Company Name: News Corp.
Public Availability Date: August 14, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
June 8, 2007
VIA FEDERAL EXPRESS
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, N.E.
Room 1580
Washington, DC 20549
Re: Proxy Statement of News Corporation; Stockholder Proposal Submitted by
Stephen Mayne
Ladies and Gentlemen:
We are writing on behalf of News Corporation, a Delaware corporation (the
"Company"), pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") to notify the Securities and Exchange Commission
(the "Commission") of the Company's intention to exclude from its proxy
materials for its 2007 annual meeting of stockholders a stockholder proposal
(the "Proposal") received from Stephen Mayne (the "Proponent"). The Company
believes that the Proposal may be excluded from the Company's proxy materials
for the procedural and substantive reasons set forth in detail below. We
respectfully request confirmation that the Staff will not recommend to the
Commission that enforcement action be taken if the Company excludes the Proposal
from its 2007 proxy materials.
In accordance with Rule 14a-8(j) under the Exchange Act, we have enclosed six
copies of this letter. A copy of the Proponent's letter dated May 15, 2007
containing the Proposal is attached as Exhibit A. By copy of this letter, the
Company has notified the Proponent of its intention to exclude the Proposal from
the 2007 proxy materials.
The Proposal
The Proposal requests that the following resolution be considered for inclusion
in the Company's proxy materials:
"Resolved: That the News Corporation board of directors submit a proposal to
holders of class A and B shares within the next 12 months which, if approved,
would create a company with just one class of share."
A supporting statement accompanied the Proposal and is included in Exhibit A.
The Proposal May Be Excluded Under Rule 14a-8(b)(1) Because Mr. Mayne Has Failed
To Demonstrate His Eligibility To Submit The Proposal To The Company.
The Proposal may be excluded from the Company's 2007 proxy soliciting material
because, among other reasons, the Proponent has failed to establish that he has
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 Proponent submitted the Proposal, as is required by the
Securities and Exchange Commission's Rule 14a-8(b)(1).
The Company has two classes of common voting stock outstanding: Class A Common
Stock and Class B Common Stock. As described in Article IV, Section 4 of the
Company's Restated Certificate of Incorporation, which is attached hereto as
Exhibit B (the "Charter"), the Company's Class A Common Stock has limited voting
rights, while the Company's Class B Common Stock generally has full voting
rights. The Proponent has presented evidence of his ownership of Class B Common
Stock but has not presented evidence of his ownership of Class A Common Stock.
The Proposal, by its terms, requires a vote of Class A Common Stockholders and
Class B Common Stockholders. Since the Proponent has not demonstrated that he is
a holder of Class A Common Stock, Proponent fails to meet the stock ownership
requirement of Rule 14a-8(b)(1) that is required to properly submit the
Proposal.
The Staff of the SEC has consistently concurred that a company may exclude from
its proxy materials stockholder proposals submitted by proponents who do not
hold the requisite class of stock entitled to vote on the proposal. In The New
York Times Company (available December 18, 2006), the Staff granted no-action
relief to The New York Times Company with respect to a proposal recommending
that the board of directors undertake specific steps to reform the company's
corporate governance, including that the board approve for submission to
shareholders a declassification plan that would provide for equal voting rights
for all of the company's shares. Similar to the Company, The New York Times
Company has two classes of voting stock outstanding: Class A and Class B Common
Stock. The proponent in The New York Times Company owned Class A Common Stock,
which was not entitled to vote on the proposal, rather than Class B Common
Stock, which was entitled to vote on the proposal. Accordingly, the Staff
concurred that the proposal was properly excluded under Rule 14a-8(b), as the
proponent did not own securities entitled to be voted on the proposal.
Similarly, in The Washington Post Company (available December 24, 2004), the
Staff granted no-action relief to The Washington Post Company with respect to a
proposal requesting that the board of directors take steps to select an
independent director who had not previously served as an officer of the company
as chairman of the board of directors of the company. Again, similar to the
Company, The Washington Post Company has two classes of voting stock
outstanding: Class A and Class B Common Stock. The proponent in The Washington
Post Company owned Class B Common Stock, rather than Class A Common Stock.
According to the voting rights described in the company's charter documents,
Class B Common Stock would not have been entitled to vote on the proposal in the
event the proposal was submitted to the vote of the company's stockholders.
Therefore, the Staff concurred that the proposal was properly excluded under
Rule 14a-8(b), for failure to meet the ownership requirement.
