Company Name: Merck & Co., Inc.
Public Availability Date: January 12, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
VIA OVERNIGHT DELIVERY
December 14, 2006
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, N.E.
Washington, DC 20549
Re: Merck & Co., Inc. Shareholder Proposal from Laborers National Pension Fund
(the "Fund")
Ladies and Gentlemen:
Merck & Co., Inc. (the "Company" or "Merck"), a New Jersey corporation, has
received a shareholder's proposal (the "Fund's Proposal") from Lu Beth Green for
inclusion in the Company's proxy materials for the 2007 Annual Meeting of
Stockholders (the "Proxy Materials"). I believe that the Fund's Proposal may be
omitted under Rule 14a-8(i)(11) (duplication) because it substantially
duplicates a proposal received from Evelyn Y. Davis (the "Davis Proposal"),
which the Company intends to include. Therefore, I respectfully request that the
Division of Corporation Finance (the "Staff") indicate that it will not
recommend enforcement action to the Securities and Exchange Commission ("SEC")
if the Company omits the Fund's Proposal.
The Fund's Proposal, which was received by the Company on October 3, 2006,
provides:
RESOLVED: That the shareholders of Merck & Co., Inc. ("Company") hereby request
that the Company provide a report, updated semi-annually, disclosing the
Company's:
1. Policies and procedures for political contributions and expenditures (both
direct and indirect) made with corporate funds.
2. Monetary and non-monetary political contributions and expenditures not
deductible under section 162 (e)(1)(B) of the Internal Revenue Code, including
but not limited to contributions to or expenditures on behalf of political
candidates, political parties, political committees and other political entities
organized and operating under 26 USC Sec. 527 of the Internal Revenue Code and
any portion of any dues or similar payments made to any tax exempt organization
that is used for an expenditure or contribution if made directly by the
corporation would not be deductible under section 162 (e)(1)(B) of the Internal
Revenue Code. The report shall include the following:
a. An accounting of the Company's funds that are used for political
contributions or expenditures as described above;
b. Identification of the person or persons in the Company who participated in
making the political contribution or expenditures; and
c. The internal guidelines or policies, if any, governing the Company's
political contributions and expenditures.
This report shall be presented to the board of directors' audit committee or
other relevant oversight committee, and posted on the company's website to
reduce costs to shareholders.
The Davis Proposal, which was received by the Company on July 5, 2006, provides:
RESOLVED: "That the stockholders recommend that the Board direct management that
within five days after approval by the shareholders of this proposal, the
management shall publish in newspapers of general circulation in the cities of
New York, Washington, D.C., Detroit, Chicago, San Francisco, Los Angeles,
Dallas, Houston and Miami, and in the Wall Street Journal and U.S.A. Today, a
detailed statement of each contribution made by the Company, either directly or
indirectly, within the immediately preceding fiscal year, in respect of a
political campaign, political party, referendum or citizens' initiative, or
attempts to influence legislation, specifying the date and amount of each such
contribution, and the person or organization to whom the contribution was made.
Subsequent to this initial disclosure, the management shall cause like data to
be included in each succeeding report to shareholders." "And if no such
disbursements were made, to have that fact publicized in the same manner."
The Fund's Proposal and supporting statement are included as Appendix A. The
Davis Proposal and supporting statement are included as Appendix B.
Rule 14a-8(i)(11) provides that a proposal may be omitted if it "substantially
duplicates another proposal previously submitted to the company by another
proponent that will be included in the company's proxy materials for the same
meeting" The purpose for the rule "is to eliminate the [possibility] of
shareholders having to consider two or more substantially identical proposals
submitted to an issuer by proponents acting independently of each other."
Release No. 34 12999 (November 22, 1976), referring to Rule 14a-8(c)(11), the
predecessor to current Rule 14a-8(i)(11). The Staff's view is that where
proposals are substantially duplicative, the previously submitted proposal
should be included. The Davis Proposal was submitted to the Company first and
the Company intends to include it in the Proxy Materials.
The Staff consistently has interpreted Rule 14a-8(i)(11) to permit companies to
exclude similar proposals that are not identical where the core issues are the
same. In fact, the Staff recently ruled twice that a proposal from Ms. Davis
that is nearly identical to the Davis Proposal and a proposal with very minor
differences from the Fund's Proposal are substantially duplicative. In Bank of
America Corporation (February 14, 2006), the staff permitted exclusion on the
basis of substantial duplication between
A proposal from Evelyn Davis that provided:
RESOLVED: "That the stockholders recommend that the Board direct management that
within five days after approval by the shareholders of this proposal, the
management shall publish in newspapers of general circulation in the cities of
New York, Washington, D.C., Detroit, Chicago, and Charlotte San Francisco, Los
Angeles, Dallas, Houston and Miami, and in the Wall Street Journal and U.S.A.
