Company Name: Apache Corp.
Public Availability Date: March 5, 2008
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January 3, 2008
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Shareholder Proposal to Apache Corporation
Ladies and Gentlemen:
On behalf of Apache Corporation, a Delaware corporation (the "Company"), I am
submitting this letter pursuant to Rule 14a-8(j) promulgated under the
Securities Exchange Act of 1934, as amended (the "Act"), regarding the Company's
intention to omit a proposal (the "Proposal") submitted by certain shareholders
of the Company for inclusion in the proxy statement and form of proxy to be
circulated by the Company in connection with its annual meeting of shareholders
proposed to be held on May 8, 2008. The definitive copies of the 2008 proxy
statement and form of proxy are currently scheduled to be filed pursuant to Rule
14a-6 on or about March 31, 2008.
The Proposal is sponsored by the Office of the Comptroller of the City of New
York 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 (collectively, the "Proponent").
We hereby request that the staff of the Division of Corporation Finance (the
"Staff") confirm that it will not recommend any enforcement action to the
Securities and Exchange Commission (the "Commission") if, in reliance on the
Company's analysis set forth below, the Company excludes the Proposal from its
proxy materials.
Pursuant to Rule 14a-8(j), I am enclosing six copies of the following documents:
This letter, which represents the Company's statement of reasons why the
Company may omit the Proposal from the Company's 2008 proxy statement and form
of proxy; and
The Proposal, attached hereto as Exhibit A.
Please acknowledge receipt of this letter by stamping the extra enclosed copy
and returning it to me in the enclosed, self-addressed, stamped envelope.
Background
The Proposal requests that the Company include in its 2008 proxy statement and
form of proxy a resolution for a vote by the holders of the Company's common
stock that provides in pertinent part:
A number of Fortune 500 corporations have implemented non-discrimination
policies encompassing the following principles:
1) Discrimination based on sexual orientation and gender identity will be
prohibited in the company's employment policy statement.
2) The company's non-discrimination policy will be distributed to all employees.
3) There shall be no discrimination based on any employee's actual or perceived
health condition, status, or disability.
4) There shall be no discrimination in the allocation of employee benefits on
the basis of sexual orientation or gender identity.
5) Sexual orientation and gender identity issues will be included in corporate
employee diversity and sensitivity programs.
6) There shall be no discrimination in the recognition of employee groups based
on sexual orientation or gender identity.
7) Corporate advertising policy will avoid the use-of negative stereotypes based
on sexual orientation or gender identity.
8) There shall be no discrimination in corporate advertising and marketing
policy based on sexual orientation or gender identity.
9) There shall be no discrimination in the sale of goods and services based on
sexual orientation or gender identity.
10) There shall be no policy barring on corporate charitable contributions to
groups and organizations based on sexual orientation.
RESOLVED: The Shareholders request that management implement equal employment
opportunity policies based on the aforementioned principles prohibiting
discrimination based on sexual orientation and gender identity.
For the reasons discussed below, Apache intends to exclude the Proposal from its
proxy materials in reliance on Rule 14a-8(i)(7).
The Proposal Relates to Ordinary Business Matters
Rule 14a-8(i)(7), the so-called "ordinary business" exclusion, permits a company
to exclude from its proxy materials any shareholder proposal that relates to
ordinary business matters. In determining whether a shareholder proposal is
excludable under Rule 14a-8(i)(7), there are two central considerations. The
first consideration is whether the proposal relates to tasks that 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. See Amendments to Rules on Shareholder Proposals, SEC Rel. No.
34-40018 (May 21, 1998). The lone exception to this rule is for shareholder
proposals that relate to ordinary business matters but that also raise
significant social policy considerations. See, e.g., Battle Mountain Gold
Company, SEC No-Action Letter (Feb. 13, 1992) ("in view of the widespread public
debate concerning executive and director compensation policies and practices,
and the increasing recognition that these issues raise significant policy issues
... proposals relating to senior executive compensation no longer can be
considered matters relating to a registrant's ordinary business.")
The second consideration relates to the degree to which the proposal attempts to
micro-manage a company by probing too deeply into matters of a complex nature
upon which shareholders would not be in a position to make an informed judgment.
This consideration is implicated when a proposal involves "intricate detail" or
"seeks to impose specific time frames or methods for implementing complex
policies." See Amendments to Rules on Shareholder Proposals at text accompanying
footnote 44; Duke Energy, SEC No-Action Letter (Feb. 16, 2001) (granting relief
Rule 14a-8(i)(7) with respect to a proposal that requested that Duke Energy
"take all necessary steps to reduce by 80% nitrogen oxide (NOx) emissions from
the coal-fired power plants operated by Duke Energy in North Carolina, with no
loopholes for higher emissions, and limiting each boiler to .15 1bs of NOx per
million btu's of heat input by 2007").
Generally, the Staff has denied relief under Rule 14a-8(i)(7) with regard to
shareholder proposals on discrimination matters because such proposals raise
significant policy considerations. See generally JP Morgan Chase, SEC No-Action
Letter (Feb. 22, 2006) (denying relief under Rule 14a-8(i)(7) with regard to a
proposal that JPMorgan Chase amend its written equal employment opportunity
policy to explicitly exclude reference to sexual orientation). However,
proposals that relate to such matters but that also relate to ordinary business
matters remain excludable under Rule 14a-8(i)(7). See, e.g., The Walt Disney
Company, SEC No-Action Letter (Nov. 22, 2006) (granting relief under Rule
14a-8(i)(7) with regard to proposal that requested a report on the steps Disney
is undertaking to avoid the use of negative racial, ethnic and gender
stereotypes in its products); AT&T Corp, SEC No-Action Letter (Feb. 25, 2005)
(granting relief under Rule 14a-8(i)(7) with regard to a proposal that requested
"that AT&T consider discontinuing all domestic partner benefits for executives
making over $500,000 per year"; in granting relief, the Staff noted that "the
thrust and focus of the proposal is on the ordinary business matter of employee
benefits."); see also Associates First Capital, SEC No-Action Letter (Feb. 23,
1999)(granting relief under Rule 14a-8(i)(7) where five of the six elements of a
proposal regarding predatory lending related to ordinary business matters);
E*Trade Group, Inc., SEC No-Action Letter (Oct. 31, 2000) (granting relief under
Rule 14a-8(i)(7) regarding a proposal to establish a committee to advise the
board on how to increase shareholder value where two out of the four potential
mechanisms for increasing shareholder value involved the company's ordinary
business operations; in granting relief, the Staff stated that "although the
proposal appears to address matters outside the scope of ordinary business,
subparts `c.' and `d.' relate to E*TRADE's ordinary business operations.").
