder vote at each annual meeting that may
occur in 2008 and beyond. Under these circumstances, the instant Proposal
plainly seeks the kind of "specific action" that is contemplated by Rule
14a-8(a), and accordingly, does present a proper subject for consideration at
the 2007 Annual Meeting.
In any event, it is evident that Rule 14a-8(a) does not require the
disqualification of a shareholder proposal merely because it may seek an
advisory shareholder vote. In addition to the Staff's recent denial of a
no-action letter with respect to a substantially similar shareholder proposal in
Sara Lee Corporation, supra, the Staff has denied requests for no-action letters
with respect to at least two shareholder proposals that sought "an advisory vote
on the members of the board audit committee," General Motors Corporation (Mar.
29, 2001) and Boeing Company (Feb. 8, 2001), one proposal that sought an
advisory vote "before the implementation of any increase in the compensation of
the chief executive," Electromagnetic Sciences (Mar. 9, 1993), and one proposal
that called for an advisory vote on any "proposals of merger, acquisition or
combination" Rorer Group, Inc. (Feb. 27, 1985).
C. There Is No Merit to GE's Claim That There Is "Staff Precedent" In Support of
Its Claim That the Proposal May Be Excluded Under Rule 14a-8(a)
1. The No-Action Letters Cited on Page Four of the GE Submission Do Not Apply
Despite the fact that the Proposal explicitly asks the GE Board to take the kind
of "specific action" that is contemplated by Rule 14a-8(a), the company proceeds
to cite two no-action letters (see p. 4) for the proposition that "a shareowner
submission is excludable if it `merely purports to express shareholders' views'
on a subject matter". These no action letters were granted in Sensar Corporation
(Apr. 23, 2001) and CSX Corporation (Feb. 1, 1999).
Neither of these staff precedents has any application to the Proposal that is at
issue here. In stark contrast to the instant Proposal, the proponent in Sensar
asked for nothing more than an expression of shareholder "displeasure" with
respect to certain matters at a forthcoming Annual Meeting, without asking that
the Board or the company take any action whatsoever . In CSX, the proposal
consisted of nothing more nor less than "three poems."
In each of the cited decisions, the Staff issued a no-action letter because the
proposals there, in stark contrast to the one at issue here, failed to recommend
that the company or its board take "any action." Accordingly, contrary to the
representation set forth in the GE letter to the Staff, it is evident that the
instant Proposal does not "parallel the submission[s]" in those cases (p.4).
Instead, it expressly calls for the GE Board to take action by adopting a new
policy of submitting the amount of its senior executive compensation to an
annual advisory vote.
Moreover, in contrast to the proposals at issue in Sensar and CSX, it is
apparent that the instant Proposal does not call for any "expression" of
shareholder views on the prescribed question at the 2007 Annual Meeting at which
the Proposal is to be considered. While it does contemplate an advisory vote in
2008 and future years, if the GE Board adopts the proposed policy, any advisory
vote on the prescribed question would be pursuant to the decision of the GE
Board that such a vote shall be held, and not pursuant to the instant Proposal
of the proponent.
2. The No-Action Letters Cited at Pages Five Through Seven of the GE Submission
Do Not Support the Claim
After contending that the Proposal may be excluded from its proxy statement on
the false premise that the Proposal does not call for any action, GE proceeds to
argue that "[t]he proponent should not be able to avoid the application of Rule
14a-8(a) merely by asking that GE adopt a policy" that satisfies the requirement
of Rule 14a-8(a) that a proposal must ask for a specific action to be taken
(p.7; see pp. 4-8). This claim of the Company is based on the incredible
nonsequitur that a proponent should not be permitted "to avoid the application
of Rule 14a-8(a)" by complying with it.
In this context, GE proceeds to cite three pages of alleged "Staff Precedent"
for the proposition that "the submission is not a proposal for purposes of Rule
14a-8" (pp 5-7). However, this lengthy recitation actually stands for nothing
more than the very different proposition that the Staff has on occasion "looked
at the subject underlying the proposed policy to determine whether a proposal is
excludable" (p.5). Despite three pages of citations and argument, the GE letter
has failed to identify a single additional reason why the instant Proposal might
be deemed to deal with an improper subject, apart from its earlier
mischaracterization of the Proposal as one that does not ask for any specific
action on the part of the Company or its Board.