Today, a detailed statement of each contribution made by the Company, either
directly or indirectly, within the immediately preceding fiscal year, in respect
of a political campaign, political party, referendum or citizens' initiative, or
attempts to influence legislation, specifying the date and amount of each such
contribution, and the person or organization to whom the contribution was made.
Subsequent to this initial disclosure, the management shall cause like data to
be included in each succeeding report to shareholders." "And if no such
disbursements were made, to have that fact publicized in the same manner."
and
A proposal from the American Federation of Labor and Congress of Industrial
Organizations (differs very slightly from the Fund's Proposal) that provided:
Resolved, that the shareholders of Bank of America Corporation ("Bank of
America" or the "Company") hereby request that the Company provide a report,
updated semi-annually, disclosing the Company's:
1. Policies and procedures for political contributions (both direct and
indirect) made with corporate funds.
2. Monetary and non-monetary contributions to political candidates, political
parties, political committees and other political entities organized and
operating under 26 USC Sec. 527 of the Internal Revenue Code including the
following:
a. An accounting of the Company's funds contributed to any of the organizations
described above;
b. Identification of the person or persons in the Company who participated in
making the decisions to contribute;
c. The internal guidelines or policies, if any, governing the Company's
political contributions. This report shall be presented to the Board of
Directors' Audit Committee or other relevant oversight committee, and posted on
the Company's website.
Bank of America (February 25, 2005) is "almost exactly the same" as the above,
according to counsel for the registrant, and the Staff permitted exclusion.
Very minor, insignificant differences do exist between the proposals at issue in
Bank of America and the Proposals facing Merck. However, those trivial
differences are inconsequential, and the Staff should agree that there is basis
to exclude the Fund's Proposal for the same reason it agreed there was basis to
exclude the AFL-CIO proposal. I therefore am of the view that the Fund's
Proposal is excludible as substantially duplicative of the Davis Proposal and
respectfully request that the Staff not recommend enforcement action to the SEC
if the Fund's Proposal is omitted from the Proxy Materials in reliance on Rule
14a-8(i)(11).
In accordance with Rule 14a-8(j)(2), we have enclosed six copies of this letter
and both Proposals including the statements in support thereof. An additional
copy is included, which we ask that you use to acknowledge receipt of this
submission by date stamping and returning to me in the enclosed self-addressed
envelope.
If the Staff believes that it will not be able to concur in our view that the
Fund's Proposal may be omitted, we very much would appreciate the opportunity to
discuss this issue in more detail with the appropriate persons before issuance
of a formal response.
By copy of this letter, the Company is notifying the Proponent of its intention
to omit the Fund's Proposal from the Proxy Materials.
For the Staff's information, the Company expects to print its Proxy Statement on
or about March 1, 2007.
If you have any questions regarding this matter or require further information,
please contact me at (908) 423-5671.
Thank you for your time and consideration.
Very truly yours,
MERCK & CO., INC.
/s/
Bruce Ellis
Counsel
Employee Benefits & Executive Compensation
Enc.
CC: Lu Beth Greene
Fund Administrator
Laborers National Pension Fund
[INQUIRY LETTER]
October 3, 2006
Ms. Celia Colbert
VP, Assistant General Counsel and Corporate Secretary
Merck & Co., Inc.
1 Merck Drive
Whitehouse Station, NY 08889
Sent Via Fax 908-735-1246
Dear Ms. Colbert:
On behalf of the Laborers National Pension Fund ("Fund"), I hereby submit the
enclosed shareholder proposal ("Proposal") for inclusion in the Merck & Co.,
Inc. ("Company") proxy statement to be circulated to Company shareholders in
conjunction with the next annual meeting of shareholders. The Proposal is
submitted under Rule 14(a)-8 (Proposals of Security Holders) of the U.S.
Securities and Exchange Commission's proxy regulations.
The Fund is the beneficial owner of approximately 90,000 shares of the Company's
common stock, which have been held continuously for more than a year prior to
this date of submission. The Proposal is submitted in order to promote a
governance system at the Company that enables the Board and senior management to
manage the Company for the long-term. Maximizing the Company's wealth generating
capacity over the long-term will best serve the interests of the Company
shareholders and other important constituents of the Company.
