Company Name: Yahoo! Inc.
Public Availability Date: April 13, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
February 7, 2007
VIA COURIER
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, NE
Washington, D.C. 20549
Re: Intention to Omit Stockholder Proposal Submitted by the Office of the
Comptroller of New York City
Ladies and Gentlemen:
Yahoo! Inc., a Delaware corporation ("Yahoo!" or the "Company"), hereby requests
confirmation that the staff (the "Staff") of the Division of Corporation Finance
of the Securities and Exchange Commission (the "Commission") will not recommend
any enforcement action if, in reliance on certain provisions of Rule 14a-8 under
the Securities Exchange Act of 1934, as amended, the Company omits the enclosed
stockholder proposal and recitals (the "Proposal") submitted by the Office of
the Comptroller of New York City (the "Proponent"), on behalf of the New York
City Employees' Retirement System, the New York City Teachers' Retirement
System, the New York City Police Pension Fund, the New York City Fire Department
Pension Fund and the New York City Board of Education Retirement System, from
the Company's proxy materials for its 2007 Annual Meeting of Stockholders.
Pursuant to Rule 14a-8(j)(2), we have enclosed six (6) copies of this letter and
the related exhibits. A copy of this letter, together with the related exhibits,
is also being delivered to the Proponent informing it of the Company's intention
to omit the Proposal from its proxy materials.
The Proposal
On December 5, 2006, Yahoo! received a letter from the Proponent containing the
following proposal for inclusion in the Company's 2007 proxy statement:
"Therefore, be it resolved, that shareholders request that management institute
policies to help protect freedom of access to the Internet which would include
the following minimum standards:
1) Data that can identify individual users should not be hosted in Internet
restricting countries, where political speech can be treated as a crime by the
legal system.
2) The company will not engage in pro-active censorship.
3) The company will use all legal means to resist demands for censorship. The
company will only comply with such demands if required to do so through legally
binding procedures.
4) Users will be clearly informed when the company has acceded to legally
binding government requests to filter or otherwise censor content that the user
is trying to access.
5) Users should be informed about the company's data retention practices, and
the ways in which their data is shared with third parties.
6) The company will document all cases where legally-binding censorship requests
have been complied with, and that information will be publicly available."
The Proposal also included a series of introductory recitals. A complete copy of
the Proposal, including such recitals, is attached hereto as Exhibit A.
As discussed more fully below, the Company believes that it may omit the
Proposal from its 2007 proxy materials for the following reasons:
1. The Proposal deals with a matter relating to the Company's ordinary business
operations, and therefore may be omitted pursuant to Rule 14a-8(i)(7);
2. The Company lacks the power or authority to implement the Proposal, and to
such extent, may omit the Proposal pursuant to Rule 14a-8(i)(6);
3. Portions of the Proposal have already been substantially implemented by the
Company, and therefore may be omitted pursuant to Rule 14a-8(i)(10); and
4. The Proposal is vague and indefinite, and the Proposal contains materially
false and misleading statements, in violation of Rule 14a-9, and therefore the
Proposal and such false and misleading statements may be omitted pursuant to
Rule 14a-8(i)(3).
Analysis
1. The Proposal may be excluded pursuant to Rule 14a-8(i)(7) because it deals
with matters relating to the Company's ordinary business operations.
A company may exclude a stockholder proposal from the company's proxy materials
under Rule 14a-8(i)(7) if the proposal deals with a matter relating to the
company's ordinary business operations. In Release No. 34-40018 (May 21, 1998)
(which we will refer to in this letter as the "1998 Release"), the Staff
indicated that the underlying policy of the "ordinary business" exception is "to
confine the resolution of ordinary business problems to management and the board
of directors, since it is impracticable for shareholders to decide how to solve
such problems at an annual shareholders meeting." The Staff further stated in
the 1998 Release that this general policy rests on two central considerations.
The first is that "[c]ertain tasks are so fundamental to management's ability to
run a company on a day-to-day basis that they could not, as a practical matter,
be subject to direct shareholder oversight." The second consideration relates to
"the degree to which the proposal seeks to `micro-manage' the company by probing
too deeply into matters of a complex nature upon which shareholders, as a group,
would not be in a position to make an informed judgment."
The Company believes that the Proposal is precisely the type of matter that the
"ordinary business" exception in Rule 14a-8(i)(7) is intended to address. The
Proposal seeks to institute policies and standards that, if implemented, would
dictate the basis and manner in which the Company provides or makes available
services to its users. For example, the Proposal would impact such day-to-day
operating decisions as the content of and basis upon which information is made
available to users of the Company's services, the content of communications from
the Company to its users, and the selection of geographic locales to host user
data. Furthermore, in seeking a policy against pro-active censorship (presumably
even with respect to illegal or regulated content) and requiring the use of "all
legal means" to resist other demands for censorship, the Proposal seeks to
dictate the Company's response to applicable governmental regulations. These
matters are not only fundamental to management's ability to operate the Company
on a daily basis, but are also complex matters that, in order to make an
informed judgment, require a detailed understanding of, among other things, the
Company's business, the services offered by the Company and the manner in which
such services are provided, available technology and the various regulatory
environments in which the Company operates. It simply would be impractical, and
impede the conduct of the Company's business, to have stockholders, as a group,
micro-managing such complex aspects of the Company's business, or seeking
solutions to these matters in the context of an annual stockholders meeting.
With the understanding that the specific instructions in the Proposal are
intended to focus the Company' attention on freedom of expression and privacy,
the Company's position in this regard is further supported by the fact that the
Company's management already addresses the matters referenced in the Proposal.
Over the last year, and in any case prior to receiving the Proposal, the Company
has established a multi-disciplinary and cross-functional team of Yahoo!
employees worldwide to coordinate and support the Company's efforts to address
privacy and free expression issues on a global basis. The team consists of
Yahoo! employees from a variety of disciplines and departments, including legal,
public and governmental relations, privacy, public policy, community affairs,
global law enforcement and compliance, security, emerging markets and
international operations. Members of the team consult regularly with Company
officers and other personnel and respond to internal and external requests for
information and feedback on foreign laws and Company practices and policies.
Members of the team also frequently engage and consult with outside experts,
such as the U.S. Department of State and various academic institutions (such as
The Berkman Center on Internet & Society at Harvard Law School), and collaborate
with leaders and representatives of other technology and communications
companies to seek solutions to the free expression and privacy challenges that
these companies face when conducting business internationally. In short, this
multi-disciplinary team of executives and managers is responsible for guiding
the Company, when faced with laws, regulations and policies that implicate human
rights issues, in making decisions as to how best to conduct business in
compliance with current regulations, and how best to act or respond to effect
change in the regulatory framework to promote the Company's business
objectives.1
In several analogous circumstances, the Staff has permitted companies to exclude
on the basis of Rule 14a-8(i)(7) proposals aimed at comparable management
functions. See, e.g., Bank of America Corporation (March 7, 2005) (company
permitted to exclude a proposal requesting a report on the company's "policies
and procedures for ensuring that all personal and private information pertaining
to all Bank of America customers will remain confidential in all business
operations `outsourced' to offshore locations"); Carnival Corporation and
Carnival plc (January 6, 2006) (company allowed to exclude proposal requiring
the company to terminate contracts to display certain broadcast stations and
certain media publications, because it related to the "nature, content and
presentation of programming"); and Bank of America Corporation (February 21,
2006) (company permitted to exclude a proposal that pertained to "customer
relations"). See also Sprint Corporation (February 6, 2002) (company permitted
to exclude a proposal requesting that the board prepare a report on the
feasibility of using recycled paper for billing statements, noting that the
proposal related the company's ordinary business of "decisions concerning the
paper stock and method of billing"). The Staff has also classified as "ordinary
business" the manner in which a company complies with or responds to
governmental regulation. See, e.g., Monsanto Company (November 3, 2005) (company
permitted to exclude a proposal establishing an ethics oversight committee
because it related to the "general conduct of a legal compliance program");
Microsoft Corporation (September 29, 2006) (company permitted to exclude a
proposal requesting a report on the company's response to regulation of the
Internet because it related to the ordinary business operation of "evaluating
the impact of expanded government regulation of the Internet"). The Staff has
also allowed companies to exclude proposals under the "ordinary business"
exception to the extent that they attempt to involve the company in a
legislative process relating to aspects of its business operations. See, e.g.,
Verizon Communications, Inc. (January 31, 2006); International Business Machines
Corporation (March 2, 2000); Pepsico, Inc. (March 7, 1991); Dole Food Company
(February 10, 1992); and GTE Corporation (February 10, 1992).
