Company Name: Bear Stearns Cos. Inc.
Public Availability Date: February 5, 2008
Document Sections: INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER
[INQUIRY LETTER]
February 4, 2008
VIA FEDEX
Office of Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, NE
Washington D.C. 20549
Re: Withdrawal of No-Action Letter Request Regarding the Stockholder Proposal of
the United Brotherhood of Carpenters Pension Fund Exchange Act of 1934Rule
14a-8
Ladies and Gentlemen:
I refer to my letter dated December 21, 2007, pursuant to which The Bear Stearns
Companies Inc. (the "Company") requested that the Staff of the Division of
Corporation Finance of the Securities and Exchange Commission concur with the
Company's view that the stockholder proposal and supporting statement
(collectively, the "Proposal") submitted by the United Brotherhood of Carpenters
Pension Fund (the "Proponent") may be properly omitted from the proxy materials
to be distributed by the Company in connection with its 2008 annual meeting of
stockholders.
As indicated in the Proponent's letter dated February 1, 2008, attached hereto
as Exhibit A, the Proponent has withdrawn the Proposal. Accordingly, the Company
hereby withdraws its request for no action relief relating to the Proposal.
If you have any questions with respect to this matter, please feel free to
contact me at (212) 504-5555.
Very truly yours,
/s/
Dennis J. Block
cc: United Brotherhood of Carpenters Pension Fund Jeffrey Lipman, The Bear
Stearns Companies Inc. Robert K. Kane, The Bear Stearns Companies Inc.
Exhibit A.
[INQUIRY LETTER]
December 21, 2007
Office of Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, NE
Washington D.C. 20549
Re: The Bear Stearns Companies Inc. Stockholder Proposal
Ladies and Gentlemen:
On behalf of The Bear Stearns Companies Inc., a Delaware corporation (the
"Company"), and in accordance with Rule 14a-8(j) under the Securities Exchange
Act of 1934, as amended, we respectfully request the concurrence of the staff of
the Division of Corporation Finance (the "Staff") of the Securities and Exchange
Commission (the "Commission") that it will not recommend any enforcement action
to the Commission if the stockholder proposal described below (the "Proposal")
is excluded from the Company's proxy statement for the Company's 2008 Annual
Meeting of Stockholders (the "Proxy Statement"). The Annual Meeting is scheduled
for April 16, 2008. A copy of the Proposal is attached hereto. As required by
Rule 14a-8(j), six copies of this letter, including all attachments, are
enclosed.
We are also sending a copy of this letter to the United Brotherhood of
Carpenters Pension Fund to notify them of the Company's intention to omit the
Proposal from the Proxy Statement.
A. Factual Background
On November 27, 2007, the Company received a stockholder proposal from the
United Brotherhood of Carpenters Pension Fund (the "Proponent"). The Proposal
reads as follows:
Resolved: That the shareholders of The Bear Stearns Companies Inc. ("Company")
request that the Board of Director's Executive Compensation Committee adopt a
pay-for-superior-performance principle by establishing an executive compensation
plan for senior executives ("Plan") that does the following:
Sets compensation targets for the Plan's annual and long-term incentive pay
components at or below the peer group median;
Delivers a majority of the Plan's target long-term compensation through
performance-vested, not simply time-vested, equity awards;
Provides the strategic rationale and relative weightings of the financial and
non-financial performance metrics or criteria used in the annual and
performance-vested long-term incentive components of the Plan;
Established performance targets for each Plan financial metric relative to the
performance of the Company's peer companies; and
Limits payment under the annual and performance-vested long-term incentive
components of the Plan to when the Company's performance-vested long-term
incentive components to the Plan to when the Company's performance on its
selected financial performance metrics exceeds peer group median performance.
The Proponent also included a supporting statement (the "Supporting Statement").
The Proponent's full letter is attached hereto as Exhibit A.
B. Reasons for Omission
The Company believes that the Proposal may be properly omitted from the Proxy
Statement for the reasons discussed below.
1. The Proposal May be Excluded Because the Company
has Substantially Implemented the Proposal.