Here, the Proposal does not simply request that the Company amend its equal
employment opportunity policy to explicitly exclude reference to gender or
sexual orientation. Instead, it seeks to have the Company implement a number of
principles, several of which relate to core ordinary business matters, including
the Company's corporate advertising policy, the Company's marketing policies,
how the Company sells its products and the Company's charitable giving
practices. Because the Proposal impermissibly delves into ordinary business
matters, it may be excluded in reliance on Rule 14a-8(i)(7).
The Proposal Relates to Advertising and Marketing Decisions
The seventh and eighth principles of the Proposal provide a strong basis for
excluding the Proposal from the Company's proxy materials under Rule
14a-8(i)(7). Those principles direct the Company to avoid the use of negative
stereotypes based on sexual orientation or gender identity in corporate
advertising policy, and to prohibit discrimination in corporate advertising and
marketing policy based on sexual orientation or gender identity. Each of these
provide a basis for excluding the Proposal from the Company's proxy materials in
reliance on Rule 14a-8(i)(7).
The Staff has long held that decisions relating to how a company advertises and
markets its products relate to ordinary business matters. See, e.g., General
Mills, Inc. (Jun. 20, 1990) (granting relief under Rule 14a-8(c)(7) [the
predecessor to Rule 14a-8(i)(7)] with respect to a proposal that sought to
prohibit General Mills from advertising on programs that encouraged
homosexuality or pornography). The Staff has taken this position even where the
proposal relates to an overarching social policy matter, such as the use of
stereotypes regarding racial, ethnic and gender stereotypes in a company's
advertising and marketing practices. For example, in 2007, the Staff agreed with
The Walt Disney Company that it could rely on Rule 14a-8(i)(7) to exclude from
its proxy materials a shareholder proposal that requested a report on the steps
that Disney was undertaking to avoid the use of negative racial, ethnic and
gender stereotypes in its products. Despite the fact that matters relating to
discrimination based on racial, ethnic or gender raise significant policy
considerations, the Staff concluded that the action sought by the proposal
related to the nature, presentation and content of its products, all of which
were ordinary business matters.
The Staff's response to The Walt Disney Company is consistent with numerous
prior no-action letters. See, e.g., Anheuser-Busch, SEC No-Action Letter (Jan.
21, 2000) (granting relief under Rule 14a-8(i)(7) with regard to a proposal that
the company report its use of advertisements that do not "offend the sexual
sensibilities of heterosexual persons"); PepsiCo, SEC No-Action Letter (Feb. 23,
1998) (granting relief under Rule 14a-8(i)(7) with regard to a proposal that the
company ensure that it only used "non-racist portrayals and designations" in its
operations); Quaker Oats, SEC No-Action Letter (Mar. 16, 1999) (granting relief
under Rule 14a-8(i)(7) with regard to a proposal that requested that the company
review its advertising content for anything that demeaned or slandered anyone
based on race, ethnicity or religion).
Based on these and similar no-action letters, the Company respectfully submits
that it may exclude the Proposal from its proxy materials on the basis that it
relates to ordinary business matters, i.e., advertising and marketing decisions.
The Proposal Relates to the Sale of Products
The ninth principle of the Proposal directs the Company to refrain from
discriminating in the sale of goods and services based on sexual orientation or
gender identity. Like decisions relating to how a company advertises or markets
its products, the Staff has long held that shareholder proposals regarding how a
company sells its products relate to ordinary business matters. See, e.g.,
Wal-Mart Stores, SEC No-Action Letter (Mar. 9, 2001) (granting relief under Rule
14a-8(i)(7) with regard to a proposal requesting a report on the company's
"policies and procedures aimed at stemming the incidence of gun violence in the
United States"); American Express Company, SEC No-Action Letter (Jan. 25, 1990)
(granting relief under Rule 14a-8(i)(7) with regard to a proposal that the
company terminate all fur promotions, excludable as relating to the promotion
and sale of a particular product).
Like its position with regard to advertising and marketing decisions, the Staff
has granted no-action relief on this basis even where the proposal at issue
raised social policy issues. For example, in 2002 the Staff agreed with
Federated Department Stores that it could rely on Rule 14a-8(i)(7) to exclude
from its proxy materials a shareholder proposal that requested that the company
prepare a report regarding the company's efforts to "identify and disassociate
from any offensive imagery to the American Indian community" in products,
advertising, endorsements, sponsorships and promotions. Federated Department
Stores, Inc., SEC No-Action Letter (Mar. 27, 2002). Like the Proposal, the
proposal in Federated Department Stores related to discrimination and
stereotypes, which might otherwise preclude reliance on Rule 14a-8(i)(7).
Nevertheless, consistent with its historical approach to such matters, the Staff
agreed with Federated that it could exclude the proposal from its proxy
materials in reliance on Rule 14a-8 (i)(7) due to the fact that it attempted to
address the issue by delving into ordinary business matters.
Based on these and similar no-action letters, the Company respectfully submits
that it may exclude the Proposal from its proxy materials on the basis that it
relates to ordinary business matters, i.e., the sale of the Company's products.
