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Company Name: Boeing Co. Document Sections:
INQUIRY LETTER [INQUIRY LETTER] December 21, 2007 VIA OVERNIGHT COURIER
U.S. Securities and Exchange Commission Re: Shareholder Proposal Concerning Shareholder Action by Written Consent Submitted by Edward P. Olson for Inclusion in The Boeing Company 2008 Proxy Statement Dear Sir or Madam: On November 22, 2007, The Boeing Company, a Delaware corporation ("Boeing" or the "Company"), received a proposed shareholder resolution and supporting statement (together, the "Proposal") from Edward P. Olson (the "Proponent") for inclusion in the proxy statement to be distributed to the Company's stockholders in connection with its 2008 Annual Meeting (the "2008 Proxy Statement"). 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 certain provisions of Commission Rule ("Rule") 14a-8 under the Securities Exchange Act of 1934, as amended, Boeing excludes the Proposal from the 2008 Proxy Statement and form of proxy (the "2008 Proxy Materials"). In accordance with Rule 14a-8(j), we hereby file six copies of this letter and the Proposal, which is attached to this letter as Exhibit A. The Company presently intends to file its definitive 2008 Proxy Materials on March 14, 2008, or as soon as possible thereafter. Accordingly, pursuant to Rule 14a-8(j), this letter is being submitted not less than 80 calendar days before the Company will file its definitive 2008 Proxy Statement with the Commission. Also, in accordance with Rule 14a-8(j), we are simultaneously forwarding a copy of this letter via overnight courier, with copies of all enclosures, to the Proponent as notice to the Proponent of the Company's intention to exclude the Proposal from the 2008 Proxy Materials. Please fax any response by the Staff to this letter to my attention at (312) 544-2829. We hereby agree to promptly forward to the Proponent any Staff response to this no-action request that the Staff transmits to us by facsimile. A copy of additional correspondence with the Proponent relating to the Proposal, since the date the Proposal was submitted to the Company, is attached to this letter as Exhibit B. The Proposal The Proposal relates to stockholder action by written consent and states, in relevant part: RESOLVED, Shareholder Action by Written Consent, Shareholders ask our board to amend our bylaws and any other appropriate governing documents in order that there is no restriction on the shareholder right to act by written consent, compared to the standard allowed by applicable law to act by written consent. Summary of Basis for Exclusion We believe that Boeing may properly exclude the Proposal from the 2008 Proxy Materials: Pursuant to Rule 14a-8(i)(2), because it would cause the Company to violate the laws of Delaware, which is the Company's jurisdiction of incorporation; and Pursuant to Rule 14a-8(i)(6), because the Company lacks the power to implement the Proposal. Analysis I. The Proposal May Be Omitted Because It Would, if Implemented, Cause the Company to Violate Delaware Law The Proposal may be omitted from the 2008 Proxy Materials pursuant to Rule 14a-8(i)(2) because, if implemented, it would cause the Company to violate Delaware law.1 As more fully described in the opinion of the Delaware law firm of Richards, Layton & Finger, P.A. (the "Delaware Law Opinion"), attached to this letter as Exhibit C, implementation of the Proposal would cause the Company's Board of Directors (the "Board") either to: A) violate the Delaware General Corporation Law (the "DGCL") by adopting a bylaw that would be inconsistent with the Company's Amended and Restated Certificate of Incorporation (the "Certificate"), or B) violate the DGCL by unilaterally adopting an amendment to the Certificate, which under the DGCL requires both board and stockholder action. A. The Proposal Asks the Board to Adopt a Bylaw That Violates the DGCL Section 228 of the DGCL provides a default right for stockholders to act by written consent without a meeting, unless such right is limited by a corporation's certificate of incorporation, as follows: (a) Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in this State, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. A corporation may not deny or limit stockholders' right to act by written consent through a bylaw; rather, per the introductory clause of section 228(a) of the DGCL, any such limitation must be contained in the certificate of incorporation.2 The Company's Certificate limits the ability of the Company's stockholders to act by written consent. Article Eighth of the Certificate provides that stockholders may not act by written consent "unless such action shall have been submitted to the stockholders after approval by the affirmative vote of a majority of the Continuing Directors" (the "Board Approval Requirement"). A copy of the Certificate is attached to this letter as Exhibit D. The Board currently consists entirely of Continuing Directors.3 Accordingly, since the Certificate is currently more restrictive of the stockholders' right to act by written consent than the DGCL, implementing the Proposal would require an amendment to the Certificate to remove the additional requirement that the action be approved and submitted to the stockholders by the Continuing Directors. As explained more fully below, Delaware law