For all of the foregoing reasons, the Company believes that it may exclude the
Proposal from the Company's proxy materials in reliance on Rule 14a-8(i)(7).
2. The Company lacks the power or authority to implement the Proposal, and to
such extent, may omit the Proposal pursuant to Rule 14a-8(i)(6).
Rule 14a-8(i)(6) allows a company to exclude from its proxy materials a proposal
if the company lacks the power or authority to implement the proposal. Yahoo!
and its affiliates currently have business operations and joint ventures in a
number of foreign countries. Yahoo! also holds investments in companies located
abroad, including in China, where Yahoo! owns a minority investment in
Alibaba.com Corporation ("Alibaba"). The text of the Proposal does not
distinguish between the Company and its affiliates, joint ventures and minority
investments, and can be read as seeking to extend application of the specified
minimum standards to all such entities. However, in the case of Alibaba, Yahoo!
owns only a minority investment, and otherwise does not have day-to-day
management control, and thus lacks the power or authority to implement or impose
the requested standards on Alibaba or any of its business units. To the extent
Alibaba has already implemented portions of the Proposal, it has done so
independently.
The Staff has allowed companies to exclude proposals pursuant to Rule
14a-8(i)(6) under analogous circumstances. For example, the Staff has determined
that a board of directors would lack the power to ensure that other directors
would retain their independence at all times. Allied Waste Industries, Inc.
(March 21, 2005); see also Staff Legal Bulletin No. 14C (June 28, 2005)
(discussing Allied Waste Industries, Inc.). The Staff has also allowed exclusion
of a proposal requesting adoption of a bylaw which would have applied "to
successor companies" because it did "not appear to be within the board's power
to ensure that all successor companies adopt a bylaw like that requested by the
proposal." AT&T Corp. (March 10, 2002).
To the extent that Yahoo! lacks the power to implement the Proposal, the Company
believes it may omit the Proposal pursuant to Rule 14a-8(i)(6).
3. Portions of the Proposal already have been substantially implemented, and
therefore may be excluded pursuant to Rule 14a-8(i)(10).
Rule 14a-8(i)(10) allows a company to exclude from its proxy materials a
proposal that the Company has already substantially implemented. Yahoo! believes
that certain elements of the Proposal have been substantially implemented.
Specifically:
Yahoo! already notifies each Yahoo! e-mail user that individual data about the
user is collected, and that under certain circumstances user data may be shared
with third parties (as the Proposal suggests in minimum standard no. 5). Yahoo!
has an extensive privacy policy that informs users of what data the Company
collects, and clearly delineates the ways in which data may be shared with third
parties A copy of Yahoo!'s privacy policy is enclosed with this letter as
Exhibit F. Links to Yahoo!'s privacy policy can be located not only on users'
e-mail pages, but from virtually anywhere on the Yahoo! website. Additionally,
acknowledgment of the privacy policy is a condition to user registration. Thus,
Yahoo! believes it has substantially implemented this policy and may exclude it
pursuant to Rule 14a-8(i)(10).
Yahoo! China, which is owned and operated by Alibaba, informs users when it
filters or censors content that the user is trying to access (as the Proposal
suggests in standard no. 4). Specifically, the following notice appears on the
Yahoo! China search page to inform users that results may have been modified
pursuant to legal requirements (quoting in pertinent part, and translated into
English):
"All the search results of Yahoo originate from relevant websites, part of which
may not be shown according to the applicable laws and regulations. Please click
here to view the search results not shown according to the Regulations on the
Protection of the Right of Communication through Information Network."
Thus, as a consequence of Alibaba's decision to have Yahoo! China include this
notice, Yahoo! believes minimum standard no. 4 has been substantially
implemented and may be excluded pursuant to Rule 14a-8(i)(10).
4. The Proposal is vague and indefinite, and the Proposal contains materially
false and misleading statements, in violation of Rule 14a-9. Accordingly, the
Company may exclude the Proposal and such false and misleading statements
pursuant to Rule 14a-8(i)(3).
The Company believes that it may exclude the Proposal from its proxy materials
under Rule 14a-8(i)(3), which allows a company to exclude from its proxy
materials stockholder proposals that violate the Commission's proxy rules,
including the prohibition contained in Rule 14a-9 against the use of materially
false and misleading statements.
A. The Proposal is Vague and Indefinite.
The Staff has consistently determined that vague and indefinite proposals are
materially misleading in violation of Rule 14a-9, and therefore may be excluded
under Rule 14a-8(i)(3). Under relevant Staff interpretations, a proposal is
vague and indefinite if "neither the stockholders voting on the proposal, nor
the company in implementing the proposal (if adopted), would be able to
determine with any reasonable certainty exactly what actions or measures the
proposal requires." See Staff Legal Bulletin No. 14B (September 15, 2004);
Philadelphia Electric Company (July 30, 1992). Furthermore, the Staff has noted
that a proposal may be materially misleading as vague and indefinite where "any
action ultimately taken by the Company upon implementation [of the proposal]
could be significantly different from the actions envisioned by shareholders
voting on the proposal." Fuqua Industries, Inc. (March 12, 1991).
The Company believes it may exclude the Proposal as vague and indefinite for the
following reasons:
The Proposal includes as minimum standard no. 1 the following: "[d]ata that
can identify individual users should not be hosted in Internet restricting
countries, where political speech can be treated as a crime by the legal
system." The reference to "Internet restricting countries" is vague and
indefinite, as it does not specify any standard for determining what countries
would be covered by this reference. Taken to its extreme, the reference could
include many countries, such as the United States and others, that regulate
content, privacy, commerce and other aspects of the Internet. Further, the
standard does not define what constitutes "political speech," nor does it
specify what types of "crimes" are relevant for purposes of applying the
standard. Thus, the Company believes that these terms are inherently vague and
indefiniteneither the Company nor stockholders would be able to determine with
any certainty which "Internet restricting countries" or what "political speech"
is required to be addressed under the Proposal.
Minimum standard no. 2 would forbid the Company from engaging in "pro-active
censorship." The Company believes this is vague and indefinite for two reasons.
First, the definition of "pro-active censorship" is unclear. If foreign law
required a company to self-censor certain materials, that censorship could be
considered proactive in the sense that the company is doing it without
government oversight, or it could be considered reactive in response to
applicable law. Thus, it is unclear whether the Company's compliance with
certain laws would violate the standard set forth in the Proposal.
Furthermore, the recitals could mislead investors as to the effect of this
minimum standard. The recitals focus on political censorship and authoritarian
governments, yet this minimum standard broadly declares that Yahoo! shall "not
engage in pro-active censorship." Such a requirement would forbid not only
proactive censorship of items that are political in nature, but also those that
have nothing to do with the stated goals of this Proposal. For instance, Yahoo!
proactively removes all materials that it finds constitute child pornography.
Such responsible action would be expressly prohibited by the language of minimum
standard no. 2. However, stockholders voting on the Proposal are not likely to
expect these unintended consequences, since the recitals focus exclusively on
political speech in countries ruled by authoritarian governments.
Minimum standard no. 3 would require the Company to use "all legal means" to
resist demands for censorship, and would allow the Company to comply with these
demands only if required to do so by "legally binding procedures." The Company
believes that the phrase "all legal means" is ambiguous, and subject to multiple
interpretations. "All legal means" could be limited to filing or defending
lawsuits or other forms of legal process. Alternatively, the phrase could be
interpreted to include protest and government lobbying because such activities
are permitted by law.