Charitable Giving
The tenth principle of the Proposal directs the Company to refrain from barring
corporate charitable contributions to groups and organizations based on sexual
orientation. This principle provides yet another basis for excluding the
Proposal from the Company's proxy materials in reliance on Rule 14a-8(i)(7). The
Staff of the SEC has long held that shareholder proposals that seek to encourage
or discourage donations to a particular charity or type of charity may be
excluded in reliance on Rule 14a-8(i)(7). See, e.g., T. Rowe Price Group, Inc.,
SEC No-Action Letter (Dec. 27, 2002) (granting relief under Rule 14a-8(i)(7)
with regard to a proposal seeking a policy that "affirms that the corporation
will not sponsor or contribute to non-profit organizations which undermine the
American war on terrorism"). The Staff reaffirmed this position in 2007, when it
agreed with Wells Fargo that it could rely on Rule 14a-8(i)(7) to exclude a
shareholder proposal that requested that the company report all charitable
organizations that are recipients of company donations. Wells Fargo, Inc., SEC
No-Action Letter (Feb. 12, 2007). Although the resolution appeared facially
neutral, the supporting statement for the proposal made clear that the proposal
was intended to question Wells Fargo's charitable giving practices and object to
giving to organizations to which the proponent objected. In granting no-action
relief, the Staff noted that "There appears to be some basis for your view that
Wells Fargo may exclude the proposal under rule 14a-8(i)(7), as relating to
Wells Fargo's ordinary business operations (i.e., contributions to specific
types of organizations)."
The Staff's position in Wells Fargo was consistent with numerous prior no-action
letters. See e.g., Walgreen Co., SEC No-Action Letter (Oct. 20, 2006) (granting
relief under Rule 14a-8 (i)(7) with regard to a proposal that Walgreen
disassociate itself from the "gay games" and not provide any additional
financial support to the "gay games"); Morgan Stanley, SEC No-Action Letter
(Dec. 23, 2002) (granting relief under Rule 14a-8(i)(7) with regard to a
proposal seeking a policy that "affirms that the corporation will not sponsor or
contribute to non-profit organizations which violate their industry's code of
ethics, and in accord with this policy, the Board should discontinue any
support, direct or indirect, for National Public Radio").
Based on these and similar no-action letters, the Company respectfully submits
that it may exclude the Proposal from its proxy materials on the basis that it
relates to ordinary business matters, i.e., contributions to specific
organizations.
Conclusion
For the reasons given above, we respectfully request that the Staff not
recommend any enforcement action from the Commission if the Company omits the
Proposal from its 2008 proxy materials. While the Proposal is intended to
address discrimination based on sexual orientation and gender identity, it seeks
the adoption of a number of principles that relate to core ordinary business
matters, thereby providing a basis for exclusion under Rule 14a-8(i)(7).
If the Staff disagrees with the Company's view that it can omit the proposal, we
request the opportunity to confer with the Staff prior to the final
determination of the Staff's position. Notification and a copy of this letter
are simultaneously being forwarded to the Proponent.
Sincerely,
APACHE CORPORATION
/s/
Sarah Ball Teslik
Senior Vice President Policy and Governance
[APPENDIX 1]
October 29, 2007
Ms. C. L. Peper
Corporate Secretary
Apache Corporation
2000 Post Oak Blvd., Suite 100
Houston, TX 77056-4400
Dear Ms. Peper:
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 the Comptroller to inform you of their intention to offer the
enclosed proposal for consideration of stockholders at the next annual meeting.
Presently, Apache Corporation does not have a policy that explicitly prohibits
discrimination based on sexual orientation. Our proposal asks the company to
include a prohibition against discrimination based on sexual orientation in its
employee policy statement. Over two thirds of the Fortune 500 companies have
already decided to make this important commitment.
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 Apache Corporation 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
pd:ma
Enclosures
[APPENDIX 2]
SEXUAL ORIENTATION
Submitted By William C. Thompson, Jr., Comptroller, City of New York, on behalf
of the Boards of Trustees of the New York City Pension Funds
WHEREAS, corporations with non-discrimination policies relating to sexual
orientation have a competitive advantage to recruit and retain employees from
the widest talent pool;
Employment discrimination on the basis of sexual orientation diminishes employee
morale and productivity;
The company has an interest in preventing discrimination and resolving
complaints internally so as to avoid costly litigation and damage its reputation
as an equal opportunity employer;
Atlanta, Seattle, Los Angeles, and San Francisco have adopted legislation
restricting business with companies that do not guaranteed equal treatment for
lesbian and gay employees and similar legislation is pending in other
jurisdictions;
The company has operations in and makes sales to institutions in states and
cities which prohibit discrimination on the basis of sexual orientation;
A recent National Gay and Lesbian Taskforce study has found that 16% -44% of gay
men and lesbians in twenty cities nationwide experienced workplace harassment or
discrimination based on their sexual orientation;
National public opinion polls consistently find more than three-quarters of the
American people support equal rights in the workplace for gay men, lesbians, and
bisexuals;
A number of Fortune 500 corporations have implemented non-discrimination
policies encompassing the following principles:
1) Discrimination based on sexual orientation and gender identity will be
prohibited in the company's employment policy statement.
2) The company's non-discrimination policy will be distributed to all employees.
3) There shall be no discrimination based on any employee's actual or perceived
health condition, status, or disability.
4) There shall be no discrimination in the allocation of employee benefits on
the basis of sexual orientation or gender identity.
5) Sexual orientation and gender identity issues will be included in corporate
employee diversity and sensitivity programs.
6) There shall be no discrimination in the recognition of employee groups based
on sexual orientation or gender identity.
7) Corporate advertising policy will avoid the use of negative stereotypes based
on sexual orientation or gender identity.
8) There shall be no discrimination in corporate advertising and marketing
policy based on sexual orientation or gender identity.
9) There shall be no discrimination in the sale of goods and services based on
sexual orientation or gender identity, and
10) There shall be no policy barring on corporate charitable contributions to
groups and organizations based on sexual orientation.
RESOLVED: The Shareholders request that management implement equal employment
opportunity policies based on the aforementioned principles prohibiting
discrimination based on sexual orientation and gender identity.