requires board and stockholder approval to amend the Certificate. See 8 Del. Code 242(b)(1). The Board cannot evade this joint approval requirement by amending the By-Laws to provide for a rule contrary to the Certificate. Moreover, Delaware law expressly prohibits adoption of bylaws that contradict a corporation's certificate of incorporation. See 8 Del. Code 109(b) ("The bylaws may contain any provision, not inconsistent with law or with the certificate of incorporation, relating to the business of the corporation, the conduct of its affairs, and its rights or powers or the rights or powers of its stockholders, directors, officers or employees.") (emphasis added). As noted by Delaware counsel in the Delaware Law Opinion: In light of the express limitations on stockholder action by written consent set forth in the Certificate of Incorporation, there is no action the Board of the Company (the "Board") can lawfully take to amend it s "bylaws and any other appropriate governing documents" to remove such limitations, as contemplated by the proposal. Any bylaw or policy adopted by a corporation's board of directors in violation of the corporation's certificate of incorporation is void. The Staff has employed Rule 14a-8(i)(2) (and its predecessor provision) as a basis for not recommending enforcement action where a proposal is excluded because it urges the adoption of a bylaw that is contrary to the certificate of incorporation. See Northrop Grumman Corp., SEC No-Action Letter, 2007 WL 817461 (Mar. 13, 2007) (declining to recommend enforcement action regarding omission of a proposal to amend the bylaws to give holders of 10% to 25% of the outstanding common stock the power to call a special stockholder meeting because such a bylaw would conflict with the certificate of incorporation that specified that only the board and the chairman of the board may call a special meeting of stockholders); AlliedSignal, Inc., SEC No-Action Letter, 1999 WL 44511 (Jan. 29, 1999) (declining to recommend enforcement action regarding omission of a proposed bylaw that would require a simple majority vote in order for stockholders to take action on all matters because such bylaw would conflict with the provisions in the certificate of incorporation and the DGCL that require a greater vote on certain actions); Weirton Steel Corp., SEC No-Action Letter, 1995 WL 107126 (Mar. 14, 1995), confirmed, 1995 WL 150685 (Apr. 3, 1995) (declining to recommend enforcement action regarding omission of a proposal asking stockholders to amend the bylaws to allow stockholders to fill director vacancies because the certificate of incorporation provided that only directors could fill such vacancies); Radiation Care, Inc., SEC No-Action Letter, 1994 WL 714997 (Dec. 22, 1994) (declining to recommend enforcement action regarding omission of a proposed bylaw that was of "questionable validity" because it specified, contrary to a provision in the certificate of incorporation, that such bylaw could be amended only by stockholders).4 Because the Proposal requests implementation of a bylaw that clearly contradicts the Certificate, it should likewise be omitted from the 2008 Proxy Materials pursuant to Rule 14a-8(i)(2). B. The Proposal Asks the Board to Unilaterally Amend the Certificate in Violation of the DGCL The Proposal requests Board implementation through an amendment to the Company's "bylaws and any other appropriate governing documents." As noted above, under the DGCL, the Proposal may not be implemented through a bylaw that conflicts with the Certificate. However, even if the Proposal is deemed to request that the Board amend the Certificate to remove any additional requirements for stockholder action by written consent not found in the DGCL (namely, the Board Approval Requirement), the Proposal would still violate the DGCL because the Board may not unilaterally adopt such an amendment. Pursuant to Section 242 of the DGCL, in order for the Company to amend its Certificate, the Board must adopt a resolution setting forth the proposed amendment, declare the advisability of the amendment and call a meeting at which the stockholders affirmatively vote in favor of the amendment in accordance with Section 242. See Stroud v. Grace, 606 A.2d 75, 93 (Del. 1992). The Proposal is not consistent with the DGCL because an amendment to the Certificate may not be effected solely by the Board, but must be approved by the stockholders. The Staff has granted relief for a nearly identical proposal under identical circumstances. In Burlington Resources Inc., SEC No-Action Letter, 2003 WL 354930 (Feb. 7, 2003), a shareholder submitted a proposal requesting the board of directors to amend the corporation's certificate of incorporation to give shareholders the right to take action by written consent and to call special meetings. However, under the DGCL, the board of directors could not unilaterally amend the corporation's certificate of incorporation, absent the subsequent approval by the corporation's shareholders. In Burlington Resources, any attempt by the board of directors to implement the proposal through a unilateral amendment to the company's certificate of incorporation would have resulted in a violation of the DGCL, and the proposal was therefore excludable under Rules 14a-8(i)(2) and 14a-8(i)(6). See also Xerox Corp., SEC No-Action Letter, 