The phrase "legally binding procedures" is also vague and indefinite. Does the
mere existence of an applicable law count as a legally binding "procedure," or
is the Company required to violate the law and wait until the local government
institutes a legal action to force the Company to comply?
Such diverse interpretations of these phrases means there is no reasonable
certainty as to what the Proposal requires, and the Company and voting
stockholders could easily hold different views as to what the Proposal means.
Minimum standard no. 4 would require the Company to "clearly" inform users
when it has acceded to "legally binding government requests" to censor content.
The word "clearly," in the context of this standard is subject to multiple
interpretations. To clearly inform the user may require placing such information
in blinking bold type font on the screen, or it may require only a small
disclaimer at the bottom of the screen. The Company may decide to inform the
user of exactly the search terms that were filtered or censored, or it may
simply inform the user that his search has been censored, without further
explanation.
The phrase "legally binding government requests" is also vague and indefinite.
First note that this language differs from that in minimum standard no. 3, which
speaks of legally binding "procedures." Thus, it is possible that the Company
may have to censor material under minimum standard no. 3 under a legally binding
procedure, but may not have to inform the user if that "procedure" does not
amount to a "request" under the meaning of minimum standard no. 4. Second, it is
unclear whether the existence of an applicable law is a sufficient request
triggering this standard, or if the Company must only comply with this standard
in the event the government institutes legal proceedings or another form of
request.
Minimum standard no. 6 would require the Company to document "all cases" where
legally binding censorship requests have been complied with, and "that
information" will be "publicly available." The term "all cases" could be
interpreted to mean either all countries where the Company has agreed to censor
materials, or every individual search attempt that results in censored material.
Further, the term "that information" does not provide any indication at all as
to what would be required. It could mean the fact that the Company has agreed to
censor materials in a certain country. If dealing with individual searches, it
could mean solely the fact that a censored search was conducted, or it could
require more intricate details about the censored search, such as censored
terms. There is a virtually endless array of information that could be included
under the requirement of "that information." Finally, the term "publicly
available" is vague and indefinite because it is impossible to tell if it
requires the Company to release the required information in the form of press
releases, to make it available on the Company website, to include it in the
Company's filings to the Commission, or to make it publicly available in some
other way.
The Company believes that the foregoing statements, read individually and
together as a whole, are vague and indefinite in violation of Rule 14a-9, and
thus warrant exclusion of the Proposal in its entirety. It would be wholly
unclear, to both the stockholders voting on the Proposal and the Company in
implementing the Proposal, what actions would be required to be taken under the
Proposal if adopted.
B. The Proposal Contains Statements that are Materially False or Misleading.
The Company also believes that the Proposal includes materially false and
misleading statements in violation of Rule 14a-9, as follows:
The Proposal's first recital states: "Article 19 of the Universal Declaration
on Human Rights guarantees freedom `to receive and impart information and ideas
through any media regardless of frontiers.'" (Emphasis added.) The fifth recital
states: "technology companies in the United States such as Yahoo ... have an
obligation to comply with the principles of the Universal Declaration."
(Emphasis added.) These statements are materially false and misleading, in that
they misstate the legal effect of the Universal Declaration, and falsely suggest
that Yahoo! has failed to meet legal obligations to which it is subject.
The use of the word "guarantees" and the phrase "obligation to comply" implies
that the principles embodied in the Universal Declaration trump the laws adopted
by governments. The Universal Declaration is a statement of objectivesit is not
legally binding on any government or private parties.2 In other words, a
government or company may choose whether to adopt its principles and how it may
elect to implement them. By contrast, the laws in any country, even those
countries run by authoritarian governments, are legally binding on the
activities of companies doing business in those countries, and electing to
disregard such laws may have significant legal consequences on those companies
or their employees.
The Proponent's recitals omit these material facts and accordingly create the
false impression that Yahoo! has failed to meet legal obligations to which it is
subject.3 Accordingly, the use of the words "guarantees" and "obligation" in
connection with the Universal Declaration are materially false and misleading.
Conclusion
For each of the reasons discussed above, the Company believes that it may
exclude the Proposal from its proxy materials for the 2007 Annual Meeting of
Stockholders. If for any reason the Commission does not agree with the Company's
position, or it has questions or requires additional information in support of
the Company's position, we would appreciate an opportunity to confer with the
Commission's Staff prior to the issuance of a formal response. Please call me at
(408) 349-7131, or in my absence, Thomas J. Leary, Esq., of O'Melveny & Myers
LLP at (949) 823-7118.
Please acknowledge receipt of this letter and the enclosures by date stamping an
enclosed copy of this letter and returning the date-stamped copy to our
messenger.
Very truly yours,
/s/
Christina Lai
Senior Legal Director
Enclosures
cc: Mr. Patrick Doherty, New York City Office of the Comptroller, Bureau of
Asset Management
Michael J. Callahan, Senior Vice President and General Counsel, Yahoo! Inc.
Thomas J. Leary, Esq., O'Melveny & Myers LLP
-----FOOTNOTES-----
1 The Company's proactive engagement on these issues, and its efforts to solicit
input from others and inform the public of its progress, are further confirmed
in a number of recent announcements and public statements by or involving the
Company. See, e.g., Company press release issued on February 13, 2006 entitled
"Yahoo! Our Beliefs as a Global Internet Company." See also press release issued
on January 18, 2007 by Business for Social Responsibility (announcing an
initiative by a group of companies (including Yahoo!), academics, investors and
technology leaders and human rights organizations to seek solutions to the free
expression and privacy challenges faced by technology and communications
companies doing business internationally); On Being Global, Yahoo! Corporate
Blog, January 18, 2007 (http://yodel.yahoo.com/2007/01/18/on-being-global/); and
The GIFT of giving, Yahoo! Corporate Blog, February 2, 2007
(http://yodel.yahoo.com/2007/02/02/the-gift-of-giving/). For the Staff's
convenience, we are enclosing with this letter a copy of each of the foregoing
materials (attached as Exhibit B, Exhibit C, Exhibit D and Exhibit E,
respectively).
2 Universal Declaration of Human Rights, G.A. res. 217A (III), U.N. Doc A/810 at
71 (1948) (proclaiming that the Universal Declaration is a "common standard of
achievement," stating that individuals "shall strive by teaching and education
to promote respect for these rights" and suggesting that "progressive measures
[be used] to secure ... universal recognition and observance" of those rights).
A copy is included as Exhibit G to this letter for the Staff's convenience.
3 In fact, although Yahoo! is not legally obligated to do so, in working with a
formal multi-stakeholder group to create a set of global principles and
operating procedures on freedom of expression and privacy to guide company
behavior, the Company makes direct reference to the Universal Declaration on
Human Rights.
[INQUIRY LETTER]
December 5, 2006
Mr. Michael J. Callahan
Senior Vice President,
General Counsel and Secretary Yahoo, Inc.
701 First Avenue
Sunnyvale, CA 94089
Dear Mr. Callahan:
The Office of the Comptroller of New York City is the custodian and trustee of
the New York City Employees' Retirement System, the New York City Teachers'
Retirement System, the New York City Police Pension Fund, and the New York City
Fire Department Pension Fund, and custodian of the New York City Board of
Education Retirement System (the "funds"). The funds' boards of trustees have
authorized me to inform you of our intention to offer the enclosed proposal for
consideration of stockholders at the next annual meeting.
I submit the attached proposal to you in accordance with rule 14a-8 of the
Securities Exchange Act of 1934 and ask that it be included in your proxy
statement.
Letters from The Bank of New York certifying the funds' ownership, continually
for over a year, of shares of Yahoo, Inc. common stock are enclosed. The funds
intend to continue to hold at least $2,000 worth of these securities through the
date of the annual meeting.
We would be happy to discuss this initiative with you. Should the board decide
to endorse its provisions as company policy, our funds will ask that the
proposal be withdrawn from consideration at the annual meeting. Please feel free
to contact me at (212) 669-2651 if you have any further questions on this
matter.