STATEMENT: By implementing policies prohibiting discrimination based on sexual
orientation and gender identity, the Company will ensure a respectful and
supportive atmosphere for all employees and enhance its competitive edge by
joining the growing ranks of companies guaranteeing equal opportunity for all
employees.
[INQUIRY LETTER]
February 1, 2008
BY EMAIL and EXPRESS MAIL
Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Apache Corporation 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 January 3, 2008 letter sent to the Securities and Exchange Commission
(the "Commission") by Sarah Ball Teslik, Senior Vice President Policy and
Governance, of Apache Corporation ("Apache" or the "Company"). In that letter,
the Company contended that the Funds' shareholder proposal (the "Proposal") may
be omitted from the Company's 2008 proxy statement and form of proxy (the "Proxy
Materials") by virtue of Rule 14a-8(i)(7) pursuant to the Securities Exchange
Act of 1934.
I have reviewed the Proposal as well as Rule 14a-8 and the January 3, 2008
letter. Based upon that review, it is my opinion that the Proposal may not be
omitted from the Company's 2008 Proxy Materials. In light of the consistent
recognition by the Division of Corporation Finance (the "Division" or the
"Staff") that discrimination based on sexual orientation is a significant social
policy issue, including its denial of no-action relief as to the Funds'
identical proposal last year, the Funds respectfully request that the Division
deny the relief that Apache seeks.
I. The Proposal
The Proposal consists of whereas clauses followed by a Resolved Clause and a
Supporting Statement. The whereas clauses and Supporting Statement note, inter
alia, that national public opinion polls consistently find more than
three-quarters of the American people support equal rights in the workplace for
gay men, lesbians, and bisexuals; that a recent study has found that 16-44% of
gay men and lesbians in twenty cities nationwide experienced workplace
harassment or discrimination based on their sexual orientation; that a number of
Fortune 500 corporations have implemented non-discrimination policies, and that
the implementation of policies prohibiting discrimination based on sexual
orientation and gender identity will ensure a respectful and supportive
atmosphere for all employees.
The Resolved clause states:
RESOLVED: The Shareholders request that management implement equal employment
opportunity policies based on the aforementioned principles prohibiting
discrimination based on sexual orientation and gender identity.
II. The Company Has Not Shown That It May Omit The Proposal Under Rule
14a-8(i)(7).
In its letter of January 3, 2008, the Company requested that the Division not
recommend enforcement action to the Commission if the Company omits the Proposal
under SEC Rule 14a-8(i)(7) (relates to the conduct of the company's ordinary
business operations and does not involve significant social policy issues).
Pursuant to Rule 14a-8(g), the Company bears the burden of proving that this
exclusion applies. As detailed below, the Company has failed to meet its burden
and its request for "no-action" relief should accordingly be denied.
A. AVOIDING EMPLOYMENT DISCRIMINATION BASED ON SEXUAL ORIENTATION AND GENDER
IDENTITY IMPLICATES A SIGNIFICANT SOCIAL POLICY ISSUE AT THE CORE OF THE
COMMISSION'S 1998 RELEASE.
This past autumn, the United States House of Representatives passed the
Employment Non-Discrimination Act, which would make it illegal to fire, refuse
to hire or fail to promote an employee because of the person's real or perceived
sexual orientation. Washington Post (November 11, 2007). This action by the
House is but the most recent such confirmation that discrimination based on
sexual orientation is a significant social policy issue.
The Funds' Proposal, in asking that management implement equal employment
opportunity policies prohibiting discrimination based on sexual orientation and
gender identity, does not implicate "ordinary business." Indeed, the leading
statement on the significant social policy exception to the "ordinary business"
exclusion, Exchange Act Release No. 34-40018, "Amendments to Rules on
Shareholder Proposals," (May 21, 1998) (the "1998 Release"), arose from the
Commission's recognition that avoiding employment discrimination based on sexual
orientation was just such an issue. Specifically, the 1998 Release was issued to
"reverse the Cracker Barrel no-action letter on employment-related proposals
raising social policy issues" Id. In Cracker Barrel (October 13, 1992), the
Staff had permitted the exclusion of the New York City Employees' Retirement
System's proposal asking that company to implement non-discriminatory employment
policies relating to sexual orientation, and to add explicit prohibitions
against such discrimination to its corporate employment policy statement. The
1998 Commission's reversal of the Cracker Barrel decision is, by itself, a fully
sufficient basis for denying no-action relief as to the Funds' current Proposal
to adopt an equal employment policy "prohibiting discrim nation based on sexual
orientation and gender identity."
Moreover, the extended discussion in the 1998 Release further demonstrates why
the current Proposal transcends "ordinary business." The 1998 Release summarized
the two principal considerations that the Commission directed must be applied
when determining whether any proposal falls within the "ordinary business"
exclusion:
The first relates to the subject matter of the proposal. Certain 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. Examples include the management of the workforce, such as the hiring,
promotion and termination of employees, decisions on production quality and
quantity, and the retention of suppliers. However proposals relating to such
matters but focusing on sufficiently significant social policy issues (e.g.,
significant discrimination matters) 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.
(Emphasis added.)
The Proposal here raises just such significant social policy issues in its
request for the Company to implement equal employment opportunity policies. The
Proposal is unlike any of the illustrative examples of day-to-day business
issues listed in the 1998 Release and furthermore, there is no question that the
Proposal's focus is a significant discrimination matter. Under that Commission
guidance, Apache shareholders should be given the opportunity to ask their
Company to implement such policies.
The second consideration set forth in the 1998 Release also precludes a finding
that avoiding such employment discrimination is "ordinary business":
The second consideration is 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. This consideration may come into play in a number of
circumstances, such as where the proposal involves intricate detail, or seeks to
impose specific time-frames or methods for implementing complex policies.
1998 Release, Id.
The implementation of equal employment opportunity policies prohibiting
discrimination based on sexual orientation and gender identity is not a matter
too complex for meaningful shareholder participation. Thus, under the
Commission's example and guidelines, shareholders should be given the chance to
vote on the Funds' Proposal regarding this serious issue.