2004 WL 351809 (February 23, 2004) (Staff granted the corporation's no-action request to exclude the proposal pursuant to Rules 14a-8(i)(2) and 14a-8(i)(6) under circumstances similar to those in Burlington Resources).. Based on the foregoing, the Proposal, if implemented, would cause the Company to violate Delaware law, and the Proposal may, therefore, properly be excluded under Rule 14a-8(i)(2). II. The Proposal May Be Omitted Because the Company Lacks the Power to Implement It The Proposal may be omitted from the 2008 Proxy Materials pursuant to Rule 14a-8(i)(6) because the Company lacks the authority to implement it.5 As described more fully in the Delaware Law Opinion, there is no action the Board can lawfully take to amend the Company's "bylaws and any other appropriate governing documents" to implement the Proposal. The Staff has consistently stated that, if implementing a shareholder proposal would result in the violation of law, the proposal may be excluded pursuant to Rule 14a-8(i)(6) as beyond the power and authority of a company. See, e.g., Burlington Resources (proposal to require the board of directors to amend the certificate of incorporation without subsequent shareholder approval excluded as beyond the power and authority of the company to implement because implementation would violate Delaware law); Xerox Corporation (proposal to require the board of directors to amend the certificate of incorporation without subsequent shareholder approval excluded as beyond the power and authority of the company to implement because implementation would violate New York law). Here, the Company cannot implement the Proposal through a bylaw that conflicts with the Certificate. In addition, the Board does not have the power and authority to unilaterally amend the Certificate to remove the Board Approval Requirement. In accordance with the DGCL and the Certificate, an amendment to the Certificate to effect the Proposal may only be implemented after the Board has adopted the amendment, declared it advisable and then submitted it to the stockholders for adoption. The Board has no power or authority to effect the Proposal absent the requisite stockholder vote and the Proposal may be properly excluded from the Proxy Materials. III. The Proponent Should Not Be Permitted to Revise The Proposal Although the Company recognizes that the Staff will, on occasion, permit proponents to revise their proposals to correct problems that are "minor in nature and do not alter the substance of the proposal," 6 the Company asks that the Staff not grant the Proponent an opportunity to return to the drawing board to correct the numerous flaws in the Proposal. The Proposal contains at least two fundamental errors: The Proposal fails to recognize that the proposed bylaw is inconsistent with the Certificate and would therefore be invalid; and The Proposal fails to recognize that an amendment to the Certificate to remove the Board Approval Requirement cannot be implemented by the Board alone and that therefore such an amendment would be invalid. The deficiencies in the Proposal are far from "minor in nature" and would require the Proponent to significantly change the Proposal to make it comply with Rule 14a-8. The Proponent had ample time to draft a resolution that complies with the proxy rules before the 120-day deadline set forth in Rule 14a-8(e) expired. In fact, the Proponent has demonstrated that he knows how to craft a proposal to request Board action to initiate a process to amend the Company's Certificate when the Board cannot take such action unilaterally. The Proponent submitted a proposal for inclusion in the Company's 2005 Proxy Statement regarding the supermajority voting provisions that formerly appeared in the Company's charter documents, asking the Board to "take each step necessary for a simple majority vote to apply on each issue that can be subject to shareholder voteto the greatest extent possible." The Boeing Co., SEC No-Action Letter, 2005 WL 326906 (Feb. 7, 2005). Proposals submitted by the Proponent to the Company before 2005 also contained broad "necessary steps" or similar language that would have been appropriate under Delaware law. See, e.g., The Boeing Co., SEC No-Action Letter, 2003 WL 942791 (Feb. 26, 2003); The Boeing Co., SEC No-Action Letter, 2001 WL 128091 (Feb. 06, 2001); The Boeing Co., SEC No-Action Letter, 1998 WL 75825 (Feb. 18, 1998). In this instance, however, the Proponent chose not to draft this Proposal with the appropriate language. Neither the Company nor the Staff should be forced to serve as legal editor for the Proponent. Because the changes required to comply with Rule 14a-8 would entail a significant revision that substantively alters the Proposal, the Company requests that the Staff agree that the Proposal should be omitted from the Proxy Materials entirely. See Northrop Grumman, supra. ***** For the foregoing reasons, we believe the Proposal may be omitted from the 2008 Proxy Materials and respectfully request that the Staff confirm that it will not recommend any enforcement action if the Proposal is excluded. Should you have any questions regarding any aspect of this matter or require any additional information, please call me at (312) 544-2802. Please acknowledge receipt of this letter and its enclosures by stamping the enclosed copy of this letter and returning it to me in the enclosed envelope. Very truly yours, /s/
