Company Name: General Mills, Inc.
Public Availability Date: June 29, 2007
Document Sections:
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
June 22, 2007
VIA E-MAIL AND COURIER
Securities and Exchange Commission
Division of Corporation Finance, Office of the Chief Counsel
450 Fifth Street, N.W.
Washington D.C. 20549
E-mail: cfletters@sec.gov
Re: General Mills, Inc.
Ladies and Gentlemen:
As special counsel for General Mills, Inc., we are writing to withdraw our
no-action request submitted on May 22, 2007 regarding a shareholder proposal
submitted by Lucian Bebchuk on April 11, 2007 for inclusion in General Mills'
2007 annual meeting proxy statement. Mr. Bebchuk has informed us, and Mr.
Bebchuk's counsel has confirmed to you by letter of June 18, 2007, attached
hereto as Exhibit A, that Mr. Bebchuk has voluntarily withdrawn his proposal.
Accordingly, the proposal will not be included in General Mills' 2007 proxy
statement. If you have any questions regarding this matter or require additional
information, please do not hesitate to contact me at 212-403-1221.
Very truly yours,
/s/
Steven A. Rosenblum
[APPENDIX]
EXHIBIT A
June 18, 2007
VIA E-MAIL AND TELECOPY
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
Mail Stop 3010
100 F. Street N.E.
Washington, D.C. 20549
Re: Shareholder Proposal Submitted by Lucian Bebchuk for Inclusion in General
Mills, Inc.'s 2007 Proxy Statement
Ladies and Gentlemen:
This letter is submitted on behalf our client, Lucian Bebchuk in connection with
the shareholder proposal (the "Proposal") which Mr. Bebchuk submitted to General
Mills, Inc. ("General Mills" or the "Company") for inclusion in the Company's
2007 Proxy Statement (the "Proposal").
On June 8, 2007, Mr. Bebchuk informed counsel for the Company of his intent to
voluntarily withdraw the Proposal. This letter confirms that the Proposal has
been withdrawn.
Sincerely,
/s/
Michael J. Barry
[INQUIRY LETTER]
May 22, 2007
VIA E-MAIL AND COURIER
Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
450 Fifth Street, N.W.
Washington D.C. 20549
E-mail: cfletters@sec.gov
Re: General Mills, Inc. Omission of Shareholder Proposal Submitted by Lucian
Bebchuk
Ladies and Gentlemen:
We are acting as special counsel to General Mills, Inc. ("General Mills"), a
Delaware corporation, in connection with the matter set forth in this letter. We
submit this letter to the Staff of the Division of Corporation Finance of the
Securities and Exchange Commission (the "Staff") on behalf of General Mills,
pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). We request that the Staff concur with General Mills' view
that the proposed shareholder resolution (the "Proposal") and accompanying
statement of support received on April 11, 2007, from Professor Lucian Bebchuk
(the "Proponent") may be properly omitted from the proxy materials to be
distributed in connection with General Mills' 2007 Annual Meeting of
Stockholders (the "2007 Proxy Materials"), in reliance on Rules 14a-8(i)(2) and
14a-8(i)(1) under the Exchange Act.
The Proposal is as follows:
It is hereby RESOLVED that pursuant to Section 109 of the Delaware General
Corporation Law, 8 Del. C. 109, and Article VII of the Company's By-laws, the
Company's By-laws are hereby amended by adding a new Section 18 to Article II as
follows:
Section 18. Stockholder Ratification Of Certain Director Compensation
(a) Notwithstanding any provision in these by-laws to the contrary, ratification
by the stockholders shall be required for the payment of compensation to any
non-employee director that would cause the total compensation paid to such
director since the corporation's preceding annual meeting to exceed $120,000,
inclusive of cash and equity-based compensation. To the extent that such
stockholder ratification is not obtained in advance, the board of directors may
authorize the payment of such compensation to a non-employee director provided
that the director agrees to promptly return any such payment(s) in excess of
$120,000 to the corporation in the event that stockholder ratification is not
obtained prior to or at the next annual meeting following the date of such
payment(s).
(b) Subsection (a) of this section shall not apply if the corporation (i) did
not have a stockholder rights plan with a term exceeding one year at any time
during the period between the preceding annual meeting and the time of such
payment, or (ii) any such plan was ratified by the stockholders. Subsection (a)
of this section shall also not apply to the payment of any compensation pursuant
to contractual agreements entered into prior to the effective date of this
section.