As the 1998 Release provides no basis for excluding the Funds' Proposal, the
Company has failed to carry its burden of proving that the Proposal may be
excluded.
B. THE SEC STAFF HAS ALREADY DENIED NO-ACTION ADVICE WITH RESPECT TO THE
IDENTICAL PROPOSAL THAT THE FUNDS PRESENTED JUST LAST YEAR.
The Proposal here is word-for-word identical to the proposal in Armor Holdings,
Inc. (April 3, 2007) ("Armor"), in which the Division stated:
The proposal requests that management implement equal employment opportunity
policies based on certain principles prohibiting discrimination based on sexual
orientation and gender identity.
We are unable to concur in your view that Armor Holdings has met its burden of
establishing that Armor Holdings may exclude the proposal under rule
14a-8(i)(7). Accordingly, we do not believe that Armor Holdings may omit the
proposal from its proxy materials in reliance upon rule 14a-8(i)(7).
Given that the Proposal is identical to the Armor proposal (copy attached) and
nothing has changed in the law or no-action letters, the identical result should
obtain here: No-action relief should be denied. Strikingly, the Company does not
even cite this recent on point letter1, much less attempt to distinguish it. We
can only assume that because the Armor proposal and the Proposal are identical
and there has been no change in the law, there is nothing the Company can say to
distinguish Armor. This basis, too, is sufficient in and of itself to deny the
Company's request that it be permitted to exclude the Proposal.
Apache also did not cite or attempt to distinguish the Proposal from another
shareholder proposal as to which the Division denied no-action relief, and which
sought amendment of the company's written equal employment opportunity policy to
explicitly prohibit discrimination based on sexual orientation. OGE Energy, Inc.
(February 24, 2004).
In short, in addition to the 1998 Release's explicit reversal of the Cracker
Barrel position, the Staff's recent denial of no-action advice as to similar or
identical proposals is further strong support for the denial of the Company's
request here.
C. THE NO-ACTION LETTERS CITED BY APACHE ARE INAPPOSITE BECAUSE NONE OF THE
PROPOSALS RELATE TO DISCRIMINATION BASED ON SEXUAL ORIENTATION OR GENDER
IDENTITY.
The Company cited no-action letters covering a wide range of subjects:
advertising and marketing; sale of products; charitable giving; executive and
director compensation; reduction of nitrogen oxide emissions; use of negative
stereotypes; domestic partner benefits; predatory lending, and the establishment
of a committee regarding shareholder value. However, none of the proposals in
the no-action letters the Company referenced was related to discrimination based
on sexual orientation or gender identity, and all are, therefore, inapposite.
III. Conclusion
The Funds' Proposal, as well as the proposal in Armor with which it is
identical, properly requested that management implement equal employment
opportunity policies prohibiting discrimination based on sexual orientation and
gender identity. The Proposal cannot be excluded as relating to "ordinary
business."
For the reasons set forth above, the Funds respectfully submit that the Company
has failed to meet the burden of showing that the Proposal may be excluded under
14a-8(i)(7), and the Company's request for "no-action" relief should be denied.
Should you have any questions or require any additional information, please
contact me.
Thank you for your time and consideration.
Very truly yours,
/s/
Janice Silberstein
Associate General Counsel
cc: Sarah Ball Teslik, Esq. Senior Vice President Policy and Governance Apache
Corporation 2000 Post Oak Boulevard, Suite 100 Houston, Texas 77056-4400
enc.
-----FOOTNOTES-----
1 While the Company cited, and attempted to distinguish JPMorgan Chase & Co.
(February 22, 2006), as an instance of the denial of no-action relief under Rule
14a-8(i)(7) with regard to shareholder proposals on discrimination matters, it
chose not to mention in any way the Armor no-action denial, which is far more
strongly supportive of the Funds' position.
[INQUIRY LETTER]
February 8, 2008
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Shareholder Proposal to Apache Corporation
Ladies and Gentlemen:
By letter dated January 3, 2008 (the "Original Letter"), Apache Corporation, a
Delaware corporation (the "Company"), requested that the staff of the Division
of Corporation Finance (the "Staff") confirm that it would not recommend
enforcement action to the Securities and Exchange Commission (the "Commission")
if the Company excluded a shareholder proposal (the "Proposal") submitted by the
Office of the Comptroller of the City of New York (the "Proponent") from the
Company's proxy materials. By letter dated February 1, 2008, the Proponent
submitted a response to the Original Letter. We are submitting this letter to
rebut the arguments against exclusion included in the Proponent's letter to the
Staff.
ANALYSIS
As we noted in the Original Letter, the Company may exclude the Proposal from
its proxy materials in reliance on Rule 14a-8(i)(7) on the basis that the
Proposal relates to ordinary business matters. The Proponent's response letter,
while correct in its assertion that the Commission generally has recognized that
proposals relating to discrimination matters raise significant social policy
considerations, makes two key assumptions that undermine its arguments against
no-action relief: first, the Proponent overlooks numerous no-action letters in
which the Staff has granted no-action relief under Rule 14a-8(i)(7) with respect
to proposals that sought to curb or prohibit discrimination, and second, the
Proponent fails to acknowledge that the Staff denied no-action relief to Armor
Holdings, Inc. on burden grounds.