Michael F. Lohr enclosures cc: Edward P. Olson -----FOOTNOTES----- 1 See 17 C.F.R. 240.14a-8(i)(2) (permitting a company to exclude a proposal that would, if implemented, "cause the company to violate any state, federal, or foreign law to which it is subject"). 2 See Allen v. Prime Computer, Inc., 540 A.2d 417, 420 (Del. 1988). The Company's By-Laws do not purport to either limit or enable stockholders to act by written consent. Under Delaware law, a corporation may adopt a bylaw that merely "impose[s] minimal essential provisions for ministerial review of the validity of the action taken by shareholder consent." Datapoint Corp. v. Plaza Sec. Co., 496 A.2d 1031, 1036 (Del. 1985). Consistent with Delaware law, Article I, Section 10 of the Company's By-Laws tracks the statutory procedural requirements contained in subsections (c) to (e) of section 228 of the DGCL for stockholder action by written consent. A copy of the relevant sections of the Company's By-Laws is attached to this letter as Exhibit E. 3 Under Article Eighth of the Certificate, a Continuing Director is "a member of the Board of Directors of the Corporation who was a director prior to May 5, 2004, or any director who was recommended for election or elected by the Continuing Directors." The following directors joined the Board after May 5, 2004 but are Continuing Directors because they were recommended for election by the Continuing Directors: Arthur D. Collins Jr. (2007), William M. Daley (2006), General James L. Jones (2007), Edward M. Liddy (2007), and Mike S. Zafirovski (2004). 4 The Company recognizes that, in 2005 and 2001, the Staff denied Alaska Air Group, Inc. and Lucent Technologies Inc., respectively, no-action relief on proposals to adopt bylaws that, counsel argued, would, among other things, violate Delaware law because the proposed bylaws were inconsistent with the certificate of incorporation. Alaska Air Group, Inc., SEC No-Action Letter, 2005 WL 678878 (Mar. 17, 2005); Alaska Air Group, Inc., SEC No-Action Letter, 2005 WL 678895 (Mar. 17, 2005); Lucent Technologies Inc., SEC No-Action Letter, 2001 WL 1381607 (Nov. 6, 2001). The Company notes, however, that these no-action requests do not appear to have been supported by opinions from members of the Delaware bar and that, in its responses to these requests, the Staff concluded specifically that the company had not "met its burden of establishing that the proposal would violate applicable state law." (Emphasis added.) In contrast, the Company's request is supported by an opinion prepared by members of the Delaware bar who are licensed, and actively practice, in Delaware. Because its request is based on an opinion of Delaware counsel, the Company believes that the Staff should grant it no-action relief in accordance with the authority cited above (see Northrop Grumman, AlliedSignal, Weirton Steel and Radiation Care, supra) rather than deny such relief on the basis of the Alaska Air Group, Inc. and Lucent Technologies Inc. no-action letters. See Division of Corporation Finance: Staff Legal Bulletin No. 14 (July 13, 2001) (noting that, in assessing how much weight to afford an opinion of counsel, the Staff considers whether counsel is licensed to practice in the jurisdiction whose law is at issue in the opinion). 5 See 17 C.F.R. 240.14a-8(i)(6) (permitting a company to exclude a proposal if "the company would lack the power or authority to implement" such proposal). 6 Division of Corporation Finance: Staff Legal Bulletin No. 14B (Sept. 15, 2004). [APPENDIX 1] EXHIBIT A
Mr. W. James McNemey Rule 14a-8 Proposal Dear Mr. McNemey, This Rule 14a-8 proposal is respectfully submitted in support of the long-term performance of our company. This proposal is submitted for the next annual shareholder meeting. Rule 14a-8 requirements are intended to be met including the continuous ownership of the required stock value until after the date of the respective shareholder meeting and presentation of the proposal at the meeting. Your consideration and the consideration of the Board of Directors is appreciated in support of the long-term performance of our company. Please acknowledge receipt of this proposal. Sincerely, /s/ Edward P. Olson Date 11/20/07
cc: James C. Johnson
Mark Pacioni [APPENDIX 2] RESOLVED, Shareholder Action by Written Consent, Shareholders ask our board to amend our bylaws and any other appropriate governing documents in order that there is no restriction on the shareholder right to act by written consent, compared to the standard allowed by applicable law to act by written consent. Taking action by written consent in lieu of a meeting is a mechanism shareholders can use to raise Important matters outside the normal annual meeting cycle. Our current limitation on shareholders' rights to act by written consent, that are stricter than the rules set by state law, are considered takeover defenses because they may impede the ability of a bidder to succeed in completing a transaction or obtaining control of the board that could result in a higher stock price. A 2001 study by Harvard professor Paul Gompers provides support for the concept that shareholder disempowering governance features, including restrictions on shareholders' ability to act by written consent, are significantly correlated with a reduction in shareholder value Please encourage our Board to adopt this higher standard. [Submitted by Edward P. Olson, November 2007] [INQUIRY LETTER] January 8, 2008