The Fund intends to hold the shares through the date of the Company's next
annual meeting of shareholders. The record holder of the stock will provide the
appropriate verification of the Fund's beneficial ownership by separate letter.
Either the undersigned or a designated representative will present the Proposal
for consideration at the annual meeting of shareholders.
If you have any questions or wish to discuss the Proposal, please contact
Jennifer O'Dell, Assistant Director of the LIUNA Department of Corporate Affairs
at (202) 942-2359. Copies of correspondence or a request for a "no-action"
letter should be forwarded to Ms. O'Dell at Laborers' International Union of
North America Corporate Governance Project, 905 16th Street, NW, Washington,
DC 20006.
Sincerely,
/s/
Lu Beth Greene
Fund Administrator
Cc. Jennifer O'Dell
Enclosure
[APPENDIX]
Resolved: That the shareholders of Merck & Co., Inc. ("Company") hereby request
that the Company provide a report, updated semi-annually, disclosing the
Company's:
1. Policies and procedures for political contributions and expenditures (both
direct and indirect) made with corporate funds.
2. Monetary and non-monetary political contributions and expenditures not
deductible under section 162 (e)(1)(B) of the Internal Revenue Code, including
but not limited to contributions to or expenditures on behalf of political
candidates, political parties, political committees and other political entities
organized and operating under 26 USC Sec. 527 of the Internal Revenue Code and
any portion of any dues or similar payments made to any tax exempt organization
that is used for an expenditure or contribution if made directly by the
corporation would not be deductible under section 162 (e)(1)(B) of the Internal
Revenue Code. The report shall include the following:
a. An accounting of the Company's funds that are used for political
contributions or expenditures as described above;
b. Identification of the person or persons in the Company who participated in
making the decisions to make the political contribution or expenditure; and
c. The internal guidelines or policies, if any, governing the Company's
political contributions and expenditures.
This report shall be presented to the board of directors' audit committee or
other relevant oversight committee, and posted on the company's website to
reduce costs to shareholders.
Supporting Statement: As long-term shareholders of Merck & Co., we support
policies that apply transparency and accountability to corporate spending on
political activities. Such disclosure is consistent with public policy and in
the best interest of the Company's shareholders.
Company executives exercise wide discretion over the use of corporate resources
for political activities. These decisions involve political contributions,
called "soft money." They also involve payments to trade associations and
related groups used for political activities that media accounts call the "new
soft money." Most of these expenditures are not disclosed. In 2003-04, the last
fully reported election cycle, Merck contributed at least $234,000 in soft
money. (PoliticalMoneyLine: http://www.fecinfo.com/cgj-win/irs [Text Illegible]f
top.exe?DoFn=DONOR&sYR=2004)
However, its payments to trade associations used for political activitics are
undisclosed and unknown. The proposal asks the Company to disclose its political
contributions and payments to tax exempt organizations including trade
associations.
The Bi-Partisan Campaign Reform Act of 2002 allows companies to contribute to
independent political committees, also known as 527s, and to give to tax-exempt
organizations that make political expenditures and contributions.
Absent a system of accountability, corporate executives will be free to use
company assets for political objectives that are not shared by and may be
inimical to the interests of the Company and its shareholders. Relying on
publicly available data does not provide a complete picture of the Company's
political expenditures. The Company's Board and its shareholders need complete
disclosure to be able to fully evaluate the political use of corporate assets.
Thus, we urge your support FOR this critical govemance reform.
[INQUIRY LETTER]
January 8, 2007
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Attention: Chief Counsel, Division of Corporation Finance
Re: Request for no-action determination by Merck & Co., Inc.; shareholder
proposal by Laborers National Pension Fund
Dear Sir or Madam,
By letter dated December 14, 2006, Merck & Co., Inc. ("Merck" or the "Company")
asked that the Office of the Chief Counsel of the Division of Corporation
Finance (the "Staff") confirm that it will not recommend enforcement action if
Merck excludes a shareholder proposal (the "Proposal") submitted pursuant to the
Commission's Rule 14a-8 by the Laborers National Pension Fund (the "Fund").