A Proposal that Seeks to Curb or Prohibit Discrimination May Be Excluded under
Rule 14a-8(i)(7) if It Focuses on Core Ordinary Business Matters
The Proponent's arguments against no-action relief rest in part on a
misunderstanding of the Staff's historical approach to Rule 14a-8 shareholder
proposals. The Proponent seems to suggest that the Proposal is presumptively
exempt from exclusion under Rule 14a-8(i)(7) due to the fact that it intends to
address discrimination matters. This, however, is incorrect. As discussed in the
Original Letter, the Staff has granted no-action relief under Rule 14a-8(i)(7)
with respect to numerous shareholder proposals purporting to address
discrimination matters. See, e.g., The Walt Disney Company, SEC No-Action Letter
(Nov. 30, 2007) (proposal requesting a report on the steps that Disney was
undertaking to avoid the use of negative racial, ethnic and gender stereotypes
in its products); AT&T Corp, SEC No-Action Letter (Feb. 25, 2005) (proposal
requesting "that AT&T consider discontinuing all domestic partner benefits for
executives making over $500,000 per year"); Tootsie Roll Industries, Inc., SEC
No-Action Letter (Jan. 31, 2002) (proposal requesting that Tootsie Roll
"identify and disassociate from any offensive imagery to the American Indian
community" in product marketing, advertising, endorsements, sponsorships, and
promotions); Quaker Oats, SEC No-Action Letter (Mar. 16, 1999) (proposal
requesting that the company review its advertising content for anything that
demeaned or slandered anyone based on race, ethnicity or religion); PepsiCo, SEC
No-Action Letter (Feb. 23, 1998) (proposal that the company ensure that it only
used "non-racist portrayals and designations" in its operations); General
Electric Company, SEC No-Action Letter (Jan. 21, 1998) (proposal requesting that
NBC exercise "special sensitivity" in the use of materials relating to sex,
race, color, age, creed, religion and national or ethnic origin).
The foregoing no-action letters illustrate the fact that the Staff will grant
no-action relief under Rule 14a-8(i)(7) with regard to any shareholder proposal
that relates to core ordinary business matters - even if the proposal seeks to
curb or prohibit discrimination. These letters are grounded in the philosophy
underlying Rule 14a-8(i)(7), that "Certain 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", and that
"proposals relating to such matters but focusing on sufficiently significant
social policy issues (e.g., significant discrimination matters) 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." 1
Based on this philosophy, a shareholder proposal that relates to ordinary
business matters may be excluded in reliance on Rule 14a-8(i)(7) unless the
proposal focuses on significant social policy issues that transcend the
day-to-day business matters addressed by such proposal. The no-action letters
cited above involved proposals that sought to address discrimination matters
that did not transcend the core ordinary business matters addressed by such
proposals. This position is consistent with numerous other instances in which a
proposal seeks to address a matter that raises significant policy
considerations, but does not transcend the ordinary business matters to which
the proposal relates. The following table illustrates this position: |[NCCDEF,6]
|[UCA1] |[TDC4,MP1,QL,VU] |[TCC4,MP2,QL,VU,G.10;] |[NCCHEAD]
|[ST]|[LC5]|[TU204;3] |[ST]|[LC5]|[RS3]SUBJECT|[QC] |[TA]EXAMPLES OF PROPOSALS
RELATING TO THE TOPIC THAT WERE DEEMED TO RELATE TO ORDINARY BUSINESS
MATTERS|[QC] |[TA]EXAMPLES OF PROPOSALS RELATING TO THE TOPIC THAT WERE DEEMED
TO RAISE SIGNIFICANT POLICY CONSIDERATIONS THAT TRANSCENDED ORDINARY BUSINESS
MATTERS|[QC] |[ST]|[LC5]|[TU204;3] |[XT]|[LA5] |[ST]|[RS4]Discrimination Based
on Race or Ethnicity |[TA]Proposal requesting that Tootsie Roll ``identify and
disassociate from any offensive imagery to the American Indian community'' in
product marketing, advertising, endorsements, sponsorships, and promotions.
|[TA]Proposal recommending that the board create an independent committee
empowered to issue a plan to eliminate discrimination in employment at National
Fuel and its subsidiaries, and describe the plan in National fuel's proxy
statement or annual report. |[ST]|[LC5] |[TA]Tootsie Roll Industries, Inc., SEC
No-Action Letter (Jan. 31, 2002) (granting relief under Rule 14a-8(i)(7) on the
basis that the proposal related to the manner in which a company advertises its
products) |[TA]National Fuel Gas Company, SEC No-Action Letter (Nov. 18, 1999)
(denying no-action relief under Rule 14a-8(i)(7)) |[ST]|[LC5]|[TU204;3]
|[ST]|[LC5]Discrimination Based on Sexual Orientation |[TA]Proposal requesting
the provision of ``spousal-type benefits to `committed domestic partners' of gay
and lesbian employees of the Company.'' |[TA]Proposal requesting that ``OGE
amend its written equal employment opportunity policy to explicitly prohibit
discrimination based on sexual orientation and take steps to substantially
implement that policy.'' |[ST]|[LC5] |[TA]International Business Corporation,
SEC No-Action Letter (Jan. 23, 1992) (``There appears to be some basis for your
view that the proposal may be excluded from the Company's proxy materials
pursuant to Rule 14a-8(c)(7) as dealing with a matter relating to the conduct of
the ordinary business operations of the registrant. In arriving at a position,
we have particularly noted that the subject of the proposal is directed to
employment related decisions with respect to general employee benefits.'')