(c) Stockholder rights plan, as referred to in this section, shall mean any
stockholder rights plan, rights agreement or any other form of "poison pill"
that is designed to or has the effect of making an acquisition of large holdings
of the corporation's shares of stock more difficult or expensive.
(d) Nothing in this section should be construed to permit or validate decisions
to adopt or maintain a stockholder rights plans [sic] that would otherwise be
prohibited or invalid.
This By-law Amendment shall be effective immediately and automatically as of the
date it is approved by the vote of stockholders in accordance with Article VII
of the Company's By-laws.
A copy of the Proposal and the accompanying supporting statement are attached
hereto as Exhibit A.
Grounds for Omission
General Mills believes that it may omit the Proposal from its 2007 Proxy
Materials pursuant to Rule 14a-8(i)(2) and 14a-8(i)(1) under the Exchange Act.
As described in more detail below, the proposed bylaw would, if adopted, violate
several provisions of state law, as well as fundamental doctrines set forth by
the Delaware courts regarding board discretion, fiduciary duty, and the
permissible scope of bylaws. In addition, if adopted, the proposed bylaw would
be invalid because it would accomplish an inequitable purpose. General Mills'
view is supported by the opinion of a leading Delaware law firm, Richards,
Layton & Finger, P.A. (the "Richards Layton Opinion"), which opinion is attached
hereto as Exhibit B. The Richards Layton Opinion concludes that the proposed
bylaw, if adopted by the shareholders, would be invalid under Delaware law. The
Proposal seeks to amend General Mills' bylaws in a manner that would unlawfully
affect a director's decision on the adoption of a rights plan, by creating
direct implications for the unrelated matter of the director's compensation. For
the reasons summarized below and discussed in greater detail in the Richards
Layton Opinion, General Mills believes that the constraints sought to be imposed
by the Proposal would violate Delaware law, making the Proposal an improper
subject for shareholder action.
A. The Proposal is excludable pursuant to Rule 14a-8(i)(2) because, if adopted,
it would cause the Company to violate Delaware law.
Rule 14a-8(i)(2) permits an issuer to omit a shareholder proposal from its proxy
materials if it would, if implemented, "cause the company to violate any state,
federal, or foreign law to which it is subject." Section 141(a) of the Delaware
General Corporation Law (the "DGCL") confers authority on a corporation's board
of directors to manage the business and affairs of the corporation, and subjects
this authority only to provisions of the DGCL itself and to provisions of the
company's certificate of incorporation. It is a fundamental precept of Delaware
law that Section 141(a) of the DGCL gives directors, not shareholders, the
ultimate power and duty to manage the corporation. Aronson v. Lewis,
473 A.2d 805, 811 (Del. 1984); Quickturn Design Sys., Inc. v. Shapiro,
721 A.2d 1281, 1291 (Del. 1998); Maldonado v. Flynn, 413 A.2d 1251, 1255 (Del. Ch. 1980), rev'd
on other grounds sub nom., Zapata Corp. v. Maldonado,
430 A.2d 779 (Del. 1981).
Within the ambit of this authority is the power to institute a rights plan.
Moran v. Household Int'l, Inc.,
500 A.2d 1346 (Del. 1985); Revlon, Inc. v.
MacAndrews & Forbes Holdings,
506 A.2d 173 (Del. 1985).
Article VI of General Mills' Certificate of Incorporation (the "Certificate"), a
copy of which is set forth as Exhibit C hereto, provides, in turn, that "[t]he
business of this Corporation shall be managed by its Board of Directors." Any
limitations on the Section 141(a) powers of the board could only be accomplished
through an amendment to this provision of the Certificate. Pursuant to Section
242(b)(1) of the DGCL, such an amendment would require approval by the board and
shareholders. The Proposal, if adopted, would thus be invalid under Delaware law
because it would purport to override, by operation of a bylaw, a provision of
General Mills' existing Certificate. Shareholder adoption of a bylaw that is
inconsistent with the Certificate would violate Section 109(b) of the DGCL.
Additionally, if adopted, the proposed bylaw would accomplish an inequitable
purpose. The Proposal seeks to use Section 141(h) of the DGCL, an enabling
provision that relates to director compensation, to create a conflict of
interest for General Mills' non-employee directors, by conditioning their
compensation on the outcome of their vote with respect to a specific matter.