The Proposal requests that Merck report semi-annually to shareholders on (a)
policies and procedures for political contributions and expenditures (both
direct and indirect) made with corporate funds; (b) an accounting of the
Company's funds that are used for political contributions and expenditures,
including (i) contributions to or expenditures on behalf of entities organized
and operating under 26 U.S.C. section 527 and (ii) any portion of dues or
similar payments made to any tax exempt organization that is used for an
expenditure or contribution if made directly by the corporation would not be
deductible under 26 U.S.C. section 162(c)(1)(B); (c) identification of the
person or persons at Merck who participated in the decision to make the
political contribution or expenditure; and (d) the internal guidelines or
policies, if any, governing the Company's political contributions and
expenditures. The Proposal also urges that the report be provided to the audit
committee of the Company's board or other relevant oversight committee and
posted on the Company's web site.
Merck argues that the Proposal is excludable under Rule 14a-8(i)(11), as
substantially duplicative of an earlier-received proposal. Because Merck has not
satisfied its burden of proving its entitlement to rely on that exclusion, its
request for relief should be denied.
The Proposal Does Not Substantially Duplicate the Davis Proposal
Merck contends that the Proposal substantially duplicates an earlier-received
proposal submitted by Evelyn Davis (the "Davis Proposal") that will appear in
Merck's proxy statement and thus is excludable under Rule 14a-8(i)(11). The
Davis Proposal asks that Merck publish its political contributions and lobbying
expenditures in several general circulation newspapers and then "in each
succeeding report to shareholders." Although both proposals deal with the broad
issue of corporate political activity, their scopes and requested actions differ
so much that they should not be considered substantially duplicative.
The first key difference between the Proposal and the Davis Proposal is the
intended audience for the requested disclosures. The main focus of the Davis
Proposal is disclosure to the broader public via newspaper advertisements. Near
the end of the resolved clause, the Davis Proposal also asks for disclosure in
"each succeeding report to shareholders." This vague language, which has the
feel of an afterthought, is difficult to interpret; presumably, the Davis
Proposal does not intend for the disclosure to appear in every 8-K, 10-Q and
other periodic report to shareholders throughout the year. The Davis Proposal
makes no mention of the board of directors.
The Proposal, by contrast, focuses on keeping both shareholders and the board's
audit committee informed about the Company's political activities. The aim of
the Proposal is to provide shareholders with comprehensive information not only
about Merck's contributions and expenditures but also about the quality of
oversight of the process within Merck. Information about the decision making
process, in the Fund's view, allows shareholders to assess the risk created by
the Company's political activities. The Proposal does not seek to inform the
public at large.
The scope of the contributions and expenditures as to which disclosure is
requested also vary significantly. The Davis Proposal limits itself to amounts
contributed "in respect of a political campaign, political party, referendum or
citizens initiative, or attempts to influence legislation ...." The Proposal, by
contrast, is much more comprehensive: It seeks disclosure not only of corporate
contributions to campaigns, parties and initiatives, some of which have been
limited by law, but also of contributions to or expenditures on behalf of
independent political committees operating under section 527 of the Internal
Revenue Code and amounts paid to entities such as trade associations that are
used for political purposes.
This last difference between the Proposal and the Davis Proposal is especially
important. Trade association political activity has attracted a great deal of
media attention, though the full extent of this activity is difficult to measure
because it avoids election law regulation, including disclosure requirements.
(E.g., Jim VendeHei and Tom Hamburger, "Drug Firms Underwrite U.S. Chamber's TV
Ads," The Wall Street Journal, Oct. 6, 2000, at A24.) One campaign finance
expert has dubbed these contributions "the new soft money." (Tom Hamburger,
"Trade Groups Join Bush on Social Security," Los Angeles Times, Apr. 11, 2005.)
According to a report by Public Citizen, 501(c) groupsincluding associations
such as the Chamber of Commerce as well as ostensibly grassroots groups backed
by trade associationsspent at least $87.8 million in the 2000 and 2002 election
cycles (a figure that is almost certainly understated due to the paucity of
disclosure regarding their activities). (See Public Citizen, "The New Stealth
PACs: Tracking 501(c) Non-Profit Groups Active in Elections" (Sept. 2004)
available at http://www.stealthpacs.org/ documents/StealthPACs.pdf)
A series of articles in The Wall Street Journal described the pharmaceutical
industry's indirect spending to influence the outcome of the 2000 federal
elections. Fifty million dollars worth of advertisements were run by Citizens
for Better Medicare, "a group created by the [drug] industry to rally
opposition" to a government-administered prescription drug plan. (See Tom
Hamburger & Laurie McGinley, "Drug Lobby Wins Big With Massive Spending Against
Medicare Plan$80 Million in Ads, Donations Help Defeat Industry Foes," The Wall
Street Journal, Nov. 9, 2000, at B1) Pharmaceutical companies contributed
another $10 million to the Chamber of Commerce to pay for similar advertisements
by the Chamber in the 2000 election cycle. (See id.)
