Company Name: Int'l. Business Machines Corp.
Public Availability Date: December 7, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
November 9, 2007
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: 2008 Stockholder Proposal of Ms. Virginia M. Brown
Ladies and Gentlemen:
Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, I am
enclosing six copies of this letter, together with a proposal and statement in
support thereof dated October 19, 2007, attached as Exhibit A hereto (the
"Proposal") from Ms. Virginia M. Brown (the "Proponent"). IBM received the
Proposal on October 22, 2007.
IBM believes that the Proposal may properly be omitted from the proxy materials
for IBM's annual meeting of stockholders scheduled to be held on April 29, 2008
(the "2008 Annual Meeting") for the reasons discussed below. To the extent that
the reasons for omission stated in this letter are based on matters of law,
these reasons are the opinion of the undersigned as an attorney licensed and
admitted to practice in the State of New York.
THE PROPOSAL MAY BE OMITTED UNDER RULES 14a-8(b)(1), (b)(2) and (f) BECAUSE THE
PROPONENT FAILED TO PROVIDE SUFFICIENT INFORMATION REQUIRED UNDER SUCH RULES
REGARDING HER ELIGIBILITY TO SUBMIT A PROPOSAL DESPITE THE TIMELY AND SPECIFIC
REQUEST OF THE COMPANY FOR THE PROPONENT TO FURNISH SUCH REQUIRED INFORMATION.
A. IBM's RECEIPT OF THE PROPOSAL ON OCTOBER 22, 2007
The Proposal, dated October 19, 2007, was sent by the Proponent to IBM via
certified mail. The Proponent posted the letter constituting the Proposal from
Port Allen, LA on Friday, October 19, 2007, and IBM received the Proposal in
Armonk, NY on Monday, October 22, 2007. (Exhibit A)
Following IBM's receipt of the Proponent's one (1) page submission, the Company
carefully examined it, checked our stock records, and confirmed our belief that
the Proponent was not an IBM stockholder of record. In this connection, no
corroborative proof of the Proponent's beneficial ownership from the record
holder accompanied the Proponent's initial submission.
B. COMPANY'S OCTOBER 23, 2007 REQUEST FOR PROPER PROOF OF BENEFICIAL OWNERSHIP
Since the Company had not received any corroborative proof of the Proponent's
beneficial ownership of IBM stock, the Company promptly replied to the Proponent
seeking such information. By letter dated October 23, 2007, the undersigned
acknowledged IBM's receipt of the Proposal on October 22, 2007, and went on to
detail exactly what we needed for the Proponent to secure and deliver to us from
the record holder that would constitute proper proof of the Proponent's
beneficial ownership of IBM stock under Rule 14a-8. (Exhibit B)
IBM sent out our request letter to the Proponent via DHL Express on October 23,
2007 (DHL Waybill No. 69874886443). (Exhibit C)
The DHL Track Results shows that IBM's letter was received by the Proponent on
October 24, 2007. (Exhibit D)
In IBM's request letter, after acknowledging receipt of the Proposal, since the
Proponent was not a record holder and no supporting documentation accompanied
the Proposal, we explained the applicable SEC rules to the Proponent and
specifically asked for proper proof of beneficial ownership of IBM stock in
accordance with the SEC's regulations. Specifically, we wrote, in the second
paragraph:
In the first place, please understand that in order to be eligible to submit a
proposal for consideration at our Annual Meeting, Rule 14a-8 under Regulation
14A of the United States Securities and Exchange Commission ("SEC") requires
that you 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. (Exhibit B)
The Company then described precisely what the Proponent should do to comply with
the SEC's regulations in order to prove her beneficial ownership to us. We
wrote, in the third paragraph:
[I]f you are not a registered stockholder, please understand that the company
does not know that you are a stockholder, or how many shares you own. In this
case, you must prove your eligibility to the company in one of two ways: The
first way is to submit to the company a written statement from the record holder
of your securities (usually a broker or bank) verifying that at the time you
submitted your proposal, you continuously held the securities for at least one
year. (Exhibit B)
Finally, the Company called to the Proponent's attention the Commission's 14-day
time limitation to reply to the Company with all of the required information,
writing in the fourth paragraph:
Please understand that all of the required information set forth in this letter
must be sent directly to me at the address set forth above within 14 calendar
days of the date you receive this request and that the Company reserves the
right to omit your proposal under the applicable provisions of Regulation 14A.