To be specific, GE's long recitation of alleged "Staff Precedent" contends that
the underlying subject of a proposal may be deemed inappropriate under Rule
14a-8(i)(2) if it "would require the company to breach existing contractual
obligations," under Rule 14a-8(i)(3) if it is "vague and indefinite," under Rule
14a-8(i)(4) if it "involves a personal grievance," under Rule 14a-8(i)(5) if it
is not "significant to a company's business, under Rule 14a-8(i)(6) if "it is
beyond a company's power to implement," under Rule 14a-8(i)(7) if it involves a
matter of ordinary business, under Rule 14a-8(i)(9) "if it conflicts with a
company proposal," under Rule 14a-8(i)(10) if it has been "substantially
implemented," and under Rule 14a-8(i)(11) if it "substantially duplicates or
conflicts with another proposal." However, GE does not contend that any one of
the foregoing grounds for exclusion is applicable to the instant Proposal. The
argument is nothing but a long nonsequitur, because there is no bridge from the
premise that the Staff may look at the underlying subject of a proposed policy
to determine whether it is excludable to the conclusion that the instant
Proposal presents an improper subject for a shareholder proposal under Rule
14a-8.
In fact, there is no credible basis for holding that the instant Proposal
presents an improper "subject of a shareholder proposal under Rule 14a-8." GE's
claim of "Staff Precedent" for that proposition is without even a scintilla of
merit.
D. There Is No Merit to GE's Claim That the Proposal "Fails to Satisfy the
Procedural Requirements of Rule 14a-8."
GE also contends (pp. 8-9) that the Proposal is improper because it "would
provide for a matter to be submitted for a shareowner vote each year, without
satisfying any of the procedural requirements of Rule 14a-8 with respect to
those future years." This argument is also devoid of any merit.
As noted above, any submission of the prescribed question to an advisory
shareholder vote in 2008 or future years would be the result of a management
proposal for such a vote. The question would be included in the Company's proxy
statement pursuant to a directive of the GE Board, not as a proposal of any
shareholder. Accordingly, since the procedural requirements of Rule 14a-8 are
expressly made applicable to "shareholder proposals," and not to management
proposals, there is no merit to GE's claim with respect to the procedural
requirements of Rule 14a-8.
V. There Is No Merit to GE's Claim That the Proposal "May Be Excluded Under Rule
14a-8(i)(2)" On the Theory That Implementation "Would Cause GE to Violate State
Law"
GE claims that the proposed question would cause the Company to violate Section
614(b) of the New York Business Corporation Law ("the NYBCL"), by asking that
shareholders vote on the question of whether the compensation of its senior
executives is "(a) excessive; (b) appropriate; or (c) too low." We submit,
contrary to the Company claim, that Section 614(b) of the NYBCL does not apply
to the instant Proposal.
Section 614(b) is expressly limited, by its terms, to shareholder votes that are
conducted for the purpose of authorizing corporate actions. In this context, it
provides;
"Whenever any corporate action, other than the election of directors is to be
taken under this chapter by a vote of the share-holders, it shall ... be
authorized by a majority of the votes cast in favor of or against such action at
a meeting of share-holders by the holders of shares entitled to vote thereon"
(emphasis added).
The instant proposal does not call for "any corporate action ... to be taken" as
a result of the proposed vote, much less one that would need to "be authorized"
within the meaning of Section 614(b) of the NYBCL. Instead, it calls for an
advisory shareholder vote with respect to the magnitude of the compensation that
GE may give to senior executives in future years for the purpose of giving the
Board additional information.
In this context, the intent of Section 614(b) of the NYBCL is clear. It is
designed to require that, when certain "corporate actions" are "to be taken",
such as mergers, consolidations and acquisitions (Section 903 of the NYBCL),
dissolutions (Section 1001 of the NYBCL), sales or other dispositions of assets
(section 1001 of the NYBCL), and the adoption or amendment of the certificate of
incorporation or the corporate by laws (Sections 601 and 803 of the NYBCL), such
corporate actions "shall ... be authorized by a majority of the votes cast in
favor of or against such action at a meeting of shareholders by the holders of
shares entitled to vote thereon" (emphasis added). Section 614(b) of the NYBCL
simply has no application to an advisory vote that will have no legal force or
effect.
