Company Name: Dresser-Rand Group Inc.
Public Availability Date: February 19, 2008
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
STAFF REPLY LETTER
[INQUIRY LETTER]
January 4, 2008
Direct Dial (202) 955-8653
Fax No. (202) 530-9677
Client No. C 22847-00003
VIA HAND DELIVERY
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Stockholder Proposal of CWA/ITU Negotiated Pension Plan Exchange Act of
1934Rule 14a-8
Dear Ladies and Gentlemen:
This letter is to inform you that our client, Dresser-Rand Group Inc. (the
"Company"), intends to omit from its proxy statement and form of proxy for its
2008 Annual Meeting of Stockholders (collectively, the "2008 Proxy Materials") a
stockholder proposal and statements in support thereof (the "Proposal") received
from CWA/ITU Negotiated Pension Plan (the "Proponent").
Pursuant to Rule 14a-8(j), the Company has:
enclosed herewith six (6) copies of this letter and its attachments;
filed this letter with the Securities and Exchange Commission (the
"Commission") no later than eighty (80) calendar days before the Company intends
to file its definitive 2008 Proxy Materials with the Commission; and
concurrently sent copies of this correspondence to the Proponent.
Rule 14a-8(k) provides that stockholder proponents are required to send
companies a copy of any correspondence that the proponents elect to submit to
the Commission or the staff of the Division of Corporation Finance (the
"Staff"). Accordingly, the Company is taking this opportunity to inform the
Proponent that if the Proponent elects to submit additional correspondence to
the Commission or the Staff with respect to the Proposal, a copy of that
correspondence should concurrently be furnished to the undersigned on behalf of
the Company pursuant to Rule 14a-8(k).
THE PROPOSAL
The Proposal requests that the Company's Board of Directors adopt a policy
giving stockholders a "vote on an advisory resolution, to be proposed by [the]
Company's management, to approve or disapprove the compensation of the named
executive officers disclosed in the Summary Compensation Table of the proxy
statement." A copy of the Proposal, as well as related correspondence with the
Proponent, is attached to this letter as Exhibit A.
BASIS FOR EXCLUSION
The Company hereby respectfully requests that the Staff concur in its view that
the Proposal may be excluded from the 2008 Proxy Materials pursuant to Rule
14a-8(i)(4) because it relates to the redress of a personal claim or grievance
and is designed to result in a benefit to the Proponent or further a personal
interest not shared with other stockholders at large.
ANALYSIS
The Proposal May Be Excluded under Rule 14a-8(i)(4) Because the Proposal Relates
to the Redress of a Personal Claim or Grievance and Is Designed to Result in a
Benefit to the Proponent Not Shared with Other Stockholders at Large.
Rule 14a-8(i)(4) permits the exclusion of stockholder proposals that are (i)
related to the redress of a personal claim or grievance against a company or any
other person, or (ii) designed to result in a benefit to a proponent or to
further a personal interest of a proponent, which other stockholders at large do
not share. The Commission has stated that Rule 14a-8(i)(4) is designed to
"insure that the security holder proposal process [is] not abused by proponents
attempting to achieve personal ends that are not necessarily in the common
interest of the issuer's shareholders generally." Exchange Act Release No. 20091
(Aug. 16, 1983). Moreover, the Commission has noted, "[t]he cost and time
involved in dealing with" a stockholder proposal involving a personal grievance
or furthering a personal interest not shared by other stockholders is "a
disservice to the interests of the issuer and its security holders at large."
Exchange Act Release No. 19135 (Oct. 14, 1982). As explained below, the
Proponent has "abuse[d] the security holder proposal process" by submitting a
stockholder proposal related to the redress of a personal grievance against the
Company and designed to pursue the Proponent's personal interest that is not
shared with other Company stockholders.
The Proposal was submitted following a recent strike by the Electronic,
Electrical, Salaried, Machine and Furniture Workers Local 313 at the Company's
facility in Painted Post, New York. See Exhibit B. Local 313 is affiliated with
the International Union of Electronic, Electrical, Salaried, Machine and
Furniture Workers-Communications Workers of America (IUE/CWA). See Exhibit C.
IUE/CWA is the Industrial Division of CWA, whose website indicates that "members
and locals can participate in one or more of the benefit trusts offered through
CWA," including the Proponent. See Exhibit D. Moreover, according to its
website, the Proponent is a "pension plan that is available to any bargaining
unit of CWA [Communication Workers of America] looking for a good pension
program." Available at http://www.cwaitu.com.