Thank you for your interest in IBM and this important matter. (Exhibit B)
C. IBM's RECEIPT OF THE BROKER'S LETTER ON OCTOBER 29, 2007, FOLLOWING OUR
REQUEST FOR PROOF OF BENEFICIAL OWNERSHIP
On October 26, 2007, two days after the Proponent received IBM's request for
proper proof of beneficial ownership, the Proponent posted a reply letter to IBM
via certified mail. (Exhibit E). IBM received such reply materials from the
Proponent on October 29, 2007. The Proponent's reply materials included:
(1) a letter from the Proponent to IBM, dated October 25, 2007, stating that she
intended to continue ownership of her IBM shares through the date of the annual
meeting, and
(2) a letter, dated October 15, 2007, from Ms. Charlotte B. Willis, Investment
Representative at Edward Jones, the Proponent's broker, sealed within a separate
envelope from the broker.
(Exhibit E)
The October 15, 2007 letter from the Edward Jones brokerage firm will sometimes
be referred to for convenience as the "Broker's letter." The October 15, 2007
Broker's letter constituted the only independent proof of Proponent's beneficial
ownership that the Company received from the Proponent, and such letter was sent
to us after we requested proper proof of the Proponent's stock ownership on
October 23, 2007.
It is well established that a proposal is considered submitted to a registrant
under the proxy rules as of the date such proposal is received by a registrant.
Although the Broker's letter in this case was timely sent to IBM in response to
our request for the Proponent to provide proof of beneficial ownership (i.e.
within the 14 day period set forth in Rule 14a-8(f)(1)), the Broker's letter
wasand remainsfatally defective. The Broker's letter is dated October 15,
2007. While such letter may contain information accurate as of such date, since
the Broker's letter was dated four (4) days before the date of the Proponent
sent the Proposal to IBM, and, more importantly, seven (7) days before IBM
received the Proponent's submission on October 22, 2007, the Broker's Letter did
not and indeed could notprovide any information properly responsive to the
Company's written request that the Proponent provide independent corroborative
evidence sufficient to prove that the Proponent had, and maintained continuous
beneficial ownership of the requisite amount of IBM stock for the relevant one
year period ending as of the date the Proposal was submitted to IBM. As a
result, the Proponent is ineligible to have IBM further consider the Proposal
for inclusion in our 2008 proxy statement under applicable SEC rules, as we had
outlined to the Proponent in our October 23, 2007 letter to her.
D. ANALYSIS
The proof offered by the Proponent in the Broker's letter was not responsive to
the Company's request. The Company had earlier pointed out to the Proponent that
we needed proof in the form of:
a written statement from the "record" holder of your securities (usually a
broker or bank) verifying that, at the time you submitted your proposal, you
continuously held the securities for at least one year."
(Exhibit B)
As noted above, the Proposal was submitted to IBM when it was received by the
Company on October 22, 2007, but the Broker's Letter which was later furnished
to usin response to our request for proper corroborative proof of ownershipwas
dated October 15, 2007. Such Broker's letter was dated four days before the date
the Proposal was posted, and seven (7) days before the Proposal was received by
IBM. The Broker's Letter, containing information dated 7 days before the
Proposal was received by IBM, could not properly address or otherwise satisfy
the Commission's regulations, as IBM had specifically requested of the
Proponent. In short, the Broker's letter, being stale, could not verify anything
at all about the Proponent's stock ownership at the time the proposal was
submitted.
Indeed, there is absolutely nothing in the Broker's Letter that was responsive
to what the Company had requested of the Proponent in our October 23 letter. We
needed to receive proper proof that the Proponent continuously held at least
$2,000 of IBM stock for at least one year at the time the Proposal was
submitted, and no other independent evidence of the Proponent's beneficial
ownership of IBM stock was ever furnished. The Proposal was submitted without
any proof of beneficial ownership when it was received by IBM on October 22,
2007, and since we promptly dispatched our request on October 23 detailing what
would constitute proper proof of beneficial ownership, we fulfilled our
responsibility to the Proponent under the SEC's regulations. Thereafter, the
Proponent failed to furnish proper corroborative proof that:
(i) the Proponent held the requisite amount of IBM securities on the date the
Proposal was submitted to IBM, and
(ii) the Proponent continuously held the requisite amount of IBM securities for
at least one year at the time the Proposal was submitted.