Very truly yours,
/s/
Patrick Doherty
Enclosures
Yaboo 2007
[APPENDIX]
INTERNET CENSORSHIP
Whereas, freedom of speech and freedom of the press are fundamental human
rights, and free use of the Internet is protected in Article 19 of the Universal
Declaration of Human Rights, which guarantees freedom to "receive and impart
information and ideas through any media regardless of frontiers", and
Whereas, the rapid provision of full and uncensored information through the
Internet has become a major industry in the United States, and one of its major
exports, and
Whereas, political censorship of the Internet degrades the quality of that
service and ultimately threatens the integrity and viability of the industry
itself, both in the United States and abroad, and
Whereas, some authoritarian foreign governments such as the Governments of
Belarus, Burma, China, Cuba, Egypt, Iran, North Korea, Saudi Arabia, Syria,
Tunisia, Turkmenistan, Uzbekistan, and Vietnam block, restrict, and monitor the
information their citizens attempt to obtain, and
Whereas, technology companies in the United States such as Yahoo, that operate
in countries controlled by authoritarian governments have an obligation to
comply with the principles of the United Nations Declaration of Human Rights,
and
Whereas, technology companies in the United States have failed to develop
adequate standards by which they can conduct business with authoritarian
governments while protecting human rights to freedom of speech and freedom of
expression,
Therefore, be it resolved, that shareholders request that management institute
policies to help protect freedom of access to the Internet which would include
the following minimum standards:
1) Data that can identify individual users should not be hosted in Internet
restricting countries, where political speech can be treated as a crime by the
legal system.
2) The company will not engage in pro-active censorship.
3) The company will use all legal means to resist demands for censorship. The
company will only comply with such demands if required to do so through legally
binding procedures.
4) Users will be clearly informed when the company has acceded to legally
binding government requests to filter or otherwise censor content that the user
is trying to access.
5) Users should be informed about the company's data retention practices, and
the ways in which their data is shared with third parties.
6) The company will document all cases where legally-binding censorship requests
have been complied with, and that information will be publicly available.
[INQUIRY LETTER]
March 13, 2007
BY EMAIL AND EXPRESS MAIL
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Yahoo! Inc.;
Shareholder Proposal submitted by the New York City Pension Funds
To Whom It May Concern:
I write on behalf of the New York City Pension Funds (the "Funds") in response
to the February 7, 2007 letter submitted to the Securities and Exchange
Commission (the "Commission") by Christina Lai, Esq., Senior Legal Director at
Yahoo! Inc. ("Yahoo" or the "Company"), which seeks assurance that the Staff
(the "Staff") of the Division of Corporation Finance (the "Division") of the
Commission will not recommend any enforcement action if the Company excludes
from its proxy statement for the 2007 annual meeting the Funds' shareholder
proposal (the "Proposal"). I have reviewed the Proposal, as well as the
Company's February 7, 2007 letter, and Rule 14a-8. Based upon that review, it is
my opinion that the Proposal may not be omitted from the Company's 2007 Proxy
Materials. The Funds' Proposal, in light of efforts of authoritarian governments
to restrict Internet freedom, requests that the Company adopt policies to
protect freedom of access to the Internet. As detailed below, the Proposal
relates to significant social policy issues that transcend "ordinary business";
the Company does not lack the power to adopt and implement a policy to protect
Internet freedom; the Proposal has not been "substantially implemented" in any
respect by the Company's existing privacy page; and the Proposal is neither
vague nor misleading, but rather is clear and flexible. Accordingly, the Funds
respectfully request that the Commission deny the relief that the Company seeks.
I. The Proposal
The Proposal consists of a series of whereas clauses followed by a resolution.
The whereas clauses set out concerns with respect to Internet access, censorship
and monitoring overseas, including that "some authoritarian foreign governments
such as the Governments of Belarus, Burma, China, Cuba, Egypt, Iran, North
Korea, Saudi Arabia, Syria, Tunisia, Turkmenistan, Uzbekistan, and Vietnam
block, restrict, and monitor the information their citizens attempt to obtain."
The Resolved clause then states:
Therefore, be it resolved, that shareholders request that management institute
policies to help protect freedom of access to the Internet which would include
the following minimum standards:
1) Data that can identify individual users should not be hosted in Internet
restricting countries, where political speech can be treated as a crime by the
legal system.
2) The company will not engage in pro-active censorship.
3) The company will use all legal means to resist government demands for
censorship. The company will only comply with such demands if required to do so
through legally binding procedures.
4) Users will be clearly informed when the company has acceded to legally
binding government requests to filter or otherwise censor content that the user
is trying to access.
5) Users should be informed about the company's data retention practices, and
the ways in which their data is shared with third parties.
6) The company will document all cases where legally-binding censorship requests
have been complied with, and that information will be publicly available.
II. DISCUSSION: THE PROPOSAL CANNOT BE OMITTED UNDER RULE 14a-8
The Company seeks to omit the Proposal under Rules: 14a-8(i)(7) (relates to
ordinary business of the company); 14a-8(i)(6) (company lacks power or authority
to implement the proposal); 14a-8(i) (10) (proposal substantially implemented);
and 14a-8(i)(3) (proposal is vague and indefinite, and contains false and
misleading statements). Pursuant to Rule 14a-8(g), the Company bears the burden
of proving that these exclusions apply. For the reasons set forth below, the
Funds submit that the Company has failed to meet its burden of proving its
entitlement to "no-action" relief on any of those grounds.
A. The Proposal Raises Significant Social Policy Concerns, and Does Not Relate
to "Ordinary Business" of the Company Under Rule 14a-8(i)(7).
Rule 14a-8(i)(7) cannot be used to exclude the Proposal that Yahoo adopt
policies to protect the Internet freedoms of its users, as against foreign
government repression. The Division of Corporate Finance has stated that
"ordinary business" cannot be used as a rationale to exclude under Rule
14a-8(i)(7) proposals that relate to matters of substantial public interest. The
July 12, 2002 Staff Legal Bulletin 14A, which specified that Staff would no
longer issue no-action letters for the exclusion of shareholder proposals
relating to executive compensation, advised:
The fact that a proposal relates to ordinary business matters does not
conclusively establish that a company may exclude the proposal from its proxy
materials. As the Commission stated in Exchange Act Release No. 40018, proposals
that relate to ordinary business matters but that focus on "sufficiently
significant social policy issues ... would not be considered to be excludable
because the proposals would transcend the day-to-day business matters." See
Amendments to Rules on Shareholder Proposals, Exchange Act Release No. 40018
(May 21, 1998).
(Footnotes omitted).
The Bulletin then reviewed the SEC's historical position of not permitting
exclusion on ordinary business grounds of proposals relating to significant
policy issues:
The Commission has previously taken the position that proposals relating to
ordinary business matters "but focusing on sufficiently significant social
policy issues ... generally would not be considered to be excludable, because
the proposals would transcend the day-to-day business matters and raise policy
issues so significant that it would be appropriate for a shareholder vote." The
Division has noted many times that the presence of widespread public debate
regarding an issue is among the factors to be considered in determining whether
proposals concerning that issue "transcend the day-to-day business matters."
Id.
In accord with that position of the Division, the Staff has declined in recent
years to permit companies to use Rule 14a-8(i)(7) to exclude proposals relating
to serious policy concerns, such as human rights and freedoms or national
security concerns, raised by a company's foreign business operations. The Staff
has not accepted arguments that such proposals improperly "micro-managed"
matters of "day-to-day" company business, such as where to do business abroad,
how to deal with foreign governments, or how to treat foreign employees or
residents. Indeed, in a letter almost directly on point, the Staff rejected a
company's argument under Rule 14a-8(i)(7) that a proposal seeking a report about
the hardware or software that that the company provided to China or other
nations to monitor, intercept or block Internet traffic could be excluded
because it dealt with the "company's ordinary business operations." Cisco
Systems, Inc. (Sep. 19, 2002).