VI. There Is No Merit to GE's Claim That the Proposal "May Be Excluded Under
Rule 14a-8(i)(3)" on the Theory That Implementation Would Violate Rule
14a-4(b)(1)
As its final argument, GE contends that implementation of the Proposal would
violate Commission Rule 14a-4(b)(1), which provides that "[m]eans shall be
provided ... [in a form of proxy] to specify by boxes a choice between approval
or disapproval of, or abstention with respect to each separate matter ...
intended to be acted upon, other than elections to office" (emphasis added). As
in the case of Section 614(b) of the NYBCL, we submit that Rule 14a-4(b)(1) does
not apply to a management proposal for a precatory advisory vote of the
shareholders.
The Commission has made clear in the text of Schedule 14A, which is set forth as
Rule 14a-101, that a "matter ... intended to be acted upon" for purposes of Rule
14a-4(b)(1) is a corporate action, such as the "authorization or issuance of
securities (Item 11), the "modification or exchange of securities" (Item 12), or
"mergers, consolidations, acquisitions and similar matters" (Item 14) (emphasis
added). Under these circumstances, it is evident that an advisory vote on the
magnitude of GE's compensation of senior executives does not constitute a
"matter ... intended to be acted upon" within the meaning of Commission Rule
14a-4(b)(1) (emphasis added).
This limitation of Rule 14a-4(b)(1) to matters that are "intended to be acted
upon" is a limitation that dates from the initial promulgation of the rule in
1952. 17 FR 11432 (Dec. 18, 1952). Although the Rule has been amended on ten
different occasions since 1952, this language has remained intact.
We believe the text of the Rule is clear and unambiguous. The requirement that a
proxy provide for "a choice between approval or disapproval of, or abstention
with respect to each separate matter ... intended to be acted upon ..." is
applicable only to proposals for some kind of "action" that require a choice to
be made between approval or disapproval of the "action" that has been proposed
(emphasis added). Accordingly, since the result of an advisory vote on the
executive compensation of GE's senior executives would have no legal force or
effect, we submit that there is no merit to the Company's claim that the
Proposal may be excluded from its proxy statement pursuant to Rules 14a-4(b)(1)
and 14a-8(i)(3).
VII. Conclusion
For the reasons set forth above, we submit that GE has failed to meet its burden
under Rule 14a-8(g) of demonstrating "that it is entitled" to exclude the
Proposal from its proxy materials. Accordingly, we respectfully submit that the
request for a no-action letter should be denied.
In the alternative, if the Staff is persuaded that the form of the proposed
question is inappropriate, and that it would not be potentially misleading to
ask shareholders to cast an advisory vote that would call for "approval" or
"disapproval" of the compensation of GE's senior executive compensation as set
forth in the Summary Compensation Table of future proxy statements, the
proponent is willing to change the form of the question. In this context, the
form of the question could be revised to ask: "Do the shareowners approve of the
compensation of GE's named executive officers as set forth in the proxy
statement's Summary Compensation Table?"
Please contact me if the Staff should have any questions.
Sincerely,
/s/
Frederick B. Wade
Suite 740
122 West Washington Ave.
Madison, WI 53703
Phone: (608)-255-5111
c. Ronald O. Mueller Counsel for GE
[INQUIRY LETTER]
January 24, 2007
Direct Dial (202) 955-8671
Fax No. (202) 530-9569
Client No. 32016-00092
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 the CWA Members' Relief Fund Exchange Act of
1934Rule 14a-8
Dear Ladies and Gentlemen:
This letter supplements the letter filed on December 8, 2006 (the "Exclusion
Notice"), on behalf of our client, General Electric Company ("GE"), in which we
notified the staff of the Division of Corporation Finance (the "Staff") that GE
intends to omit from its proxy statement and form of proxy for its 2007 Annual
Shareowners Meeting (collectively, the "2007 Proxy Materials") a purported
shareowner proposal and statements in support thereof (the "Submission")
received from CWA Members' Relief Fund (the "Proponent"). We address below the
points raised by Mr. Frederick B. Wade, counsel to the Proponent, in a letter
dated January 2, 2007, a copy of which is attached hereto as Exhibit A.