A report by campaign finance watchdog organization Public Citizen estimates that
PhRMA (the Pharmaceutical Research and Manufacturers of America) alone is
reported to have contributed as much as $41 million to four groupsUnited
Seniors Association, 60 Plus Association, Seniors Coalition and America 21that
styled themselves as grassroots membership organizations but whose funding came
largely from a single donor. (Public Citizen Congress Watch, "Big PhRMA's
Stealth PACs: How the Drug Industry Uses 501(c) Non-Profit Groups to Influence
Elections," Sept. 2004, at 2-3 (available at www.stealthPACs.org) (hereinafter,
"Public Citizen Report")). An article in the AARP Bulletin characterized three
of the four groups as "front groups" that work to advance the pharmaceutical
industry's agenda "under the veil of other interests." (Bill Hogan, "Pulling
Strings from Afar," AARP Bulletin, Feb. 2003)
PhRMA has acknowledged making "unrestricted educational grants" to two of the
organizations and a grant to a third, although it has not confirmed that it is
the large donor whose contributions made up over 75% of the groups' combined
revenues in 2002. The groups broadcast advertisements and distributed
communications in 39 U.S. Senate and House campaigns in that election cycle.
(See Public Citizen Report, supra, at 4)
Merck is a member of PhRMA. (See http://www.phrma.org/whoweare/members) Thus,
the extent of contributions to 501(c) non-profit groups that engage in political
activity, either directly or through trade associations, is critical to a full
understanding of Merck's political activity. It is possible that such
contributions dwarf those made by the Company through the more traditional
channels on which it currently makes disclosure. The Davis Proposal's omission
of payments to and on behalf of trade associations thus constitutes a critical
difference from the much more comprehensive approach taken by the Proposal.
Finally, the disclosure requested by the Davis Proposal does not include any
information on the process by which Merck's management decides to make political
contributions. The Proposal gives as much attention to this process as to
disclosure of the contributions and expenditures themselves. The Proposal asks
Merck to disclose the policies and procedures governing political contributions
and expenditures and any internal guidelines used during the decision making
process. It also asks Merck to identify the persons involved in deciding to
engage in political activities.
The Fund believes that ad hoc decisions, especially those made by lower-level
employees who do not know the full range of a company's political activities,
have a higher likelihood of creating unacceptable risks for the company and its
shareholders. The Fund also believes that understanding a company's decision
making process allows shareholders to evaluate the robustness of the oversight
process and engage in a dialogue with the company about potential
value-enhancing changes.
The nature of the differences between the Proposal and the Davis
Proposalnamely, that the Proposal in each respect goes well beyond the Davis
Proposaleliminates the possibility of shareholder confusion, an important
policy behind the (i)(11) exclusion. The Proposal and the Davis Proposal do not
conflict with each other, as would be the case if a proposal urging annual
election of all directors and one pressing for triennial director elections were
submitted for a shareholder vote at the same company. (Contrast Monsanto Company
(Feb. 7, 2000)(allowing exclusion where proposals both dealt with director
election timing but urged different arrangements)) A shareholder voting on both
proposals could easily understand what the effect of approving both of them
would be.
Examination of the measures requested in both proposals shows that
implementation of both would also be quite straightforward. Merck could do so by
making the newspaper disclosure requested in the Davis Proposal and by adopting
the other measures urged in the Proposal, which encompass but go further than
the limited measures requested in the Davis Proposal.
*****
The Fund is pleased to be of assistance to the Staff on this matter. If you have
any questions or need additional information, please do not hesitate to contact
me at 972-233-4458.
Sincerely yours,
/s/
Lu Beth Greene
Fund Administrator
cc: Bruce Ellis
Counsel, Employee Benefits and Executive Compensation
Merck & Co., Inc.
Fax # 908-735-1218
STAFF REPLY LETTER]
January 12, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Merck & Co., Inc. Incoming letter dated December 14, 2006
The proposal requests that Merck prepare a report concerning political
contributions that contains information specified in the proposal.
There appears to be some basis for your view that Merck may exclude the proposal
under rule 14a-8(i)(11), as substantially duplicative of a previously submitted
proposal that will be included in Merck's 2007 proxy materials. Accordingly, we
will not recommend enforcement action to the Commission if Merck omits the
proposal from its proxy materials in reliance on rule 14a-8(i)(11).
Sincerely,
/s/
Rebekah J. Toton
Attorney-Adviser
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