As the Yahoo Proposal deals with the same core policy issue as the proposal in
Cisco, except in the context of providing Internet services rather than hardware
or software, we submit that the same result should obtain here. See also General
Electric Co. (Jan. 28, 2005) (seeking report on reputational risks of investing
in Iran); BJ Services Co. (Dec. 10, 2003) (seeking report on financial
consequences of investing in, and divesting from, Burma); Freeport-McMoran
Copper & Gold, Inc. (Feb. 12, 2004) (calling for end to payments to Indonesian
military, after killings of company employees); and Xcel Energy, Inc. (March 24,
2003) (seeking adoption of standards for human rights, treatment of indigenous
peoples, and worker health and safety). Given the very significant public
concerns as to the policy implications of U.S. companies facilitating Internet
censorship, as raised in the recent U.S. government statements discussed below,
the Staff should deny the Company's request for no-action relief on "ordinary
business" grounds as to the current Proposal, as well.
In both the legislative and the executive branches of the United States
government, serious public policy concerns have recently been raised with
respect to Internet censorship and monitoring by repressive foreign governments.
Congressional policy concerns over foreign Internet and online censorship have
resulted in proposed legislation, "The Global Online Freedom Act," re-introduced
as H.R. 275 on January 7, 2007 by Congressman Chris Smith (R-NJ), a senior
member of the House Foreign Affairs Committee, and cosponsored by Congressman
Frank Wolf (R-VA), the senior Republican member on the State and Foreign
Operations subcommittee of the House Appropriations Committee. The near-identity
of those legislative concerns with the social policy concerns identified in the
Funds' Proposal can be seen just from a review of the headings of some of the
bill's Titles and Sections:
TITLE IPROMOTION OF GLOBAL INTERNET FREEDOM
Sec. 104. Office of Global Internet Freedom.
Sec. 105. Annual designation of Internet-restricting countries; report.
TITLE IIMINIMUM CORPORATE STANDARDS FOR ONLINE FREEDOM
Sec. 201. Protection of personally identifiable information.
Sec. 202. Integrity of personally identifiable information.
Sec. 203. Transparency regarding search engine filtering.
Sec. 204. Transparency regarding Internet censorship.
The full bill can be found at:
http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.275: Those same policy concerns
were summarized in Congressman Smith's release that accompanied the
re-introduction of the bill:
Authoritarian regimes including China, Belarus, Cuba, Ethiopia, Iran, Laos,
North Korea, Tunisia and Vietnam are all known to block, restrict and monitor
the free flow of information on the Internet. In some of the more egregious
cases, democracy activists have been tracked down and incarcerated for their
online communications. American IT companies Microsoft, Google, Yahoo! and Cisco
Systems have assisted repressive regimes who censor information, monitor
Internet usage and punish political dissidents.
"By helping dictators stifle free speech and spy on dissidents, American IT
companies are putting profits before principles," said Smith.
Smith said he felt positive about the prospects for Congressional approval of
the "Global Online Freedom Act of 2007" in the 110\th/ Congress, especially in
light of recent efforts by shareholders to pressure these companies to change
their business practices with repressive countries. Last November, 29% of Cisco
Systems shareholders voted for an unprecedented resolution that would have
forced the company to account for its activities in repressive countries.
"Investors are taking notice of the repressive business practices of these
Internet companies and are starting to voice their opposition in masses.
Corporations need to heed these concerns and understand that it is good business
to promote human rights, not suppress them," said Smith.
(Attached to hard copy of this letter as Exhibit 1; emphases in original). Found
at: http://www.house.gov/list/press/nj04_smith/gofareintro.html
Similarly, the United States Department of State, expressing the concerns of the
President, has publicly stated that foreign governments' Internet censorship and
restrictions raise serious policy concerns. David Gross, Deputy Assistant
Secretary for International Communications and Information Policy at the
Department of State, testified at length before Congress earlier in 2006, in
connection with Congressman Smith's initiative:
We have before us a subject of great importance to the Administration and to the
people of China. The Internet is one of the great engines of human freedom in
the world today, and limits on the spread of information and the use of the
Internet to repress legitimate dissent are of great concern to the U.S.
Government. Such measures also work against the interests of the Chinese people
as they strive to build an "innovation society."
We welcome this occasion to discuss with you our views on the Internet in China
and U.S. Government efforts to promote the free flow of information via the
Internet. The involvement in this hearing of several of the principal U.S.
Internet companies active in China, as well as human rights organizations with
an abiding interest in this issue, puts a needed spotlight on a matter of real
concern to this Administration, the Congress, and the American people.
In Chairman Hyde's invitation to appear at this hearing, he referred to
regulations issued by the Chinese government in September 2005 that are being
used to suppress freedom of the press and free speech. The regulations are very
broadly written, criminalizing virtually any unlicensed reporting over the
Internet of any situation or event that is unflattering to Chinese society or
its leadershipat least, in the view of the censors. Among the forbidden
activities are "harming the honor or interests of the nation," "spreading
rumors, disturbing social order or disrupting social stability" and "inciting
illegal assemblies, associations, marches, demonstrations, or gatherings that
disturb social order." Clearly, the regulations provide the legal means to
censor a very broad spectrum of legitimate speech, and their scope causes great
concern.
"Statement of David Gross Deputy Assistant Secretary for International
Communications and Information Policy, Bureau of Economic and Business Affairs,
U.S. Department of State," Committee on House International Relations,
Subcommittee on Asia and the Pacific, in Congressional Quarterly Testimony (Feb.
15, 2006), (attached to hard copy of this letter as Exhibit 2; emphases added).
Mr. Gross concluded, emphasizing the deep interest of both Secretary of State
Condoleezza Rice and President Bush in the issue of foreign Internet censorship,
particularly in China:
Secretary Rice pays close attention to threats to the Internet and its
transformational power as a force for freedom. In order to ensure a robust U.S.
foreign policy response she established a Global Internet Freedom Task Force
(GIFTF) on February 14. The task force will report to the Secretary through
Under Secretary for Economic and Agricultural Affairs Josette Shiner and Under
Secretary for Democracy and Global Affairs Paula Dobriansky, and will consider
foreign policy aspects of Internet freedom, including:
The use of technology to restrict access to political content and the impact of
such censorship efforts on U.S. companies;
The use of technology to track and repress dissidents; and
Efforts to modify Internet governance structures in order to restrict the free
flow of information.
***
We believe that, as President Bush has stated: "Historians will note that in
many nations, the advance of markets and free enterprise helped to create a
middle class that was confident enough to demand their own rights. They will
point to the role of technology in frustrating censorship and central
controland marvel at the power of instant communications to spread the truth,
the news, and courage across borders."
Mr. Chairman, we do not believe that technology alone will lead to the Chinese
government's allowing its people to enjoy freedom of expression or the political
benefits of the free flow of uncensored information. We will continue to make
clear that it is not acceptable for the Chinese government to continue to
suppress speech on the Internet or to foster a climate of intimidation and
persecute dissidents. All the people of China, including the more than 111
million Chinese Internet subscribers, deserve no less.
Id. (emphasis added)
More recently, the news service of the United States Department of State, on
November 21, 2006, issued an official release on Internet freedom, which quoted
Deputy Assistant Secretary Gross, discussed Congressman Chris Smith's proposed
Internet freedom legislation at some length, and then reaffirmed the concerns of
the executive branch:
Debate over Internet censorship heated up at the inaugural Internet Governance
Forum in Athens, Greece, when Chinese delegates claimed their government does
not censor Web sites and representatives of major Internet service firms faced
accusations of complicity in China's monitoring activities.
The U.N.-sponsored conference, which took place October 30-November 2, promoted
the importance of a regulatory and legal environment conducive to investment in
telecommunications, preservation of intellectual property rights and support of
freedom of speech on the Internet.
We are working with many to address the important issue of freedom of
expression, an issue about which President Bush, Secretary Rice and other senior
government officials feel very strongly, said Gross, who headed the U.S.
delegation.
(November 21, 2006 State Department release, attached to hard copy of this
letter as Exhibit 3).