I. The Fact that the Submission Relates to Executive Compensation Does Not
Support Its Inclusion.
Proponent's counsel asserts that the Submission is not excludable because it
relates to executive compensation. In Staff Legal Bulletin No. 14 (July 13,
2001) ("SLB 14") at question and answer B.6., the Staff states:
Question: "Do we base our determinations solely on the subject matter of the
proposal?"
Answer: "No. We consider the specific arguments asserted by the company and the
shareholder, the way in which the proposal is drafted and how the arguments and
our prior no-action responses apply to the specific proposal and company at
issue. Based on these considerations, we may determine that company X may
exclude a proposal but company Y cannot exclude a proposal that addresses the
same or similar subject matter."
Consistent with the foregoing, the Staff has on many occasions concurred with
the exclusion of a proposal addressing executive compensation when the proposal
does not satisfy one of the requirements under Rule 14a-8. As noted in the
Exclusion Notice, the Staff has previously concurred that a submission seeking
an advisory vote on executive compensation was excludable under Rule 14a-8(a).
See Sensar Corp. (avail. Apr. 23, 2001). Likewise, the Staff has regularly
concurred with the exclusion of proposals addressing executive compensation
under Rule 14a-8(i)(3) where the proposals were vague or indefinite. For
example, in General Electric Co. (Newby) (avail. Feb. 5, 2003), the Staff
permitted exclusion of a proposal to require "shareholder approval for all
compensation for Senior Executives and Board members, not to exceed more than 25
times the average wage of hourly working employees." Similarly, in General
Electric Co. (avail. Jan. 23, 2003), the Staff concurred with the exclusion
under Rule 14a-8(i)(3) of a proposal seeking "an individual cap on salaries and
benefits of one million dollars for G.E. officers and directors" where the
proposal was not in a proper form due to having vague terms that made the
proposal impossible to implement.1 Thus, the fact that the Submission relates to
executive compensation does not excuse it from having to satisfy the
requirements of Rule 14a-8. Just as the proposals relating to executive
compensation cited above failed to satisfy the standards under Rule 14a-8(a) and
Rule 14a-8(i)(3) and therefore were excludable, here the Submission fails to
satisfy the standards of Rule 14a-8(a) and accordingly is excludable.
II. The Examples of Previous Submissions Addressing an Advisory Vote Cited by
Proponent's Counsel Are Not Controlling.
It should be emphasized that the letters cited by Proponent's counsel were
decided on bases other than Rule 14a-8(a) or were decided before the adoption of
current Rule 14a-8(a), and therefore are not applicable precedent in responding
to the Exclusion Notice.
In SLB 14, at question and answer B.5, the Staff states, "we will not consider
any basis for exclusion that is not advanced by the company." In Sara Lee Corp.
(avail. Sept. 11, 2006), General Motors (avail. Mar. 29, 2001) and Boeing
Company (avail. Feb. 8, 2001), each cited by Proponent's counsel, the companies
did not assert that the submissions being considered were excludable under Rule
14a-8(a).2 Accordingly, the Staff did not consider whether those submissions
were excludable under Rule 14a-8(a), and the Staff's determinations in those
letters therefore are not controlling authority on whether the Submission is
excludable under Rule 14a-8(a).
Likewise, the letters cited by Proponent's counsel that date before 1998
Electromagnetic Sciences, Inc. (avail. Mar. 9, 1993) and Rorer Group, Inc.
(avail. Feb. 27, 1985) are not applicable precedent because, as indicated in
the Exclusion Notice, Rule 14a-8(a) was not adopted until 1998.
III. Because the Submission Requests a Policy of Seeking Advisory Votes, It is
Excludable under Rule 14a-8(a).