In newspaper articles and union literature discussing the strike, the union
complains about the Company's executive compensation practices, including that
they are the cause of the Company not taking on a greater portion of the burden
of increased health care costs for the striking union members. For example,
union leader Steve Coates has claimed that the Company "paid [the Company's
Chief Executive Officer] over $30 million in bonuses last year after shoving a
concessionary contract down the throats of the Wellsville workers. [The Company]
paid other executives millions of dollars in bonuses as well .... For executives
who make millions of dollars a year, I guess this health insurance is no big
deal." Exhibit E. Moreover, a union press release claims that the Company
"rewards the executives for persecuting the employees who make it rich.
Dresser-Rand executives want to break Local 313 so that they can receive even
larger payoffs." Exhibit F. Another union press release quotes a union leader as
saying, "our members are well aware that the money Dresser-Rand saved at
Wellsville went directly into the pockets of their top executives." Exhibit G.
See also Exhibit H. Similarly, the Proponent's supporting statement repeats this
grievance when it asserts that the Company pays "excessive compensation," a
characterization that the Company strongly objects to. Thus, the Proposal is an
attempt by the Proponent, on behalf of its affiliated labor union, to pursue its
personal grievance against the Company and to further its personal interest
regarding minimizing increased health care costs for certain workers, which the
Proponent's affiliated labor union attributes in part to the Company's executive
compensation practices.
In the past, the Staff has permitted exclusion of stockholder proposals
submitted by labor unions under similar circumstances, finding them to be
personal grievances (specifically union campaign tactics) submitted under the
guise of legitimate stockholder proposals. For example, in Dow Jones & Co., Inc.
(avail. Jan. 24, 1994), the Staff concurred with the exclusion of a stockholder
proposal concerning executive compensation as being related to a personal
grievance of the labor union-proponent. The company described several union
publications in support of the company's claim that the proposal sought to
address a personal grievance, namely "inducing Dow Jones to include a collective
bargaining agreement on terms favorable to the [unionproponent]." Similarly, in
Core Industries, Inc. (avail. Nov. 23, 1982), the Staff concurred with the
exclusion of a stockholder proposal related to equal employment opportunity
policies where the proponent represented a union attempting to organize against
another company. The Staff stated, "despite the fact that the proposal is
drafted in such a way that it may relate to matters which may be of general
interest to the all shareholders, the Proponent is using the proposal as one of
many tactics designed to assist the Proponent in his objective as a union
organizer." See also Union Pacific Corp. (avail. Jan. 31, 2000) (permitting
exclusion under Rule 14a-8(i)(4) of a stockholder proposal related to
non-discriminatory pension policies as part of a plan by the proponent to
achieve particular employment goals). As in these other cases, the Proposal is
using the Rule 14a-8 process to further its grievance against the Company
following the affiliated union's unsuccessful strike at one of the Company's
facilities.
While in some recent situations the Staff has declined to find a stockholder
proposal excludable under Rule 14a-8(i)(4), we believe that the instant
circumstances are distinguishable. For example, in Charles Schwab Corp. (avail.
Mar. 2, 2006), the Staff denied exclusion where the company cited as evidence of
the labor union-proponent's motive allegations that individuals besides the
proponent, namely "people who we believe to be representatives of the [p]roponent,"
voiced opposition and faxed numerous opposition letters to the company.
(emphasis added.) Further, in Charles Schwab Corp., the alleged grievance
related to a particular issuesocial security reformas opposed to a grievance
with the company. Here, as evidenced in Exhibits C-H, the Proponent is
affiliated with the relevant labor union, and the Proposal's subject matter
clearly relates to the Proponent's specific grievance with the Company, as noted
in the union press releases quoted above. The Proposal also is distinguishable
from the stockholder proposal at issue in Cintas Corp. (avail. July 6, 2005), in
which the Staff declined to permit exclusion where the company claimed the
stockholder proposal was another organizing tactic by the labor union-proponent.
The proposal in Cintas Corp., however, sought an independent chairman for the
board of directors, while the labor union-proponent's grievance was with the
company's failure to allow labor union organization. Here, there is a direct
correlation between the personal grievance and the Proposal, as evidenced by the
union's comments linking the Company's executive compensation practices and
increased health care costs for certain workers. See also Nabors Industries Ltd.
(avail. Apr. 4, 2005) (denying exclusion where the topic of the stockholder
proposal was unrelated to the union's grievance). But see, e.g., Marriott
International, Inc. (avail. Mar. 19, 2002).