The SEC's rules are crisp, and have been carefully designed with a clear
purposeto ensure that proper proof of beneficial ownership is timely furnished
to a registrant following a proper request for such information so that
registrants do not have to speculate as to a beneficial owner's eligibility to
file a stockholder proposal under Rule 14a-8.
Finally, the fact that the Broker's letter wasn't sent into IBM until the
Proponent mailed it together with her October 25 responsive correspondence is
utterly irrelevant, as the substantive information contained within such
Broker's letter was notand could never be found to beproperly responsive to
the Company's October 23 request to the Proponent for proper proof of beneficial
ownership as of the date the Proposal was submitted under Rules 14a-8(b) and
(f).
In Staff Legal Bulletin 14 (July 13, 2001), the Division of Corporation Finance
made it crystal clear that Broker's letters like the instant one simply do not
pass muster under Rule 14a-8. Paragraph C.(3) of the Staff Legal Bulletin sets
forth the following Q & A to bring this point home:
(3) If a shareholder submits his or her proposal to the company on June 1, does
a statement from the record holder verifying that the shareholder owned the
securities continuously for one year as of May 30 of the same year demonstrate
sufficiently continuous ownership of the securities as of the time he or she
submitted the proposal?
No. A shareholder must submit proof from the record holder that the shareholder
continuously owned the securities for a period of one year as of the time the
shareholder submits the proposal.
As in the Q&A above, the Broker's letter here was defective, and it was the only
independent proof ever submitted in response to IBM's October 23 letter seeking
proper corroboration for the Proponent's claim of eligibility to file the
Proposal. Because the fourteen (14) day time frame for furnishing the proper
information to IBM in response to our October 23 request has now expired, the
instant Proposal should properly be excluded under Rules 14a-8(b)(1), (b)(2) and
(f). See, e.g. International Business Machines Corporation (November 16,
2006)(to same effect).
The Proponent is an experienced stockholder proponent, having filed multiple
proposals with IBM in the past 4 years. Although the Proponent's submission for
our 2004 proxyaddressing charitable contributions, organizations performing
abortions and embryo researchwas excluded on procedural grounds[see
International Business Machines Corporation (January 7, 2004)]IBM was prepared
to include in our 2006 proxy another proposal from the instant
Proponentaddressing sexual orientation, homosexuality, specific sexual
practices and sexually transmitted diseaseswithout challenging her beneficial
ownership, since that year the Proponent had proven her ownership to us.
However, that year the Proponent later decided, sua sponte, to withdraw her
proposal after IBM received concurrence from the SEC to excise portions of her
supporting statement as materially false and misleading under Rules 14a-8(i)(3)
and 14a-9. See International Business Machines Corporation (January 26, 2006)1.
This year, the proof of ownership offered up by the Proponent in response to our
timely request was defective, and as such, we are now properly seeking to
exclude the 2008 Proposal in accordance with SEC rules.