Also, in The E. W. Scripps Company (available December 4, 2006), the Staff
granted no-action relief to The E.W. Scripps Company with respect to a proposal
requesting that the company's board of directors submit a survey question
regarding the compensation of executive officers to a shareholder's vote at each
future annual meeting. Similar to the Company, The E. W. Scripps Company has two
classes of voting stock outstanding: Class A Common Shares and Common Voting
Shares. The proponent in The E. W. Scripps Company owned Class A Common Shares
and not Common Voting Shares. As provided in the company's charter documents and
under Ohio law, Class A Common Shares would not have been entitled to vote on
the proposal in the event the proposal was submitted to the vote of the
company's stockholders. Accordingly, since the proponent did not own Common
Voting Shares, the Staff concurred that the proposal was properly excluded under
Rule 14a-8(b).
This rationale underlying the Staff's positions in the foregoing letters is
consistent with the underlying purpose of Rule 14a-8. As stated in Staff Legal
Bulletin No. 14(CF) (July 13, 2001), one of the requirements of Rule 14a-8 is
that a shareholder must own company securities entitled to be voted on the
proposal at the meeting. To require companies to include proposals upon which a
shareholder is not entitled to vote would clearly waste valuable resources and
circumvent the intent of the rule. Where a company has multiple classes of stock
entitled to vote on different matters, it is therefore an important precondition
to the inclusion of the proposal in a company's proxy materials for the
shareholder to own the class of stock that is the subject of the requested
shareholder action. Where a proposal seeks the vote of one class, a shareholder
must own shares of that class. In this case, where a proposal seeks the vote of
two classes, and the vote of both is necessary either under state law or
pursuant to the terms of the proposal itself, ownership of shares of both
classes is necessary. See, The E. W. Scripps Company (avail. Dec. 4, 2006); The
Washington Post Company (avail. Dec. 24, 2004); The New York Times Company
(avail. Dec. 18, 2006).
Rule 14a-8(b)(1) of the Exchange Act requires that, to be eligible to submit a
proposal for a company's annual meeting, a shareholder must (i) 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 such shareholder submits the proposal and (ii) continue to hold
these securities through the date of the meeting. Under Rule 14a-8(b)(2), if a
proponent is not a registered shareholder of a company and has not made a filing
with the SEC detailing his beneficial ownership of shares in the company (as
described in Rule 14a-8(b)(2)(ii)), such proponent has the burden to prove that
he meets the beneficial ownership requirements of Rule 14a-8(b)(1) by submitting
to the Company (i) a written statement from the "record" holder of the
securities verifying that, at the time the proponent submitted the proposal, the
proponent continuously held the requisite amount of such securities for at least
one year and (ii) the proponent's own written statement that he intends to
continue to hold such securities through the date of the meeting. If the
proponent fails to provide such proof of ownership at the time the proponent
submits the proposal, the company must notify the proponent in writing of such
deficiency within 14 calendar days of receiving the proposal. A proponent's
response to such notice of deficiency must he postmarked or transmitted
electronically to the Company no later than 14 days from the date the proponent
receives the notice of deficiency.
The Company received the Proposal on May 15, 2007. In the letter accompanying
the Proposal, the Proponent represented that he was the registered owner of at
least $2,000 worth of the Company's Class B Common Stock. However, the Proponent
did not provide proof of ownership of the Company's Class A Common Stock. The
Company attempted on its own to verify Proponent's ownership of Class A Common
Stock by examining the Company's shareholder records. The Proponent was not
listed on the Company's shareholder records as an owner of Class A Common Stock.
As required by Rule 14a-8(f), the Company sent a request by fax and overnight
delivery to the Proponent on May 24, 2007, which is within 14 days of receiving
the Proposal, requesting that the Proponent provide the necessary proof required
by Rule 14a-8(b)(2) within 14 days of his receipt of the Company's request. A
copy of the deficiency notice provided to the Proponent is attached hereto as
Exhibit C. The Proponent did not respond to the Company's request within the 14
day period indicated in the Company's deficiency notice and required by Rule
14a-8(f).
Since the Proponent has not demonstrated that he is a holder of Class A Common
Stock that is entitled to vote on the subject matter of his Proposal, the
Proponent has failed to meet the proof of notice of ownership requirements to
establish eligibility to submit a shareholder proposal under Rule 14a-8(b).
Conclusion
For the foregoing reasons, we respectfully request that the Staff concur in our
view that the Proposal may be omitted from the 2007 proxy materials under Rule
14a-8(b)(1) because Mr. Mayne has not demonstrated that he is a holder of Class
A Common Stock eligible to submit the Proposal to the Company. The Company
reserves the right, should it be necessary, to present additional reasons for
omitting the Proposal. If the Staff does not concur with the Company's position,
we would appreciate an opportunity to confer with the Staff concerning this
matter prior to the issuance of a Rule 14a-8 response. The Proponent is
requested to copy the undersigned on any response it may choose to make to the
Staff.