Finally, the Company itself has admitted the policy implications of foreign
nations' Internet censorship and monitoring. In the testimony of Michael
Callahan, Yahoo's Senior Vice President and General Counselbefore the same
Congressional panel before which Undersecretary Gross testifiedthe Company
first recognized the serious policy concerns with respect to the release by its
subsidiary, Yahoo! China, of Internet usage information that led to the arrest
of a Chinese dissident, Shi Tao:
The facts of the Shi Tao case are distressing to our company, our employees, and
our leadership. Let me state our view clearly and without equivocation: we
condemn punishment of any activity internationally recognized as free
expression, whether that punishment takes place in China or anywhere else in the
world. We have made our views clearly known to the Chinese government.
"Testimony of Michael Callahan, Senior Vice President and General Counsel,
Yahoo! Inc., Before the Subcommittees on Africa, Global Human Rights and
International Operations, and Asia and the Pacific," February 15, 2006
("Callahan Testimony;" attached to hard copy as Exhibit 4), found at:
http://yhoo.client.shareholder.com/ReleaseDetail.cfm?ReleaseID=187725.
Mr. Callahan then stated in his testimony, more generally:
We commend you, Mr. Chairmen, for holding this hearing. It allows these issues
to be raised in a public forum and provides an opportunity for companies such as
those appearing here today to ask for the assistance of the U.S. government to
help us address these critical issues. While we absolutely believe companies
have a responsibility to identify appropriate practices in each market in which
they do business, we also think there is a vital role for
government-to-government discussion of the larger issues involved.
These issues are larger than any one company, or any one industry. We all face
the same struggle between American values and the laws we must obey. Yahoo!
intends to be a leader in the discussion between U.S. companies and the U.S.
government. We appeal to the U.S. government to do all it can to help us provide
beneficial services to Chinese citizens lawfully and in a way consistent with
our shared values.
Id.
Those significant social policy issues relating to foreign restrictions on
Internet freedom, recognized at the most senior levels of the United States
government (and Yahoo), take the Proposal outside of "ordinary business." They
also distinguish the no-action letters under Rule 14a-8(i)(7) cited by the
Company.* Those letters related to more routine issues of domestic legal
policies and compliance or product content. None of those proposals directly
implicated international human rights and freedoms, whereas the Proposal here
does just that. That factor also distinguishes the two more recent letters of
which we are aware (issued after Yahoo's February 7, 2007 letter), granting
no-action advice as to proposals relating to companies' cooperation with U.S.
government information requests. Verizon Communications, Inc. (Feb. 21, 2007)
and AT&T Corp. (Feb. 9, 2007). Rather, as noted earlier, the Proposal and issues
here far more closely resemble the issues of Internet access and freedom, in
China and elsewhere, that warranted denial of no-action relief in Cisco Systems,
Inc. (Sep. 19, 2002).
In sum, in light of the very significant social policy issues raised by the
Funds' Proposal, the Company has not met its burden of showing that the Proposal
may be excluded under Rule 14a-8(i)(7), and its request for no-action relief on
that ground should be denied.
B. The Company Is Fully Able to Implement the Proposal, and So May Not Omit It
Under Rule 14a-8(i)(6)
Yahoo claims that because some of its business activities involve affiliates, it
is unable to put in place an Internet policy which will implement the Proposal.
The Company in particular attempts to rely upon the fact that though Yahoo is
the largest shareholder of its Chinese affiliate, Alibaba, Yahoo does not
control that affiliate and its policies. The Proposal, however, only requests
that Yahoo itself adopt a policy. At the same time, Yahoo has proclaimed
publicly that it uses its considerable influence as the largest shareholder to
help shape the Internet freedom policies of Alibaba.
Specifically, the Proposal requests only that "management institute policies"
for Internet freedom. As with any shareholder proposal asking that a company's
"management" take some action, the plain meaning is that the directors and
officers take action on behalf of that company, not on behalf of some entity
that the company does not control. Here, Yahoo cannot deny that it is fully
capable of putting in place a wholly compliant Internet freedom policy for
itself. The Proposal does not even mention affiliates, subsidiaries, or any
other entity besides the Company itself, and so does not impose an obligation
other than with respect to Yahoo itself.
That indisputable fact immediately distinguishes the no-action letters that the
Company cites, where a company or its directors were asked to guarantee the
taking of certain actions that could, however, be taken only by a person or
entity that they did not control. Waste Industries, Inc. (March 21, 2005) (no
control over other directors and their independence); AT&T Corp. (March 10,
2002) (no control over "successor companies"). Cf. also Harsco Corp. (Feb. 16,
1988) (proposal could only be implemented by subsidiary that company did not
control). Here, Yahoo can readily adopt the requested Internet policy for
itself, and nothing in the Proposal requests that it do so for any affiliate
that it does not control.
Of course, as a practical matter, once Yahoo does adopt the requested Internet
policy for itself, that Company-level policy is likely to shape Yahoo's dealings
with affiliates that it may not fully control. Yahoo's policy on Internet
freedom will thus tend to have an impact at those affiliates as well. A foreign
affiliate, such as Alibaba, that has Yahoo as its largest shareholder and
sitting on its Board, will know of Yahoo's Internet policy, and is likely to be
receptive to Yahoo's recommendations that the affiliate strengthen the
protections of its own Internet users.
Indeed, Yahoo's General Counsel, Michael Callahan, has testified before Congress
that while Yahoo does not control Alibaba's day-to-day operations, Yahoo already
uses its influence to persuade Alibaba to implement appropriate Internet
practices in China:
The Alibaba.com management team runs the business; however, as a large equity
investor, we have made clear our desire that Alibaba.com continue to apply
rigorous standards in response to government demands for information about its
users. I have personally discussed our views with senior management of
Alibaba.com, as have other senior executives of Yahoo!
Callahan Testimony, February 15, 2006, supra. The Funds' Proposal does no more
than request Yahoo to put its own compliant policy in place - with the likely
resulting benefit that Yahoo, as it says it already is doing, would use its
influence to spread best practices to Alibaba and others.
In short, Yahoo has full power and authority to implement for Yahoo itself the
Internet freedom policy that the Proposal requests. The Company, therefore, has
not carried its burden of showing why it should be permitted to exclude the
Proposal under Rule 14a-8(i)(6).
C. The Company's Current Privacy Notice Does Not Substantially Implement the
Proposal Under the Standards of Rule 14a-8(i)(10)
Yahoo asserts (Yahoo February 7, 2007 letter at p. 6) that its current Privacy
Policy, which users can look up on a separate web page, implements this Item 4
of the Proposal:
4) Users will be clearly informed when the company has acceded to legally
binding government requests to filter or otherwise censor content that the user
is trying to access.
The argument must fail, because Item 4 of the Proposal requires that in each
case "when the company has acceded" to a government recuest to block access to a
website, a clear notice must come into view to disclose that event to a user who
is seeking access to that website. The Proposal cannot be implemented simply by
a static page which has to be looked up elsewhere on Yahoo's site, which does
not state that a particular website has been blocked, and which never pops up to
give notice that access to a particular website has been blocked. Such a
non-notice cannot substantially implement the Proposal's request for a clear
notification in each case.
The Company further claims that Item 4 of the Proposal is substantially
implemented by a notice that purportedly does pop up when website access is
blocked for a user of Yahoo! China, now a subsidiary of its Alibaba affiliate.
However, given that the Company argues elsewhere in its letter that it does not
control Alibaba, and given that Yahoo has worldwide Internet operations other
than Alibaba, it cannot be that the actions of that one affiliate can serve to
substantially implement Item 4 of the Proposal for all of Yahoo. If anything,
that pop up notice provided by its affiliate's subsidiary only serves to
highlight how the Company's own current efforts fall far short of implementing
Item 4 of the Proposal.
As the Funds' Proposal has not been substantially implemented under Rule
14a-8(i)(10), the Staff should reject the Company's request for relief on that
ground.
D. The Proposal Is Neither Vague Nor Misleading Under Rule 14a-8(i)(3)
The Company asserts that the Proposal, in judiciously laying out nine carefully
phrased and yet flexible principles to guide a policy on Internet freedom, is
impermissibly "vague" and "misleading" under the standards of Rule 14a-8(i)(3).