In evaluating requests under Rule 14a-8, the Staff has consistently looked at
the effect of implementing a proposal, reflecting its position that if one
looked only to what a proposal would accomplish in the current year, and not to
its effect in subsequent years, the purposes of Rule 14a-8 could be evaded
easily. While trying to question the relevance of this uniform policy in
administering Rule 14a-8, Proponent's counsel does not present a single instance
in which a different standard has been applied under Rule 14a-8. Whether a
submission asks for an advisory vote or asks management to seek an advisory vote
at subsequent meetings, the submission involves an advisory vote.3
IV. The Submission Violates State Law and Commission Rules.
Proponent's counsel argues that advisory votes are not subject to the
Commission's proxy rules because they do not represent a matter "intended to be
acted upon." The Commission applies Section 14(a) under the Securities Exchange
Act of 1934, as amended ("Exchange Act"), to any matter being submitted to a
vote of or consent by a registrant's shareowners, including non-binding advisory
votes.4 In particular, Rule 14a-8(a), a provision that excludes advisory votes
from the scope of Rule 14a-8, would not have been necessary ifas argued by
Proponent's counsel - advisory votes were not otherwise subject to the
Commission's rules under Section 14(a). Accordingly, we believe that any request
for shareowners to vote on an advisory matter that otherwise implicates the
Commission's jurisdiction under Exchange Act Section 14(a) is subject to Rule
14a-4 and that the Submission is excludable under Rule 14a-8(i)(3) because it
does not satisfy Rule 14a-4. Likewise, for the reasons set forth in the
Exclusion Notice, we are of the opinion that implementation of the Submission
would violate New York State law.
We note that Proponent's counsel offers to revise the form of question on which
it seeks an advisory vote in an attempt to cure its defects under Rules
14a-8(i)(2) and (i)(3). In SLB 14, at question and answer E.5., the Staff sets
forth the limited circumstances in which it may permit revisions to cure defects
under Rules 14a-8(i)(2) and (i)(3).5 Neither of those circumstances apply with
respect to the defects in the Submission. Accordingly, the Proponent's offer to
revise the Submission should not be accepted and the Submission should be
excluded in its entirety.
Please contact me at (202) 955-8671 or David M. Stuart, GE's Senior Counsel, at
(203) 373-2243 if we may provide additional information.
Sincerely,
/s/
Ronald O. Mueller
ROM/
cc: David M. Stuart, General Electric Company Tony Daley, CWA Research
Department Frederick B. Wade, Esq.
-----FOOTNOTES-----
1 See also Woodward Governor Co. (avail. Nov. 26, 2003) (agreeing that exclusion
was appropriate where a proposal sought to implement a "policy for compensation
for the executives ... based on stock growth," and included a specific formula
for calculating that compensation, but did not specify whether it addressed all
executive compensation or merely stock-based compensation); Eastman Kodak Co. (Kuklo)
(avail. Mar. 3, 2003) (allowing the exclusion of a proposal that would have
capped executive salaries at $1 million "to include bonus, perks [and] stock
options," but failed to define various terms, including "perks," and gave no
indication of how options were to be valued).
2 In Sara Lee Corp. (avail. Sept. 11, 2006), the company sought exclusion under
Rule 14a-8(i)(3) and (i)(7). In General Motors (avail. Mar. 29, 2001), the
company sought exclusion under Rules 14a-8(i)(3) and (i)(8). In Boeing Company
(avail. Feb. 8, 2001), the company sought exclusion under Rule 14a-8(b) and (c)
and under Rule 14a-8(i)(1), (i)(3) and (i)(6).
3 At the risk of stating the obvious, in this respect a submission seeking an
advisory vote is different than a proposal that seeks to condition management
action on binding shareowner approval. A proposal requesting that management
seek shareowner approval before implementing a "golden parachute" arrangement,
executive severance agreement providing a certain level of benefits, SERP or
other executive retirement arrangement is not seeking an advisory vote, and
therefore is in a proper form for consideration under Rule 14a-8.