Finally, there is nothing in the Proponent's own two correspondences to IBM
which can properly serve to cure the defective Broker's letter, since statements
from a beneficial owner about her own stock ownership cannot, in any event,
serve to satisfy the Commission's regulatory requirements for independent
corroborative proof of continuous beneficial ownership. In this connection, the
staff has made it clear on numerous occasions that assertions by a putative
beneficial owner as to his/her own stock ownership and/or the required holding
period for such shares cannot serve to establish the requisite proof of
beneficial ownership under Rule 14a-8. See International Business Machines
Corporation (December 19, 2004)(defective broker's letter not subject to
post-facto cure when company had timely sent out proper request for proof of
beneficial ownership which was not timely satisfied); International Business
Machines Corporation (January 7, 2004)(to same effect); International Business
Machines Corporation (January 22, 2003; reconsideration denied February 26,
2003)(original broker's letter was stale and could not serve to prove beneficial
ownership as of the date the proposal was submitted; after the fact attempt to
cure deemed ineffective); International Business Machines Corporation (November
16, 2006)(stale broker's letter); International Business Machines Corporation
(January 7, 2002)(stale broker's letter could not serve to prove continuous
beneficial ownership of IBM stock); International Business Machines Corporation
(January 14, 2002)(broker's letter claiming ownership of shares "since prior to
November 30, 2001" did not properly establish ownership on November 8, 2001);
International Business Machines Corporation (January 8, 2002)(broker's letter
naming ownership in another company was fatally defective to the stockholder's
claim of continuous beneficial ownership of IBM stock); Oracle Corporation (June
22, 2001)(proposal excluded based upon defective broker's letter which did not
show that stockholder owned shares on the date the proposal was submitted);
Baxter International Inc. (February 22, 2006)(when proposal submitted on
November 4, 2005, broker's letter stating that it held 100 shares in the
proponent's account from November 18, 2004 through November 30, 2005 was
insufficient to prove continuous beneficial ownership); The St. Joe Company
(March 14, 2006)(undated broker's letter stating that the Proponent continuously
owned 64 shares of the Company's common stock from October 24, 2004 to the date
of the broker's letterthe date of which could not be pinpointedwas
insufficient to establish proper proof of beneficial ownership); AT&T Corp.
(January 24, 2001) (stockholder's own statements insufficient, even when coupled
with brokerage statements); International Business Machines Corporation
(December 16, 1998)(statements by proponent as to efficacy of his own brokerage
documentation determined by staff to be insufficient to prove that proponent in
fact satisfied the continuous minimum ownership requirement for the one year
period required by current Rule 14a-8(b)).
The staff has regularly granted no-action relief to registrants, in situations
similar to the instant one, where proponents have failed, following a timely and
proper request by a registrant, to furnish the full and proper evidence of
continuous beneficial ownership called for under the regulations in a timely
fashion. International Business Machines Corporation (January 7, 2004)(defective
broker letter); International Business Machines Corporation (January 22, 2003,
reconsideration denied February 26, 2003)(broker letter insufficient);
International Business Machines Corporation (January 8, 2002)(broker letter
insufficient) Oracle Corporation (June 22, 2001)(broker letter insufficient);
Bank of America (February 12, 2001)(broker letter insufficient); Eastman Kodak
Company (February 7, 2001) (statements deemed insufficient); Bell Atlantic
Corporation (July 21, 1999)(proponent's brokerage documentation found by staff
insufficient to prove continuous beneficial ownership); Skaneateles Bancorp,
Inc. (March 8, 1999)(letter by proponent as to stock ownership coupled with
broker letter also properly determined to be insufficient proof of beneficial
ownership under Rule 14a-8(b)); see generally XM Satellite Radio Holdings Inc.
(March 28, 2006)(submission of 1099's, an E-trade statement and computer
printouts insufficient proof); General Motors Corporation (March 24,
2006)(Ameritrade portfolio report insufficient); American International Group,
Inc. (March 15, 2006)(monthly ownership statements from the Proponent's broker
not equivalent to a Broker's statement needed to prove continuous beneficial
ownership).
Under the Commission's rules, the burden of establishing proof of continuous
beneficial ownership is on the stockholder, and here, the Proponent simply
failed to meet that burden. Under Rule 14a-8(f), the Company timely and
courteously notified the Proponent that the Company required proof of continuous
beneficial ownership of IBM stock, as required by Rule 14a-8(b), and we further
advised specifically what would constitute such proper proof. The Company also
advised the Proponent of the 14 day time period in the Commission's regulations
for furnishing such information to the Company. After having received a timely,
clear and specific request for all of the information required by the SEC's
regulations, the Proponent subsequently failed to provide the information called
out by the Company which could have proven that the Proponent continuously held
the proper amount of IBM shares for the requisite period.