Purportedly, neither Yahoo nor its shareholders will be able to determine what
the Proposal requires, as they will be unable to put a reasonable construction
on the following terms: "Internet restricting countries," "political speech,"
"pro-active censorship," "all legal means," "legally binding procedures,"
"clearly," "legally binding government requests," "all cases," and "that
information." (Yahoo February 7, 2007 letter at pp. 7-9). Yet those are the very
kinds of terms that are typically found in statements of policy throughout
business and government, or that guide the adoption of such policies, and it is
well within Yahoo's powers to ascribe a reasonable meaning to all of them.
In point of fact, Yahoo's General Counsel was well able to use very similar
kinds of terms in explaining to Congress the policies that underlay its response
to Chinese government requests for information on an Internet user:
At the time the demand was made for information in this case, Yahoo! China was
legally obligated to comply with the requirements of Chinese law enforcement.
When we had operational control of Yahoo! China, we took steps to make clear our
Beijing operation would honor such instructions only if they came through
authorized law enforcement officers and only if the demand for information met
rigorous standards establishing the legal validity of the demand.
When we receive a demand from law enforcement authorized under the law of the
country in which we operate, we must comply.
Callahan Testimony, supra. Surely, Yahoo can use such terms as well to craft its
policy on Internet freedom, going forward.
By that same token, the Staff has declined to accept company claims under Rule
14a-8(i)(3) that terms in proposals were too "vague" to permit the drafting of
compliant reports on Internet freedom and on a human rights policy,
respectively. See Cisco Systems, Inc. (Sep. 19, 2002) (not accepting claim that
terms "which allows monitoring," "which acts as a `firewall,'" and "monitoring"
were vague); Cisco Systems, Inc. (Aug. 31, 2005) (not accepting claim that term
"Human Rights Policy" was vague). The terms here properly give Yahoo adequate
guidance as to what concepts it should incorporate when drafting its policy to
protect Internet freedom, while leaving it with flexibility in doing so.
There is also no merit to Yahoo's other claim under Rule 14a-8(i)(3), that the
Proposal's reference to the Universal Declaration on Human Rights is false and
misleading, in allegedly suggesting that the Declaration legally "guarantees"
freedoms under U.S. law, or that Yahoo has a binding "obligation" to comply with
the Declaration. (Yahoo February 7, 2007 letter, at pp. 9-10). The Proposal does
not contain the extra words that Yahoo would seek to insert in it. Rather, the
Proposal properly presents the Universal Declaration on Human Rights as a
leading moral source for human rights, and makes no reference to any legally
binding effect or obligation under United States law. Moreover, the Proposal's
references to the Declaration are very similar to those used by Congressman
Smith in the proposed Global Online Freedom Act, as this excerpt from that
bill's findings shows:
Congress makes the following findings:
(1) Freedom of speech and freedom of the press are fundamental human rights, and
free flow of information on the Internet is protected in Article 19 of the
Universal Declaration of Human Rights, which guarantees freedom to `receive and
impart information and ideas through any media regardless of frontiers'.
H.R. 275, supra. We submit that, just as in the Global Online Freedom Act, the
Proposal's statement of the import of the Declaration is a fair one, too.
Yahoo has failed to carry its burden of showing under Rule 14a-8(i)(3) that any
part of the Proposal is either vague or misleading, and so its request on that
ground for no-action relief should be denied.
III. Conclusion
For the reasons set forth above, the Funds respectfully request that the
Company's request for "no-action" relief be denied.
Thank you for your consideration.
Sincerely,
/s/
Richard Simon
Cc: Christina Lai, Esq.
Senior Legal Director
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
-----FOOTNOTES-----
* Bank of America Corp. (March 7, 2005); Bank of America Corp. (Feb. 21, 2006);
Carnival Corp. (Jan. 6, 2006); Sprint Corp. (Feb. 6, 2002); Monsanto Co. (Nov.
3, 2005); Microsoft Corp. (Sep. 29, 2006); Verizon Communications, Inc. (Jan.
31, 2006); IBM Corp. (March 2, 2006); Pepsico, Inc. (March 7, 1991); Dole Food
Co. (Feb. 10, 1992); and GTE Corp. (Feb. 10, 1992).
[INQUIRY LETTER]
March 20, 2007
VIA COURIER
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, NE
Washington, D.C. 20549
Re: Intention to Omit Stockholder Proposal Submitted by the City of New York
Office of the Comptroller
Ladies and Gentlemen:
This letter supplements the letter of February 7, 2007, relating to a proposal
(the "Proposal") and supporting recitals (the "Supporting Statement") submitted
to Yahoo! Inc. ("Yahoo!" or the "Company") by the Office of the Comptroller of
New York City (the "Proponent"), on behalf of the New York City Employees'
Retirement System, the New York City Teachers' Retirement System, the New York
City Police Pension Fund, the New York City Fire Department Pension Fund and the
New York City Board of Education Retirement System, for inclusion in the
Company's proxy statement for its 2007 Annual Meeting of Stockholders (the "2007
Proxy Statement"). In our February 7 letter, we notified the Securities and
Exchange Commission (the "Commission") and the Proponent of the Company's
intention to omit the Proposal from the Company's 2007 Proxy Statement on the
grounds set forth in Rule 14a-8(i)(7), Rule 14a-8(i)(6), Rule 14a-8(i)(10) and
Rule 14a-8(i)(3). We further requested in our letter that the staff of the
Division of Corporation Finance (the "Staff") confirm that it will not recommend
enforcement action to the Commission if Yahoo! omits the Proposal from its 2007
Proxy Statement.
In an effort to rebut the arguments in our February 7 letter, Mr. Richard Simon,
Deputy General Counsel to the Proponent, has submitted a letter to the
Commission dated March 13, 2007 (the "Response Letter"). Notwithstanding the
arguments contained in Mr. Simon's Response Letter, Yahoo! reaffirms its
intention to omit the Proposal from its 2007 Proxy Statement on the grounds set
forth in its February 7 letter, and hereby renews its request that the Staff
confirm that it will not recommend enforcement action to the Commission if
Yahoo! omits the Proposal from its 2007 Proxy Statement. In accordance with Rule
14a-8(j), we have enclosed for filing six copies of this letter. We are also
concurrently sending a copy of this letter to Mr. Simon, as counsel to the
Proponent.
In our view, Mr. Simon's Response Letter does not persuasively rebut the
Company's arguments set forth in its February 7 letter. While we do not intend
to respond to each of Mr. Simon's arguments, we would like to address the
specific points outlined below.
The Proposal Relates to Yahoo!'s Ordinary Business Operations
Yahoo! is committed to preserving and advancing the fundamental principles of
free speech and expression, and understands and appreciates the Proponent's
concerns about political censorship. However, this does not alter the ultimate
conclusion that the Proposal is seeking to micro-manage basic elements of the
Company's day-to-day business operations, and therefore may be omitted from the
2007 Proxy Statement on the basis of Rule 14a-8(i)(7).
By its terms, the Proposal sets forth specific policies that, if implemented,
would dictate how the Company addresses such complex operational matters as
governmental regulation, the content of the Company's web pages and other
communications to its users, and the selection of technology and geographic
locales to host user data. Indeed, we believe that Mr. Simon's own argument, as
to whether the Company has substantially implemented minimum standard no. 4
(which seeks to impose a requirement that the Company clearly inform users when
it has acceded to legally binding government requests to filter or otherwise
censor content that the user is trying to access), highlights the degree to
which some elements of the Proposal seek to intrude on management's conduct of
the Company's ordinary business operations. Mr. Simon argues that "[t]he
Proposal cannot be implemented simply by a static page which has to be looked up
elsewhere on Yahoo's site, which does not state that a particular website has
been blocked, and which never pops up to give notice that access to a particular
website has been blocked." It is difficult to imagine a more fundamental element
of the Company's operations as an Internet company than the content,
presentation and placement of its web pages. Furthermore, the fact that the
Company has already assigned responsibility for these matters to a
multi-disciplinary team of its executives and managers, and that these
individuals routinely make decisions on these matters on a daily basis (all as
described in detail in the Company's February 7 letter), further support
Yahoo!'s contention that these matters represent a fundamental component of the
Company's ordinary business operations, requiring a detailed understanding of
the Company's business, available technologies and the various regulatory
environments in which the Company operates.