4 Exchange Act Rule 14a-2 states, "Sections 240.14a-3 to 240.14a-15, except as
specified, apply to every solicitation of a proxy with respect to securities
registered pursuant to section 12 of the Act, whether or not trading in such
securities has been suspended." Under Rule 14a-1, the term "solicitation"
applies to "any request for a proxy" and a "proxy" is "every proxy, consent or
authorization within the meaning of Section 14(a) of the Act" which "may take
the form of failure to object or to dissent."
5 Specifically, the Staff allows revisions to proposals that fail to satisfy
these rules only "[i]f implementing the proposal would require the company to
breach existing contractual obligations" or "[i]f the proposal contains specific
statements that may be materially false or misleading or irrelevant to the
subject matter of the proposal."
[INQUIRY LETTER]
January 31, 2007
Via Express and Electronic Mail (cfletters@sec.gov)
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Request of the General Electric Company for a No-Action Letter With Respect
to the Shareholder Proposal of the CWA Members' Relief Fund
Ladies and Gentlemen:
I. Introduction
This letter is submitted to supplement my letter of January 2, 2007, and to
respond to the claim of the General Electric Company ("GE"), by letters dated
December 8, 2006, and January 24, 2007, that it may exclude the shareholder
proposal of the CWA Members' Relief Fund from its 2007 proxy materials. As
explained in more detail below, and in my previous letter, there is no merit in
any of the Company's arguments under Rule 14a-8.
II. GE Has Again Failed to Cite Any Controlling Authority For Its Claim That The
Proposal Is Excludable Under Rule 14a-8(a)
GE has again failed to cite any controlling authority to support its conclusory
assertion that the Proposal may be excluded from its proxy materials under Rule
14a-8(a). None whatsoever.
In its initial submission, counsel for GE claimed that the Proposal does not
present "a proper subject [for a proposal] under Rule 14a-8" on the demonstrably
false premise that it does not "'request that the company or its board of
directors take an action'" (GE Request, p. 3, quoting Securities Exchange Act
Release No. 39093 (Sept. 18, 1997). In truth, as my letter of January 2 points
out at p. 4, the proposal contains an express request that the board of
directors take a specific action by adopting a new policy, which would provide
for the submission of a prescribed question on executive compensation to an
advisory vote of the shareholders at each annual meeting that may occur in 2008
and beyond.
As in the initial request for a no-action letter, the most recent GE submission
fails to cite any controlling authority for the proposition that a proposal may
be excluded under Rule 14a-8(a) when, as here, it satisfies the requirement that
a proposal must ask a company or its board of directors to "'take an action.'"
The closest approximation to "authority" that GE cites is the Staff decision in
Sensar Corporation (Apr. 23, 2001). But that decision provides no support for
GE's claim that the instant Proposal is in any way defective, because the
Staff's letter explicitly states that the proposal in Sensar did "not recommend
or require that Sensar or its board of directors take any action."
Counsel for GE finally drops the facade that there is precedent for his
unprecedented argument at pp. 3-4 of his most recent letter, when he asserts
that, "whether a submission asks for an advisory vote or asks management to
[adopt a policy that it will] seek an advisory vote at subsequent meetings, the
submission involves an advisory vote." No authority, controlling or otherwise,
is cited for this naked assertion that a proposal for the adoption of a new
policy with respect to advisory votes is somehow inappropriate under Rule
14a-8(a).
In the final analysis, there is no shred of merit in the Company's claim. To
borrow a phrase, "it is a tale ... full of sound and fury, signifying nothing."
William Shakespeare, Macbeth, Act 5, Scene 5, lines 26-28.
III. GE Has Again Failed to Demonstrate That The Proposal Has Failed to Satisfy
Any Requirement of Rule 14a-8(a)
The recent GE letter concedes "the fact that the Submission [of the Proponent]
relates to executive compensation" (see pp. 1-2). However, it goes on to argue
that, "when the proposal does not satisfy one of the requirements under Rule
14a-8" (see p. 2), this fact "does not excuse it from having to satisfy the
requirements of Rule 14a-8[a]."
As noted above, GE has failed to establish any predicate whatsoever for its
unfounded allegation that there has been any failure to satisfy any requirement
of Rule 14a-8(a). In the absence of any credible predicate for that demonstrably
false claim, the Company's argument that such violations cannot be "excused" is
nothing more than innuendo.