|[TA]OGE Energy, SEC No-Action Letter (Feb. 24, 2004) (denying no-action relief
under Rule 14a-8(i)(7)) |[ST]|[LC5]|[TU204;3] |[ST]|[LC5]Gun Sales |[TA]Proposal
requesting that Wal-Mart ``adopt a policy which refuses to sell handguns and
their accompanying ammunition in any way, and that Wal-Mart return its
inventories of these products to their manufacturers.'' |[TA]Proposal requesting
a report on Sturm Ruger's ``policies and procedures aimed at stemming the
incidence of gun violence in the United States.'' |[ST]|[LC5] |[TA]Wal-Mart
Stores, SEC No-Action Letter (Mar. 9, 2001) (granting relief under Rule
14a-8(i)(7) on the basis that the proposal related to the sale of a particular
product) |[TA]Sturm, Ruger & Company, Inc., SEC No-Action Letter (Mar. 5, 2001)
(denying no-action relief under Rule 14a-8(i)(7)) |[ST]|[LC5]|[TU204;3]
|[ST]|[LC5]Environmental Matters |[TA]Proposal requesting that the board ``take
the necessary steps ``to reduce by 80% nitrogen oxide (NOx) emissions from the
coal-fired plants operated by Duke Energy in North Carolina, with no loopholes
for higher emissions, and limiting each boiler to .15 1bs of NOx per million
btu's of heat input by 2007.'' |[TA]Proposal requesting that the board adopt
quantitative goals, based on current technologies, for reducing total greenhouse
gas emissions from the company's products and operations, and that the company
report to shareholders by September 30, 2007 on its plans to achieve these
goals. |[ST]|[LC5] |[TA]Duke Energy Corporation, SEC No-Action Letter (Feb. 16,
2001) (granting relief under Rule 14a-8(i)(7)) |[TA]Exxon Mobil Corporation, SEC
No-Action Letter (March 23, 2007) (denying no-action relief under Rule
14a-8(i)(7)) |[ST]|[LC5]|[TU204;3] |[ET]
As these no-action letters illustrate, the Staff's analysis of Rule 14a-8(i)(7)
historically is not limited to the purpose or intent of the proposal. Instead,
the Staff traditionally has looked at the specific actions that a proposal seeks
to address in determining whether the proposal may be excluded in reliance on
Rule 14a-8(i)(7). It is in light of this practice that the Proponent's reliance
on OGE Energy, SEC No-Action Letter (Feb. 24, 2004), is misplaced. Despite the
Proponent's assertions, the Staff's response to OGE Energy is consistent with
the no-action positions described above. The proposal in OGE Energy, unlike the
Proposal, simply requested that the company amend its equal its written equal
employment opportunity policy to prohibit discrimination based on sexual
orientation, which, as we noted in our Original Letter, would not be excludable
under Rule 14a-8(i)(7).
While the Proposal requests that the Company amend its written equal employment
opportunity policy to prohibit discrimination based on sexual orientation and
gender identity, it also seeks to have the Company implement a number of
principles that relate to core ordinary business matters. For example, the
following principles address matters that the Staff previously has concluded
constitute ordinary business matters:
the fourth principle directs the Company to prohibit discrimination in the
allocation of employee benefits on the basis of sexual orientation or gender
identity;
the seventh principle directs the Company to avoid the use of negative
stereotypes based on sexual orientation or gender identity in corporate
advertising policy;
the eighth principle directs the Company to prohibit discrimination in
corporate advertising and marketing policy based on sexual orientation or gender
identity;
the ninth principle of the Proposal directs the Company to refrain from
discriminating in the sale of goods and services based on sexual orientation or
gender identity; and
the tenth principle of the Proposal directs the Company to refrain from
barring corporate charitable contributions to groups and organizations based on
sexual orientation.
Each of these principles provides an independent basis for excluding the
Proposal under Rule 14a-8(i)(7).2
THE STAFF DENIED RELIEF TO ARMOR HOLDINGS ON BURDEN GROUNDS
The Proponent also argues that the Staff should follow the position it took in
response to a no-action request from Armor Holdings, Inc. in 2007. In that
letter, Armor Holdings unsuccessfully sought no-action relief under Rule
14a-8(i)(7) with regard to a proposal that was nearly identical to the Proposal.
Armor Holdings, Inc. (Apr. 3, 2007). The Proponent fails to acknowledge,
however, that the Staff's response indicated that Armor Holdings had failed to
meet its burden of establishing that the proposal related to ordinary business
matters. A denial on burden grounds does not necessarily mean that the Proposal
may not be excluded under Rule 14a-8(i)(7); a denial on burden grounds typically
means that the company failed to cite the proper basis for exclusion under Rule
14a-8 or that the company invoked an appropriate basis for exclusion but failed
to make an argument that would otherwise provide a basis for relief. See, e.g.,
Loews Corporation, SEC No-Action Letter (Mar. 22, 2006).
In the Loews Corporation no-action response, the Staff granted no-action relief
to Loews Corporation under Rule 14a-8(i)(7) upon reconsideration despite the
fact that the Staff previously had denied relief under Rule 14a-8(i)(7) on
burden grounds. In the original no-action request, Loews did not argue that the
proposal could be excluded under Rule 14a-8(i)(7) on the basis that it related
to its litigation strategy. Noting that another company had been able to exclude
the same proposal from its proxy materials in reliance on Rule 14a-8(i)(7),
Loews submitted a request for reconsideration making the arguments for exclusion
that had been successful for the other company. The Staff granted no-action
relief, noting:
On February 9, 2006, we issued our response expressing our informal view that
Loews could not exclude the proposal from its proxy materials for its upcoming
annual meeting because we were unable to conclude that Loews had met its burden
of establishing that Loews could exclude the proposal under rule 14a-8(i)(7).
You have asked us to reconsider our position.
The Division grants the reconsideration request, as there now appears to be some
basis for your view that Loews may exclude the proposal under rule 14a-8(i)(7),
as relating to Loews' ordinary business operations (i.e., litigation strategy).
The Staff's response to Loews Corporation was consistent with other instances in
which the Staff denied relief on burden grounds to a company that failed to cite
the correct basis for exclusion or failed make an argument that otherwise would
provide a basis for exclusion.3
As was the case in the Loews reconsideration request, the Company believes that
the Staff's denial of no-action relief to Armor Holdings should not preclude the
Company from excluding the Proposal from its proxy materials in reliance on Rule
14a-8(i)(7). In Armor Holdings, the company argued that the proposal could be
excluded as relating to ordinary business matters, but it did not make or
substantiate many of the arguments for exclusion included in our Original Letter
or this letter. The following is a list of differences between the arguments
made by Armor Holdings and the arguments made by the Company:
Armor Holdings Failed to Cite Specific No-Action Letters in Support of its
Argument that the Proposal Related to Employee Benefits. Armor Holdings made a
conclusory argument that the proposal in that letter related to employee
benefits but it did not cite to any no-action letters that involved proposals
that addressed the allocation of employee benefits based on sexual orientation.