The Company also believes that the current Proposal is distinguishable from
those involved in Cisco Systems, Inc. (Sep. 19, 2002) and the other no-action
letters cited by Mr. Simon in support of his argument.1 The proposals involved
in the Cisco and other letters generally involved requests for the company to
review or provide shareholders with information concerning a matter that
implicated a social policy issue, but did not otherwise seek to dictate specific
actions or responses by the subject company or direct management to conduct the
company's daily business operations in a particular manner. In contrast, the
current Proposal sets forth the specific methods for implementing the complex
policies suggested by the Proponent, and to such extent, is seeking to subject
to stockholder oversight operational matters that are clearly within the purview
of the Company's management. In this regard, we believe that the current
Proposal is more closely analogous to those involved in the no-action letters
that we cited in our February 7 letter in support of the Company's position
under Rule 14a-8(i)(7).
We further believe, notwithstanding Mr. Simon's argument to the contrary, that
the current proposal is also analogous to that involved in the no-action letter
recently issued to Verizon Communications, Inc. (Feb. 21, 2007). In Verizon, the
proponent requested that the board of directors issue a report on the
technological, legal and ethical policy issues surrounding the disclosure of
customer records and other content to governmental agencies without a warrant
and to private investigators, and their effect on customer privacy rights.
Rejecting the proponent's attempt to cloak the matter as one involving social
policy, the Staff permitted the company to exclude the proposal on the basis
that it related to "Verizon's ordinary business operations (i.e., procedures for
protecting customer information)." We believe that the current Proposal is
likewise aimed at Yahoo!'s basic procedures for providing information and
services to its users on an everyday basis.
Accordingly, the Company continues to believe, for the reasons set forth herein
and in its February 7 letter, that it may omit the Proposal and Supporting
Statement from the 2007 Proxy Statement on the basis of Rule 14a-8(i)(7).
The Proposal is Vague and Indefinite and Contains Materially False and
Misleading Statements
In his Response Letter, Mr. Simon attempts to rebut the Company's arguments
under Rule 14a-9 and Rule 14a-8(i)(3) by offering generalized opinions and by
referencing excerpts from public testimony that was given in a different context
and for different purposes. However, the Company does not believe that these
opinions or excerpts sufficiently address the inherent ambiguities and false
statements that the Company referenced in its February 7 letter. Indeed, Mr.
Simon's own argument with respect to the implementation of minimum standard no.
4 (requiring that users be clearly informed when the Company has acceded to
legally binding requests to filter or otherwise censor content that the user is
trying to access) further highlights the degree to which this element of the
Proposal is vague and indefinite, and subject to multiple and conflicting
interpretations, as to what constitutes "clear" notice to the user that the
Company has acceded to a "legally binding government request."
In response to two specific points raised by Mr. Simon in his Response Letter:
Mr. Simon cites in support of his position two no-action letters involving
Cisco Systems, Inc.,2 in which the Staff declined to accept the company's claims
that terms such as "monitoring" and "firewall" were impermissibly vague. The
Company respectfully submits, however, that the terms "monitoring" and
"firewall," at least in the context of the specific proposal that was offered at
Cisco, are more technical in nature, and as such, are far less vague and open to
interpretation than "political speech," "pro-active censorship," "all legal
means," "legally binding government requests" and the other terms and phrases
that Yahoo! has questioned in the current Proposal. Moreover, unlike the second
proposal at Cisco, in which the supporting statement arguably provided
sufficient context for shareholders to discern the meaning and intent of the
proposal on human rights policies, the Supporting Statement accompanying the
current Proposal does not provide any further context or guidance to the
Company's stockholders as to the meanings of the ambiguous terms and phrases
utilized by the Proponent. Thus, Yahoo! believes that the current Proposal is
distinguishable from those involved in each of the Cisco letters cited by Mr.
Simon.
The Company respectfully requests that the Staff compare Mr. Simon's
characterization of the Universal Declaration of Human Rights (the
"Declaration") in his Response Letter (i.e., as a "leading moral source for
human rights," with no "legally binding effect or obligation under United States
law") with the actual text of the Supporting Statement (which states that the
Declaration "guarantees" certain freedoms, and that companies such as Yahoo have
an "obligation to comply" with the principles of the Declaration). This conflict
highlights the inherent inaccuracy of these references in the Supporting
Statement, and further supports the Company's position that these references, as
written, are materially false and misleading.
Accordingly, for the reasons set forth herein and in the Company's February 7
letter, the Company respectfully submits that it may omit the Proposal and
Supporting Statement from the 2007 Proxy Statement on the basis of Rule
14a-8(i)(3).
Conclusion
Notwithstanding the arguments presented in Mr. Simon's Response Letter, the
Company continues to believe that it may exclude the Proposal from its 2007
Proxy Statement pursuant to Rule 14a-8(i)(7), Rule 14a-8(i)(6), Rule
14a-8(i)(10) and Rule 14a-8(i)(3). If the Staff has any questions or comments
regarding this or any of our prior submissions, please call me at (408)
349-7131, or in my absence, Thomas J. Leary, Esq., of O'Melveny & Myers LLP at
(949) 823-7118. If the Staff concludes that the Proposal should not be excluded
from the 2007 Proxy Statement, we would appreciate the opportunity of a
conference prior to the issuance of a formal response. In any case, when the
Staff issues its formal response, we respectfully ask that you send a copy of
the response by facsimile to the undersigned at (408) 349-3400, and to Tom Leary
at O'Melveny & Myers LLP at (949) 823-6994, and by facsimile, courier or U.S.
Mail to the Proponent.
Please acknowledge receipt of this letter by date stamping an enclosed copy of
this letter and returning the date-stamped copy to our messenger.
Very truly yours,
/s/
Christina Lai
Senior Legal Director
cc: Mr. Patrick Doherty, New York City Office of the Comptroller, Bureau of
Asset Management
Richard Simon, Esq., Deputy General Counsel, New York City Office of the
Comptroller
Michael J. Callahan, Senior Vice President and General Counsel, Yahoo! Inc.
Thomas J. Leary, Esq., O'Melveny & Myers LLP
-----FOOTNOTES-----
1 See General Electric Co. (Jan. 28, 2005) (seeking report on reputational risks
of investing in Iran); BJ Services Co. (Dec. 10, 2003) (seeking a report on the
financial consequences of investing in, or divesting from, Burma);
Freeport-McMoran Copper & Gold, Inc. (Feb. 12, 2004) (calling for an end to
payments to Indonesian military, pending further investigation into the killings
of company employees); and Xcel Energy (Mar. 24, 2003) (requesting that the
company's board review or amend, where applicable, Xcel's code or standards for
its international operations and report a summary of this review to
shareholders).
2 See Cisco Systems, Inc. (Sep. 19, 2002); Cisco Systems, Inc. (Aug. 31, 2005).
[STAFF REPLY LETTER]
April 13, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Yahoo! Inc.
Incoming letter dated February 7, 2007
The proposal requests that management institute policies, with certain minimum
standards, to help protect freedom of access to the Internet.
We are unable to concur in your view that Yahoo! may exclude the proposal under
rule 14a-8(i)(3). Accordingly, we do not believe that Yahoo! may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(3).
We are unable to concur in your view that Yahoo! may exclude the proposal under
rule 14a-8(i)(6). Accordingly, we do not believe that Yahoo! may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(6).
We are unable to concur in your view that Yahoo! may exclude the proposal under
rule 14a-8(i)(7). Accordingly, we do not believe that Yahoo! may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(7).
We are unable to concur in your view that Yahoo! may exclude the proposal under
rule 14a-8(i)(10). Accordingly, we do not believe that Yahoo! may omit the
proposal from its proxy materials in reliance on rule 14a-8(i)(10).
Sincerely,
/s/
Derek B. Swanson
Attorney-Adviser
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