The Staff consistently has taken the position that a stockholder proposal may be
excluded pursuant to Rule 14a-8(i)(4) as involving the redress of a personal
claim or grievance when the proposal is used as an alternative forum to press
claims that a proponent has asserted in litigation against the company. See,
e.g., General Electric (avail. Jan. 9, 2006); Schlumberger Ltd. (avail. Aug. 27,
1999); Station Casinos, Inc. (avail. Oct. 15, 1997). In the instant case, the
strike against the Company is analogous to litigation: the union attempted to
settle its grievance with the Company through a strike and filed claims against
the Company with the National Labor Relations Board, and an affiliated pension
fund who shares this grievance now seeks to further it by submitting the
Proposal.
While on its face the Proposal may involve a matter of general interest to all
stockholders, the Proposal is excludable as a personal grievance as demonstrated
by Staff precedent. See Texaco Inc. (avail. Mar. 18, 1993); Exchange Act Release
No. 19135 (Oct. 14, 1982) (stating that stockholder proposals phrased in broad
terms that "might relate to matters which may be of general interest to all
security holders" may be omitted from a registrant's proxy materials "if it is
clear from the facts ... that the proponent is using the proposal as a tactic
designed to redress a personal grievance or further a personal interest"). For
example, in MGM Mirage (avail. Mar. 19, 2001), a stockholder proposal that would
have required the company to adopt a written policy regarding political
contributions and furnish a list of any of its political contributions was found
to be excludable under Rule 14a-8(i)(4) where the proponent had filed a number
of lawsuits against the company based on its decisions to deny the proponent
credit at the company's casino and to bar the proponent from the company's
casinos. See also Sara Lee Corp. (avail. Aug. 10, 2001) (permitting the company
to omit a stockholder proposal regarding a policy for pre-approval of certain
types of payments where the proponent had a personal interest in a subsidiary
that the company had sold and where the proponent participated in litigation
related to the subsidiary and directly adverse to the company).
As in each of those cases, the Proponent is using the Proposal as a tactic to
seek redress for a personal grievance. The Proposal was submitted by the pension
fund affiliated with the labor union that led the strike against the Company.
Moreover, the Proposal requests action with respect to executive compensation,
which during the strike the affiliated union specifically criticized as being an
impetus for the Company insisting on higher health care costs for certain
workers. The cost of health care for certain workers (which the union affiliated
with the Proponent claims is related to the Company's executive compensation
practices) is not a matter of general interest for the stockholders generally.
Thus, the Proposal seeks a benefit that is a personal, financial interest not
shared with other stockholders. See Exchange Act Release No. 19135 (Oct. 14,
1982) (a proposal is excludable under the predecessor to Rule 14a-8(i)(4) if it
is used to give the proponent some particular benefit or to accomplish
objectives particular to the proponent).
We note that the Commission recently promulgated amendments to the federal proxy
rules under the Securities Exchange Act of 1934 to facilitate the use of
electronic shareholder forums, which we believe represent a more appropriate
forum than the Rule 14a-8 stockholder proposal process for the Proponent to air
its grievance with the Company. The new rules "are expected to open up new
avenues for real-time communications among shareholders, and between
shareholders and the companies they own." Press Release 2007-247 (Nov. 28,
2007). Moreover, electronic shareholder forums provide "another venue for
interested investors to share thoughts and ideas with company management and
among themselves." Press Release 2007-247 (Nov. 28, 2007). Rather than "abuse
... the security holder proposal process" with a personal grievance, the Company
believes that the Proponent should more appropriately bring its concerns to the
Company and other stockholders through other means, such as an electronic
shareholder forum. See Exchange Act Release No. 56160 (Jul. 27, 2007)
(discussing the electronic shareholder forum and noting that "the proxy system
may not be the only, or the most efficient, means of shareholder communication
with management on purely advisory matters").
CONCLUSION
Based upon the foregoing analysis, we respectfully request that the Staff concur
that it will take no action if the Company excludes the Proposal from its 2008
Proxy Materials. We would be happy to provide you with any additional
information and answer any questions that you may have regarding this subject.
Moreover, the Company agrees to promptly forward to the Proponent any response
from the Staff to this no-action request that the Staff transmits by facsimile
to the Company only.
If we can be of any further assistance in this matter, please do not hesitate to
call me at (202) 955-8653 or Mark F. Mai, the Company's Vice President, General
Counsel and Secretary, at (713) 973-5356.
Sincerely,
/s/
Amy L. Goodman
Enclosures
cc: Mark F. Mai, Dresser-Rand Group Inc.
Tony Daley, CWA Research Department
[APPENDIX 1]
VIA Fax & Overnight Mail
December 6, 2007
Randy D. Rinicella
Vice President, General Counsel and Secretary
Dresser-Rand Group, Inc.