Under Rule 14a-8(i)(10), a shareholder proposal is excludable from a company's
proxy materials if the company has already substantially implemented the
proposal. The Staff has stated that even if company practice does not mirror the
proposal exactly, exclusion may be appropriate if the proposal's purpose has
been substantially implemented by the company. See, e.g., Masco Corporation
(Mar. 29, 1999) (shareholder proposal rendered moot by Board action on
resolution similar to shareholder proposal with amendments); Capital Cities/ABC,
Inc. (Feb. 29, 1988) (finding basis for view that proposal to hire ombudsman was
rendered moot by employment of Vice President of News Practices). Additionally,
the Staff has permitted exclusion of a proposal where the company has
implemented a number, but not all, of the parts of a multi-part proposal.
Columbia/HCA Healthcare Corp. (Feb. 18, 1998) (proposal to establish healthcare
compliance committee rendered moot by establishment of ethics committee with
similar responsibilities). The Staff has stated that "a determination that the
Company has substantially implemented the proposal depends upon whether its
particular policies, practices and procedures compare favorably with the
guidelines of the proposal." Texaco, Inc. (March 28, 1991). The Staff has also
determined that a stockholder proposal has been "substantially implemented" and
may be excluded from a company's proxy statement when the company can
demonstrate that it has already taken actions to address the substance of a
shareholder proposal. See, e.g., ConAgra Foods, Inc. (June 20, 2005) (permitting
exclusion of a proposal requesting a sustainability report, including a
company-wide review of related company policies and practices, where the company
already posted on its website a report that addressed social, environmental and
workplace policies), Nordstrom Inc. (February 8, 1995) (proposal that the
company commit to a code of conduct and submit a report to shareholders
describing the Company's supplier policy and compliance efforts was
substantially covered by existing company guidelines and was therefore
excludable as moot) and The Gap, Inc. (March 8, 1996) (proposal that the company
adopt guidelines that were substantially implemented was rendered moot).
The Proposal seeks to have the Company implement a pay-for-superior-performance
standard in determining executive compensation. The Proponent requests that the
Board of Director's Executive Compensation Committee adopt a
pay-for-superior-performance principle. The Compensation Committee of the Board
of Directors (the "Compensation Committee") has historically followed the
long-held principle that the executive officers should be rewarded based on both
the Company's and their own individual performance. Consistent with this
principle, the Company intends that base salaries represent a minimal portion of
executive compensation to ensure that substantially all compensation received is
based on performance. In determining the bonus pool for the executive officers
the Compensation Committee utilizes a variety of financial metrics. The total
bonus pool can be based upon one or more of the following criteria, adjusted in
such a manner as the Compensation Committee determines: (a) pre-tax or after-tax
return on common equity, (b) earnings per share, (c) pre-tax or after-tax net
income; (d) business unit or departmental pre-tax or after-tax income, (e) book
value per share, (f) market price per share, (g) relative performance to peer
group companies, (h) expense management and (i) total return to stockholders. In
addition, in making bonus determinations, the Compensation Committee evaluates
many factors, including the overall performance of the Company in relation to
the performance of the Company's peer group of companies. The Company has
substantially implemented the Proposal, because the Compensation Committee
follows a pay-for-performance principle and the amount of money allocated to
bonus payments already hinges on the achievement of the Company's financial
performance including its performance relative to its peer group companies.
Furthermore, the Proponent requests that the Company provide its rationale and
weighting of the financial metrics the Company uses in its incentive plans. The
Company has already substantially implemented this proposal. The Company
currently discloses information about its compensation plans through its filings
with the Commission. Specifically, the Company provides an annual description of
its compensation policies and practices in the proxy statement relating to its
Annual Meeting of Shareholders as directed by the Compensation Discussion and
Analysis disclosures in Item 402(b)(2)(iii), (v) and (vi) of Regulation S-K.
2. The Proposal is Extremely Vague and Therefore
Excludable under Rule 14a-(8)(i)(3).
Rule 14a-8(i)(3) provides that a registrant may exclude a proposal if it
violates the proxy rules, including Rule 14a-9, which prohibits materially false
or misleading statements in proxy soliciting materials. The Staff has determined
that a proposal is excludable under this rule if it is "so inherently vague and
indefinite that 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."
Philadelphia Electric Company (July 30, 1992); see also Bristol-Myers Squibb Co.