Although phrased as a restriction on director compensation, the approved
Proposal would prevent the board from freely exercising the judgment within its
purview under Delaware law on decisions that are of fundamental importance to
General Mills.
Accordingly, the Proposal would violate state law and is therefore excludable
under Rule 14a-8(i)(2).
B. The Proposal is excludable pursuant to Rule 14a-8(i)(1) because it is an
improper subject for action by shareholders under Delaware law.
Rule 14a-8(i)(1) permits an issuer to exclude a proposal if it "is not a proper
subject for action by shareholders under the laws of the jurisdiction of the
company's organization." A Note accompanying Rule 14a-8(i)(1) states that
"[d]epending on the subject matter, some proposals are not considered proper
under state law if they would be binding on the company if approved by
shareholders." This Proposal is not merely precatory; it is an attempt to adopt
a binding bylaw that would infringe upon the management authority vested in the
board. If implemented, the Proposal would cause General Mills to violate
Delaware law, and is therefore an improper subject for shareholder action.
Although Section 141(h) of the DGCL permits a company's bylaws to restrict the
directors' power to set director compensation, Section 141(a) of the DGCL and
the Certificate empower the board to manage the business and affairs of General
Mills. The DGCL sets forth the permitted scope of bylaws, but requires that any
bylaw provision be "not inconsistent with law or with the certificate of
incorporation." DGCL 109(b). A bylaw that fails to meet this basic requirement
is void. Frantz Mfg. Co. v. EAC Indus.,
501 A.2d 401, 407 (Del. 1985).
Moreover, by directly linking compensation to a specific act to be taken (or not
to be taken) in the discharge of a director's duties, the Proposal gratuitously
creates a conflict of interests for an affected director. The effect of the
Proposal, if not its goal, is to influence the board's judgment in the discharge
of its fiduciary duties. To coerce the board in this manner would effectively
usurp the board's managerial authority, placing the Proposal outside the realm
of proper shareholder action. Delaware law prohibits not only the usurpation of
the board's duties and powers, but also impermissible limitations on a
director's ability to use his or her best judgment to manage the corporation.
Grimes v. Donald,
673 A.2d 1207, 1214 (Del. 1996); Abercrombie v. Davies,
123 A.2d 893, 899 (Del. Ch. 1956). As a result, the Proposal is excludable pursuant
to Rule 14a-8(i)(1).
Conclusion
Based upon the foregoing and the Richards Layton Opinion, we respectfully
request that the Staff concur with General Mills' view that the Proposal may be
properly omitted from the 2007 Proxy Materials, in reliance on Rules 14a-8(i)(2)
and 14a-8(i)(1).
Pursuant to guidance set forth on the Commission's web site, we are submitting
this letter electronically via e-mail with six confirmatory hard copies to be
sent concurrently to the Staff by mail. In addition, pursuant to Rule
14a-8(j)(1), we are sending a copy of this letter and its exhibits to Proponent
as notice of General Mills' intention to omit the Proposal, including the
accompanying supporting statement, from its 2007 Proxy Materials. General Mills
intends to file with the Securities and Exchange Commission its definitive proxy
statement and form of proxy for the 2007 Annual Meeting no earlier than 80 days
after this date.
If the Staff disagrees with the conclusions set forth in this letter, I
respectfully request the opportunity to confer with you before the determination
of the Staff's final position. Please call me at 212-403-1221 if you have any
questions regarding this matter.
Very truly yours,
/s/
Steven A. Rosenblum
[STAFF REPLY LETTER]
June 29, 2007
Steven A. Rosenblum
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-6150
Re: General Mills, Inc.
Dear Mr. Rosenblum:
This is in regard to your letter dated June 22, 2007 concerning the shareholder
proposal submitted by Lucian Bebchuk for inclusion in General Mills' proxy
materials for its upcoming annual meeting of security holders. Your letter
indicates that the proponent has withdrawn the proposal, and that General Mills
therefore withdraws its May 22, 2007 request for a no-action letter from the
Division. Because the matter is now moot, we will have no further comment.
Sincerely,
/s/
Ted Yu
Special Counsel
cc: Lucian Bebchuk
1545 Massachusetts Avenue
Cambridge, MA 02138
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