Because the Proponent failed to respond with the proper information required by
Rule 14a-8(b) to prove her claim of continuous beneficial ownership of IBM
stock, IBM now respectfully requests your advice that the Division will not
recommend any enforcement action to the Commission if IBM omits the instant
Proposal from our proxy materials now being prepared for the 2008 Annual Meeting
under Rules 14a-8(b) and (f). We are sending the Proponent a copy of this
submission, advising her of our intent to exclude the Proposal from our proxy
materials. If you have any questions relating to this submission, please do not
hesitate to contact the undersigned at (914) 499-6148. The Proponent is
respectfully requested to copy the undersigned on any response that the
Proponent may choose to make to the Commission.
Thank you for your attention and interest in this matter.
Very truly yours,
/s/
Stuart S. Moskowitz
Senior Counsel
copy, with exhibits, to:
Ms. Virginia M. Brown
581 Oregon Avenue
Port Allen, LA 70767
-----FOOTNOTES-----
1 The proposal requests an amendment to IBM's written equal employment
opportunity policy to explicitly exclude reference to any matters related to
sexual interests, activities or orientation. We are unable to concur in your
view that IBM may exclude the entire proposal under rule 14a-8(i)(3). There
appears to be some basis for your view, however, that portions of the supporting
statement may be materially false or misleading under rule 14a-9. In our view,
of the ten paragraphs comprising the proposal and supporting statement, the
following portions must be deleted: the entire first paragraph that begins
"Whereas: Thomas Jefferson said ..."; the entire second paragraph that begins
"Charitable contributions come from ..."; the entire third paragraph that
begins "While there are thousands ..."; the entire fifth paragraph that begins
"According to Karla Jay ..."; the entire sixth paragraph that begins
"According to a 1999 ..."; and the entire seventh paragraph that begins
"Whereas, those who engage ...." Accordingly, we will not recommend enforcement
action to the Commission if IBM omits only these portions of the supporting
statement from its proxy materials in reliance on rule 14a-8(i)(3).
[INQUIRY LETTER]
October 19, 2007
Office of the Secretary
International Business Machines Corp.
New Orchard Rd. Mail Drop 301
Armonk, NY 10504
Dear Sir:
I am the owner of 152 shares of International Business Machines common stock. I
have continuously owned the shares more than one year and intend to hold them
through the date of the next annual meeting. At that meeting, I wish to propose
the following resolution
Whereas, charitable contributions should enhance the image of our company in the
eyes of the public.
Whereas, making known the recipients of our company's charitable gifts to as
many people as possible should promote the company's interests.
Resolved, it is requested that our company list the recipients of corporate
charitable contributions of $1,000 or more on the company website.
Supporting Statement
The more people know of our support of philanthropic activity the better it is
for our company. For example, if we should decide to give money to the American
Cancer Society we might garner good will from the millions of people touched by
cancer. Similarly, should we decide to give money to Planned Parenthood, the
nations largest abortion performing organization, we might be expected to win
sympathetic praise from many who support the choice of abortion. Possible
contributions to organizations like the Human Rights Campaign, the Gay, Lesbian
Straight Education Network or other organizations that focus on the interests of
people who choose to define themselves by their interest in homosexual sex,
would likely engender positive feelings among potentially millions of people who
enjoy engaging in sex with members of their own sex or simply those who support
same sex marriage. If we gave money to the Boy Scouts of America we might expect
the plaudits of potentially millions of their past members, even though they
refuse to allow homosexuals to be scout leaders. Contributions to the American
Heart Association or a myriad number of other worthwhile cultural and
educational charities could be a source of ongoing public approval. Proper
disclosure of charitable contributions would cost us little and should only
serve to enhance our corporate image. For these reasons and others we urge your
support for the above resolution.
Sincerely,
/s/
Virginia M. Brown
[STAFF REPLY LETTER]
December 7, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: International Business Machines Corporation Incoming letter dated November
9, 2007
The proposal relates to charitable contributions.
There appears to be some basis for your view that IBM may exclude the proposal
under rule 14a-8(f). We note that the proponent appears to have failed to
supply, within 14 days of receipt of IBM's request, documentary support
sufficiently evidencing that she satisfied the minimum ownership requirement for
the one-year period required by rule 14a-8(b). Accordingly we will not recommend
enforcement action to the Commission if IBM omits the proposal from its proxy
materials in reliance on rules 14a-8(b) and 14a-8(f).
Sincerely,
/s/
William A. Hines
Special Counsel
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