If you have any questions or need additional information, please feel free to
contact me at (212) 918-8270 or Lillian Tsu at (212) 918-3599. When a written
response to this letter is available, I would appreciate your sending it to me
by fax at (212) 918-3100. A copy of the Staff's response also may be faxed to
the Proponent at 011-613-9846-7887.
Very Truly Yours,
/s/
Amy Bewerman Freed
cc: Stephen Mayne
[INQUIRY LETTER]
Ms Laura O'Leary
Company Secretary
News Corporation
1211 Avenue of the Americas
New York 10036
By fax (212) 852 7217
May 15, 2007
Dear Ms O'Leary
Please accept this letter as my formal proposal of the following shareholder
resolution to be considered at the 2007 annual stockholders meeting in New York:
Resolved:
That the News Corporation board of directors submit a proposal to holders of
class A and B shares within the next 12 months which, if approved, would create
a company with just one class of share.
SUPPORTING STATEMENT
When News Corporation first announced its reincorporation proposal on 6 April,
2004, it justified the move, in part, on the following grounds:
"The reincorporation is expected to benefit all shareholders by increasing the
scope and depth of the shareholder base, improving trading liquidity, enhancing
access to the capital markets and making the Company's shares eligible for
inclusion in a variety of US-based indices."
Unfortunately, the move initially caused considerable share price weakness as
News Corporation was ejected from the Australian indices, triggering large sales
by Australian funds.
Whilst both classes of share were included in the Australian indices,
unfortunately Standard & Poors only allows one class of share from each company
to be included in the S&P500 index on the New York Stock Exchange.
Given this has to be the most populous share on issue, News Corp's B Class
voting shares are not included in the S&P500 index. Therefore, many index funds
are compelled to buy non-voting A Class shares and holders of the B Class voting
shares suffer a lower than necessary share price.
Having a single class of share would add almost 1 billion News Corp shares into
the S&P500 index, lifting the total to more than 3 billion shares.
Creating a single class of share, possibly by simply giving A class shareholder
full voting rights, would also serve the purpose of diluting Murdoch family
control from approximately 39% of the voting stock to less than 15% of the total
stock. This would likely trigger a re-rating of the stock as investors build in
a potential takeover premium.
The Grant Samuel report accompanying the Liberty Media Exchange proposal noted
the "adverse" consequences of not having Liberty as a counter balancing force to
the Murdoch interests on the News Corporation share register. Creating a single
class of share would dilute Murdoch family control and allow the independent
shareholders to appoint a majority of directors and determine key future issues
such as a succession management.
As News Corporation discovered when it first approached Dow Jones & Company, a
two tier voting system can appear highly undemocratic and discourage attractive
takeover bids. News Corp's suite of strategic assets would be highly attractive
to private equity bidders, yet the two-tier voting structure discourages their
interest.
News Corp is a company which passionately promoted the idea of spreading
democracy to places like Iraq, so it seems inappropriate that our own system of
democracy is severely gerrymandered with almost 70% of the shares on issue not
having voting rights.
The exact form of any restructure proposal should be developed by the board and
delivered to stockholders in time for a vote at the 2008 annual meeting, if not
earlier.
ENDS
Please note that I have been the registered owner of more than $US2000 worth of
shares for longer than the past 12 months and intend to remain so up until the
2007 annual meeting.
I currently own 95 B class shares in my own name at the registered address of PO
Box 925, Templestowe, 3106. I enclose a print out of the relevant pages from my
online stockbroking account, plus a copy of the original contract note from
October 2005 when I bought 200 shares.
Could you please confirm your receipt and acceptance of this shareholder
resolution by email to smayne@crikey.com.au or by phone to (61412) 106 241 or
fax to (613) 9846 7887. If there are any outstanding qualification issues
pursuant to your constitution could you please inform me of those before the
deadline for shareholder resolutions closes.
Yours Sincerely
Stephen Mayne
News Corporation Shareholder
[STAFF REPLY LETTER]
August 14, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: News Corporation
Incoming letter dated June 8, 2007
The proposal relates to the creation of "a company with just one class of
share."
We are unable to concur in your view that News Corporation may exclude the
proposal under rules 14a-8(b) and 14a-8(f). Accordingly, we do not believe that
News Corporation may omit the proposal from its proxy materials in reliance on
rules 14a-8(b) and 14a-8(f).
Sincerely,
/s/
Ted Yu
Special Counsel
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