Office of Chief Counsel
The Boeing Company (BA) Ladies and Gentlemen: This addresses the Written Consent resolution in the company December 21, 2007 no action request. There is no text in this resolution asking the board to act solely on its own to adopt the resolution. And the company makes no claim that the resolution should not be addressed to the board. The same or similar "Shareholders recommend that our Board adopt" the topic of another resolution, cumulative voting, was used in cumulative voting resolutions submitted to 9 large-cap companies for 2007. The result was that none of these companies contested the same text format used in the cumulative voting resolutions. These 9 companies had a market capitalization of $1.3 trillion. And these 9 companies are not historically reticent in filing no action requests. This same text then received a total of more than 6 billion yes-votes. The above could lead to the conclusion that the text of this resolution, "RESOLVED, Shareholder Action by Written Consent, Shareholders ask our board to amend our bylaws and any other appropriate governing documents in order that there is no restriction on the shareholder right to act by written consent, compared to the standard allowed by applicable law to act by written consent" is implicit in stating that the board is requested to "take all the steps in their power" to adopt a shareholder right to act by written consent. And that the companies that published the rule 14a-8 resolutions and the shareholders who cast the 6 billion yes-votes similarly understood this "take all the steps in their power" text to be implicit. The resolution text is addressed to the board, which clearly must act first to adopt the resolution. The non-excluded Wal-Mart Stores Inc. (March 20, 2007) precedent has the text "that the board take all the steps in their power to adopt cumulative voting." However, in this instance Wal-Mart gave its proponent the opportunity to add the text "take all the steps in their power." On the other hand Boeing did not give me the opportunity to add similar text and instead filed an 8-page no action request. The non-excluded Alaska Air Group, Inc. (March 1, 2004) precedent used the same "Board adopt" text format of this proposal to Boeing. The proponent response to the Alaska Air no action request made these two points: 1) "Shareholder participation in corporate governance via writing and submitting proposals is defined in simple English in the Question-and-Answer portion of Commission's instructions. We believe that the most reasonable understanding of this format is that it expects corporations to communicate with shareholder proponents to resolve structural and procedural details before appealing for guidance on disputed points to the Commission. The company declined to take this approach." 2) "Please be advised that [the proponent] Mr. Flinn is ready, willing and able to recast and revise his proposal based upon the guidance of the Staff." I am wiling to revise the text similar to the 2007 Wal-Mart precedent. Additionally, Staff Legal Bulletin No. 14 refers to the long-standing staff practice of issuing no-action responses that permit shareholders to make revisions that are minor in nature (bold added): 1. Why do our no-action responses sometimes permit shareholders to make revisions to their proposals and supporting statements? There is no provision in rule 14a-8 that allows a shareholder to revise his or her proposal and supporting statement. However, we have a long-standing practice of issuing no-action responses that permit shareholders to make revisions that are minor in nature and do not alter the substance of the proposal. We adopted this practice to deal with proposals that generally comply with the substantive requirements of the rule, but contain some relatively minor defects that are easily corrected. In these circumstances, we believe that the concepts underlying Exchange Act section 14(a) are best served by affording an opportunity to correct these kinds of defects. For this resolution the minor revision would be to insert to take all the steps in their power into "Shareholders ask our board to take all the steps in their power to amend our bylaws ..." For these reasons it is requested that the staff find that this resolution cannot be omitted from the company proxy. Sincerely, Edward P. Olson cc: Mark Pacioni<Mark.R.Pacioni@boeing.com> [STAFF REPLY LETTER] February 19, 2008
Response of the Office of Chief Counsel Division of Corporation Finance The proposal asks the board to amend the bylaws and any other appropriate governing documents in order that there is no restriction on the shareholder right to act by written consent. There appears to be some basis for your view that Boeing may exclude the proposal under rules 14a-8(i)(2) and 14a-8(i)(6). We note that in the opinion of your counsel, implementation of the proposal would cause Boeing to violate state law. Accordingly, we will not recommend enforcement action to the Commission if Boeing omits the proposal from its proxy materials in reliance on rules 14a-8(i)(2) and 14a-8(i)(6). Sincerely, /s/
Peggy Kim |
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