1200 West Sam Houston Parkway North
Houston, TX 77043
Re: Submission of Shareholder Proposal
Dear Mr. Rinicella:
On behalf of the CWU/ITU Negotiated Pension Plan ("NPP"), we hereby submit the
enclosed Shareholder Proposal ("Proposal") for inclusion in the Dresser-Rand
Group, Inc. ("DRC") proxy statement to be circulated to DRC shareholders in
conjunction with the next annual meeting of shareholders in 2008. The Proposal
is submitted under Rule 14(a)-8 of the U.S. Securities and Exchange Commission's
proxy regulations.
NPP is a beneficial holder of DRC common stock with market value in excess of
$2,000 held continuously for more than a year prior to this date of submission.
We can supply proof of such holdings upon request.
NPP intends to continue to own DRC common stock through the date of DRC's 2008
annual meeting. Either the undersigned or a designated representative will
present the Proposal for consideration at the annual meeting of stockholders.
Please direct all communications regarding this matter to Mr. Tony Daley, CWA
Research Department, at 202-434-9515.
Sincerely,
/s/
Bill Boarman
Chairman
WJB:It
Enclosure
[APPENDIX 2]
Shareholder Proposal
Resolved: The shareholders of Dresser-Rand Group Inc. request that the Board of
Directors adopt a policy that shareholders will be given the opportunity at each
annual meeting of shareholders to vote on an advisory resolution, to be proposed
by Company's management, to approve or disapprove the compensation of the named
executive officers disclosed in the Summary Compensation Table of the proxy
statement. The board should provide appropriate disclosures to ensure that
shareholders understand that the vote is advisory and will neither abrogate any
employment agreement nor affect any compensation already paid or awarded.
Supporting Statement
In our view, existing U.S. corporate governance arrangements, including SEC
rules and stock exchange listing standards, do not provide shareholders with
adequate means for communicating their views on senior executive compensation to
boards of directors. In contrast, in the United Kingdom, shareholders of public
companies are permitted to cast an advisory vote on the "directors' remuneration
report," which discloses executive compensation. Such a vote is not binding, but
it gives shareholders an opportunity to communicate views in a manner that could
influence senior executive compensation.
"Say on Pay" in the U.K., we believe, serves a constructive purpose. A study by
the Yale School of Management found that the resulting dialogue between boards
and shareholders appeared to moderate pay increases, enhance the ability of
compensation committees to stand up to insider pressures, and add legitimacy to
the executive compensation process. [Stephen Davis, "Does `Say on Pay' Work?"
Millstein Center for Corporate Governance and Performance, Yale, 2007]
U.S. stock exchange listing standards currently require shareholder approval of
equity-based compensation plans. However, those plans give compensation
committees broad discretion in making awards and establishing performance
thresholds. Also, the performance criteria submitted for shareholder approval
are generally stated in broad terms that, in our view, do not effectively
constrain compensation.
Under the circumstances, we do not believe shareholders have an adequate
mechanism for providing feedback with respect to the application of those
general criteria to individual pay packages. [See Lucian Bebchuk & Jesse Fried,
Pay Without Performance (2004), p. 49.] While withholding votes from
compensation committee members who stand for reelection is an option, we believe
that course is a blunt and insufficient instrument for registering
dissatisfaction with the way compensation committees have administered
compensation plans and policies.
Our CEO received compensation in excess of $12.1 million in 2006. This proposal
looks to the future and would give shareholders a voice that could help assure
that such excessive compensation does not continue. The annual "Say on Pay"
would also provide a focus for media scrutiny that could assist in bringing
about more reasonable compensation practices.
We urge Dresser-Rand's board to allow shareholders to express their opinion
about senior executive compensation by establishing an annual shareholder "Say
on Pay." We believe the results of such a vote would provide our Board with
useful information about whether shareholders view the company's senior
executive compensation, as reported each year in the proxy statement, to be
appropriate.
[STAFF REPLY LETTER]
February 19, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Dresser-Rand Group Inc. Incoming letter dated January 4, 2008
The proposal requests that the board adopt a policy that shareholders be given
the opportunity at each annual meeting of shareholders to vote on an advisory
resolution to approve or disapprove the compensation of the named executive
officers set forth in the Summary Compensation Table of the company's proxy
statement.
We are unable to concur in your view that Dresser-Rand may exclude the proposal
under rule 14a-8(i)(4). Accordingly, we do not believe that Dresser-Rand may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(4).
Sincerely,
/s/
William A. Hines
Special Counsel |