In contrast, the Company has identified several letters that involved proposals
that, like the Proposal, sought to direct the company to allocate employee
benefits based on sexual orientation. See, e.g., International Business
Corporation, SEC No-Action Letter (Jan. 23, 1992) (proposal requesting the
provision of "spousal-type benefits to `committed domestic partners' of gay and
lesbian employees of the Company," excludable as relating to general employee
benefits);
Armor Holdings Failed to Cite Any No-Action Letters in Support of its Argument
that the Proposal Related to Advertising or Marketing Decisions. Armor Holdings
also made a cursory argument that the proposal in that letter was excludable
under Rule 14a-8(i)(7) as relating to advertising or marketing decisions. Unlike
the Company, Armor Holdings did not cite any no-action letters in support of
this argument. In contrast, the Company has identified several no-action letters
in which the Staff granted no-action relief with respect to a proposal that
sought to prohibit discrimination and the use of stereotypes in marketing and
advertising activities. See e.g., The Walt Disney Company, SEC No-Action Letter
(Nov. 30, 2007) (proposal requesting a report on the steps that Disney was
undertaking to avoid the use of negative racial, ethnic and gender stereotypes
in its products, excludable as relating to the sale of a particular product);
Armor Holdings Did Not Argue that the Proposal Related to the Sale of a
Particular Product. Unlike the Company, Armor Holdings did not argue that the
proposal in that letter related to the sale of a particular product. In
contrast, the Company has cited numerous no-action letters that support its view
that the Proposal relates to the sale of a particular product. See e.g.,
Federated Department Stores, Inc., SEC No-Action Letter (Mar. 27, 2002)
(proposal requesting a report regarding the company's efforts to "identify and
disassociate from any offensive imagery to the American Indian community" in
products, advertising, endorsements, sponsorships, and promotions, excludable as
relating to the sale of a particular product); and
Armor Holdings Did Not Argue that the Proposal Related to its Contributions to
a Specific Organization. Unlike the Company, Armor Holdings did not argue that
the proposal in that letter related to contributions to a specific organization.
In contrast, the Company has cited numerous no-action letters that support its
view that the Proposal relates to contributions to specific types of
organizations. See, e.g., The Walt Disney Company, SEC No-Action Letter (Nov.
10, 1997) (proposal that the company cease charitable giving, excludable on the
basis that "the proposal appears directed at contributions to groups advocating
domestic partner health benefits").
The Company believes that these differences warrant a different result from the
Staff's response to Armor Holdings. By making all of the arguments for exclusion
that apply to the Proposal and supporting these arguments with the applicable
no-action letters, the Company believes that it has satisfied its burden under
Rule 14a-8(g). Accordingly, the Company respectfully urges the Staff to grant
the Company's request for no-action relief.
CONCLUSION
For the reasons given above, we respectfully request that the Staff not
recommend any enforcement action from the Commission if the Company omits the
Proposal from its 2008 proxy materials. Although the Proposal is intended to
address discrimination based on sexual orientation and gender identity, it seeks
the adoption of a number of principles that relate to core ordinary business
matters, thereby providing a basis for exclusion under Rule 14a-8(i)(7).
We urge the staff not to base its decision solely on the fact that the Proposal
is ostensibly directed at addressing employment discrimination, which the
Company recognizes as a laudable goal. Instead of focusing solely on employment
discrimination, the Proposal attempts to address a number of ordinary business
matters that the Staff previously has decided constitute inappropriate matters
for shareholder action. To deny relief under Rule 14a-8(i)(7) would allow the
Proponent to end-run these no-action positions and do indirectly what the Staff
has said shareholders cannot do directly: dictate the manner in which the
Company allocates employee benefits; the manner in which the Company selects,
advertises and markets its products; and how the Company chooses the
organizations to which it makes contributions. Accordingly, we respectfully
request that the Staff grant no-action relief under Rule 14a-8(i)(7).
If the Staff disagrees with the Company's view that it can omit the proposal, we
request the opportunity to confer with the Staff prior to the final
determination of the Staff's position. Notification and a copy of this letter
simultaneously are being forwarded to the Proponent.
Sincerely,
APACHE CORPORATION
/s/
Sarah Ball Teslik
Senior Vice President Policy and Governance
-----FOOTNOTES-----
1 Amendments to Rules on Shareholder Proposals, SEC Rel. No. 34-40018 (May 21,
1998)
2 See, e.g., International Business Corporation, SEC No-Action Letter (Jan. 23,
1992) (proposal requesting the provision of "spousal-type benefits to `committed
domestic partners' of gay and lesbian employees of the Company", excludable as
relating to employment related decisions with respect to general employee
benefits); Anheuser-Busch, SEC No-Action Letter (Jan. 21, 2000) (proposal that
the company report its use of advertisements that do not "offend the sexual
sensibilities of heterosexual persons", excludable as relating to the manner in
which it advertised its products); Federated Department Stores, Inc., SEC
No-Action Letter (Mar. 27, 2002) (proposal requesting a report regarding the
company's efforts to "identify and disassociate from any offensive imagery to
the American Indian community" in products, advertising, endorsements,
sponsorships and promotions, excludable as relating to the manner in which it
advertised its products); The Walt Disney Company, SEC No-Action Letter (Nov.
10, 1997) (proposal recommending that the Company cease making charitable
contributions; excludable as relating to charitable contributions).
3 See, e.g., Qwest Communications International, Reconsideration Request, SEC
No-Action Letter (Mar. 22, 2004) (granting relief under Rule 14a-8(i)(8) upon
reconsideration where Qwest made an argument for exclusion that it had not made
in its original request for no-action relief; the previous no-action request had
been denied on burden grounds).
[STAFF REPLY LETTER]
March 5, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Apache Corporation Incoming letter dated January 3, 2008
The proposal requests that management implement equal employment opportunity
polices based on principles specified in the proposal prohibiting discrimination
based on sexual orientation and gender identity.
There appears to be some basis for your view that Apache may exclude the
proposal under rule 14a-8(i)(7). We note in particular that some of the
principles relate to Apache's ordinary business operations. Accordingly, we will
not recommend enforcement action to the Commission if Apache omits the proposal
from its proxy materials in reliance on rule 14a-8(i)(7).
Sincerely,
/s/
Heather L. Maples
Special Counsel
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