The Company's tactic of repeating its claim of a failure to satisfy Rule
14a-8(a) as if it were true, and with an air of self-righteous certitude, does
not constitute the required proof under Rule 14a-8(g) "that it is entitled" to
exclude the Proposal. Nor does the Company's innuendo that my prior letter was
attempting to "excuse" such a failure when it pointed out that the instant
Proposal relates to executive compensation. As Gertrude Stein once wrote, after
an unsuccessful search for her childhood home, "there is [simply] no there
there."
IV. SLB 14 Makes Clear That the Staff May Permit Revision of the Proposal If the
Staff Finds Potential Violations of State Law and Commission Rules
For the reasons set forth in my prior letter (pp. 7-9), we submit that there is
no merit to the Company's claims that the Proposal may be excluded from its 2007
proxy materials under Rules 14a-8(i)(2) and Rules 14a-8(i)(3). However, if the
Staff were to conclude that the form of the proposed question on executive
compensation might violate either Section 614 (b) of the New York Business
Corporation Law, or Commission Rule 14a-4, counsel for GE has helpfully pointed
out the potential application of SLB 14.
SLB 14 reflects a "long-standing practice" of the Staff, which permits
"shareholders to make revisions that are minor in nature and do not alter the
substance of the proposal." It points out that the Staff has permitted such
revisions to be made in cases, such as the present one, where a proposal or a
supporting statement may "contain some relatively minor defects that could be
easily corrected."
In arguing that the Staff should not permit a revision of the proposed question
that would be submitted to an advisory shareholder vote (see pp. 4-5), GE
contends that "neither" of the "circumstances" that might warrant revision,
which the Staff set forth in SLB 14 with respect to defects under Rules
14a-8(i)(2) and (i)(3), are present in this case. However, contrary to that
argument, SLB 14 specifically states that the types of revisions that are set
forth therein "are [merely] examples of ... the types of permissible changes"
(emphasis added).
We submit that this is a case in which any possible defect in the form of the
question "could be easily corrected," because the alleged defect is "relatively
minor" and could be corrected without altering the substance of the proposal.
Accordingly, if the Staff should be persuaded that the form of the proposed
question is inappropriate, we respectfully request that the Proponent be
permitted to revise the prescribed question to ask: "Do the shareowners approve
of the compensation of GE's named executive officers as set forth in the proxy
statement's Summary Compensation Table?"
V. Conclusion: GE Has Failed to Demonstrate "That It Is Entitled to Exclude the
Proposal"
For the reasons set forth above, and in my letter of January 2, 2007, we submit
that GE has failed to demonstrate, in accord with the burden of proof imposed by
Rule 14a-8(g), "that it is entitled" to exclude the proposal from its 2007 proxy
materials (emphasis added). Accordingly, we respectfully submit that the request
for a no-action letter should be denied.
Please contact me if you should have any questions. Copies of this letter are
being sent to counsel for the company and to the proponent, and six copies are
enclosed for use of the Staff.
Sincerely,
/s/
Frederick B. Wade
Suite 740
122 West Washington Ave.
Madison, WI 53703
Phone: (608)-255-5111
c. Ronald O. Mueller
STAFF REPLY LETTER]
February 7, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: General Electric Company Incoming letter dated December 8, 2006
The proposal requests that the board adopt a policy of submitting the following
question to a shareholder vote at each annual meeting in the future: "Is the
compensation of GE's named executive officers as set forth in the proxy
statement's Summary Compensation Table: (a) excessive; (b) appropriate; or (c)
too low?"
There appears to be some basis for your view that GE may exclude the proposal
under rule 14a-8(i)(3), as contrary to rule 14a-4(b)(1). In reaching this
position, we have noted that the actions contemplated by the proposal may
involve proxy solicitations subject to Section 14(a) of the Securities Exchange
Act of 1934. 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)(3). In reaching this position, we have not found it necessary to
address the alternative bases for omission upon which GE relies.
Sincerely,
/s/
Gregory S. Belliston
Attorney-Adviser
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