(February 1, 1999) (the Staff permitted exclusion of a proposal which was so
vague that it precluded shareholders from determining with reasonable certainty
either the meaning of the resolution or the consequences of its implementation)
and Microlog Corporation (December 22, 1994) (a proposal that recommended that a
company pay bonuses, etc. based on a very convoluted formula could be excluded
as vague and indefinite). Moreover, proposals have been found sufficiently false
or misleading where the proponent fails to define key terms or provide guidance
on implementation. See, e.g., General Electric Company (Jan. 23, 2003) (proposal
failed to define critical terms or provide guidance on implementation); Fuqua
Industries, Inc. (Mar. 12, 1991) (proposal's failure to define terms allowed for
many different interpretations of proposal); NYNEX Corporation (Jan. 12, 1990)
(proposal's failure to explain "interference" and "government policies" allowed
for several different interpretations).
The Proposal is extremely vague. The language of the Proposal that discusses the
Company's incentive plans is so inherently vague and indefinite that neither the
shareholders voting on the Proposal or the Company in implementing the Proposal,
if it is adopted, would be able to determine what actions are required. The
Proposal uses phrases such as "financial performance metrics" and "Company's
peer companies" without explaining what is meant by these terms. These terms are
open to numerous interpretations. Without guidance as to what metrics the
Company should use for financial performance criteria and what characteristics
the Company should use to define the peer group, the Company and its
shareholders may have vastly different interpretations of the Proposal and its
implementation. The Proposal also indicates that compensation should be received
only when the Company's performance exceeds its peers' median, but it is not
clear how this would be implemented when more than one performance criteria is
used. For example, some awards may utilize several criteria and the payment may
be based on an average score, a proportionate amount per criteria or some other
method. Does the Proposal require that each financial performance criterion
exceed the median or no payment will be permitted? A substantial part of the
Proposal has already been implemented by the Company and, without further
explanation, the shareholders and the Company will be unable to determine what
changes to the Company's incentive plans the Proposal requires. The Proposal
should be excludable because it is so inherently vague and indefinite that the
Company would not know how to implement it if passed.
C. Request
Based on the foregoing, the Company believes that it may omit the Proposal from
its Proxy Statement, and we respectfully request that the Staff not recommend
any enforcement action if the Proposal is omitted from the Proxy Statement. If
you have any questions or if the Staff is unable to concur with our conclusions
without additional information or discussion, we respectfully request the
opportunity to confer with members of the Staff prior to the issuance of a
written response to this letter. Please do not hesitate to contact me at (212)
504-5555. Thank you for your consideration.
Very truly yours,
/s/
Dennis J. Block
cc: United Brotherhood of Carpenters Pension Fund Jeffrey Lipman, The Bear
Stearns Companies Inc. Robert K. Kane, The Bear Stearns Companies Inc.
[INQUIRY LETTER]
November 28, 2007
Kenneth L. Edlow
Corporate Secretary
The Bear Stearns Companies Inc.
383 Madison Avenue
New York, New York 10179
Dear Mr. Edlow:
On behalf of the United Brotherhood of Carpenters Pension Fund ("Fund"), I
hereby submit the enclosed shareholder proposal ("Proposal") for inclusion in
the Bear Steams Companies Inc. ("Company") proxy statement to be circulated to
Company shareholders in conjunction with the next annual meeting of
shareholders. The Proposal relates the issue of the Company's executive
compensation plan. The Proposal is submitted under Rule 14(a)-8 (Proposals of
Security Holders) of the U.S. Securities and Exchange Commission proxy
regulations.
The Fund is the beneficial owner of 1,888 shares of the Company's common stock
that have been held continuously for more than a year prior to this date of
submission. The Fund intends to hold the shares through the date of the
Company's next annual meeting of shareholders. The record holder of the stock
will provide the appropriate verification of the Fund's beneficial ownership by
separate letter. Either the undersigned or a designated representative will
present the Proposal for consideration at the annual meeting of shareholders.
Over the past several months, Fund staff has examined hundreds of new CD&A
reports and related compensation disclosure and measured the companies' programs
against the pay-for-superior-performance standard advanced in the Proposal.
Specifically, we examined the executive compensation plans of companies in ten
industries or peer company groupings in order to assess a company's plan within
the context of its peers' programs. We found this peer group approach to be
helpful in judging the quality of a company's executive compensation plan. Our
examination revealed various positive aspects of the Company's compensation
plan, however, on balance, we belleve that the plan's shortcomings outweigh the
positive aspects of the plan.
If you would like to discuss the Proposal, please contact Ed Durkin at edurkin@carpenters.org
or at (202)546-6206 x221 to set a convenient time to talk. Please forward any
correspondence related to the proposal to Mr. Durkin at United Brotherhood of
Carpenters, Corporate Affairs Department, 101 Constitution Avenue, NW,
Washington D.C. 20001 or via fax to (202) 543-4871.
Sincerely,
/s/
Douglas J. McCarron
Fund Chairman
cc. Edward J. Durkin Enclosure
[APPENDIX]
Pay-for-Superior-Performance Principle Proposal
Resolved: That the shareholders of The Bear Steams Companies Inc. ("Company")
request that the Board of Director's Executive Compensation Committee adopt a
pay-for-superior-performance principle by establishing an executive compensation
plan for senior executives ("Plan") that does the following:
Sets compensation targets for the Plan's annual and long-term incentive pay
components at or below the peer group median;
Delivers a majority of the Plan's target long-term compensation through
performance-vested, not simply time-vested, equity awards;
Provides the strategic rationale and relative weightings of the financial and
non-financial performance metrics or criteria used in the annual and
performance-vested long-term incentive components of the Plan;
Establishes performance targets for each Plan financial metric relative to the
performance of the Company's peer companies; and
Limits payment under the annual and performance-vested long-term incentive
components of the Plan to when the Company's performance on its selected
financial performance metrics exceeds peer group median performance.
Supporting Statement: We feel it is imperative that executive compensation plans
for senior executives be designed and implemented to promote long-term corporate
value. A critical design feature of a well-conceived executive compensation plan
is a close correlation between the level of pay and the level of corporate
performance. The pay-for-performance concept has received considerable
attention, yet all too often executive pay plans provide generous compensation
for average or below average performance when measured against peer performance.
We believe the failure to tie executive compensation to superior corporate
performance has fueled the escalation of executive compensation and detracted
from the goal of enhancing long-term corporate value. Post-employment benefits
provided to executives from severance plans and supplemental executive pensions
exacerbate the problem.
We believe that the pay-for-superior-performance principle presents a
straightforward formulation for senior executive incentive compensation that
will help establish more rigorous pay for performance features in the Company's
Plan. A strong pay and performance nexus will be established when reasonable
incentive compensation target pay levels are established; demanding performance
goals related to strategically selected financial performance metrics are set in
comparison to peer company performance; and Incentive payments are awarded only
when median peer performance is exceeded.
We believe the Company's Plan falls to promote the pay-for-superior-performance
principle in several important ways. Our analysis of the Company's executive
compensation plan reveals the following features that do not promote the
pay-for-superior-performance principle:
Total compensation targets are not disclosed.
Target performance levels for annual bonus plan metrics are not disclosed and
are not peer group related.
The Company does not have a long-term incentive plan; instead, the annual
bonus plan pays off partly in cash and partly in equity.
Capital Accumulation Plan ("CAP") Units vest 50% on each of the second and
third anniversaries of grant date.
Stock options have 3 year cliff-vesting.
We believe a plan designed to reward superior corporate performance relative to
peer companies will help moderate executive compensation and focus senior
executives on building sustainable long-term corporate value.
[STAFF REPLY LETTER]
February 5, 2008
Dennis J. Block
Cadwalader, Wickersham & Taft LLP
One World Financial Center
New York, NY 10281
Re: The Bear Stearns Companies Inc.
Dear Mr. Block:
This is in regard to your letter dated February 4,
2008 concerning the shareholder proposal submitted by the United Brotherhood of
Carpenters Pension Fund for inclusion in Bear Stearns' proxy materials for its
upcoming annual meeting of security holders. Your letter indicates that the
proponent has withdrawn the proposal, and that Bear Stearns therefore withdraws
its December 21, 2007 request for a no-action letter from the Division. Because
the matter is now moot, we will have no further comment.
Sincerely,
/s/
Heather L. Maples
Special Counsel
cc: Douglas J. McCarron Fund Chairman United Brotherhood of Carpenters Pension
Fund 101 Constitution Avenue, N.W. Washington, DC 20001
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