Company Name: Gap, Inc.
Public Availability Date: January 31, 2008Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER
[INQUIRY LETTER]
January 31, 2008
VIA E-MAIL AND FEDERAL EXPRESS
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington D.C. 20549-3010
Re: The Gap, Inc.: Withdrawal of Request for No-Action Letter re Shareholder
Proposal of Professor Lucian Bebchuk
Ladies and Gentlemen:
This letter is to inform you that The Gap, Inc. (the "Company") hereby withdraws
its request for a no-action letter regarding its intention to omit the
shareholder proposal and statement in support thereof (the "Proposal") received
from Professor Lucian Bebchuk (the "Proponent"). The Proponent has withdrawn the
Proposal in a letter to the Company dated January 30, 2008, which is attached
hereto as Attachment A.
Please do not hesitate to call me at (415) 773-5918 if we may be of any further
assistance in this matter.
Very truly yours,
/s/
Brett Cooper
cc: Michelle Banks
[INQUIRY LETTER]
January 25, 2008
VIA E-MAIL AND FEDERAL EXPRESS
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington D.C. 20549-3010
Re: The Gap, Inc.: Intention to Exclude Shareholder Proposal of Professor Lucian
Bebchuk
Ladies and Gentlemen:
This letter is to inform you that The Gap, Inc. (the "Company" or "The Gap")
intends to exclude from its notice and proxy statement and form of proxy for the
Company's 2008 Annual Meeting of Shareholders (collectively, the "2008 Proxy
Materials") a shareholder proposal and statement in support thereof (the
"Proposal") received from Professor Lucian Bebchuk (the "Proponent"). The
Proposal recommends that the Company's Board of Directors (the "Board of
Directors") adopt a provision under the Company's Amended and Restated Bylaws
(the "Bylaws") that would mandate inclusion in the Company's proxy materials of
any qualified proposal for an amendment of the Bylaws that is submitted by a
shareholder, even where such proposal would otherwise be properly excluded under
Rule 14a-8. The Proponent's letter setting forth the Proposal is attached hereto
as Attachment A. Additional correspondence between the Company and the Proponent
related to the Proposal is attached hereto as Attachment B.
We hereby respectfully request that the staff of the Division of Corporation
Finance (the "Staff") concur in our opinion that the Proposal may be properly
excluded from the 2008 Proxy Materials pursuant to Rules 14a-8(i)(1), (2), (3)
and (8), and Rule 14a-9. In support of our position that the Proposal may be
excluded pursuant to Rule 14a-8(i)(1) and (2), an opinion on Delaware law from
the law firm of Morris, Nichols, Arsht & Tunnell LLP (the "Opinion") is attached
hereto as Attachment C.
Pursuant to the guidance set forth on the Commission's web site, we are
submitting this letter via e-mail to cfletters@sec.gov with six (6) confirmatory
hard copies to be filed concurrently with the Staff via mail. Also, in
accordance with Rule 14a-8(j), a copy of this letter and its attachments is
being mailed on this date to the Proponent, informing the Proponent of our
intention to exclude the Proposal from the 2008 Proxy Materials. The Company
intends to file its definitive 2008 Proxy Materials with the Commission no
earlier than April 16, 2008. Accordingly, pursuant to Rule 14a-8(j), we submit
this letter not less than 80 days before the Company intends to file its 2008
Proxy Materials.
A. The Proposal
The Proposal requests that the Board of Directors adopt a Bylaw provision that
would require the Company to include in its proxy materials any shareholder
proposal for a Bylaw amendment that complies with most, but not all, of the
eligibility and procedural requirements of Rule 14a-8, but eliminates all of the
substantive bases for excluding proposals under Rule 14a-8(i), other than the
legal validity of the proposed Bylaw amendment. Under the Proposal, a qualified
proposal to amend the Bylaws would meet the following requirements: (i) each
proposed amendment would be legally valid under state law, if adopted, (ii) the
Company would be given sufficient notice, (iii) each proposing shareholder would
be able to demonstrate ownership of a requisite value of shares, show that they
held such shares for at least one year at the time of submission, and did not
submit other proposals for that year, (iv) each proposed amendment and
supporting statement would meet length limitations, (v) each proposed amendment
would not be duplicative of another proposal to be included in the proxy
materials, and (vi) each proposed amendment would not be substantially similar
to any proposal voted on by the shareholders during the preceding three years
and have failed to receive at least 3% of the votes cast when so considered.
B. Rule 14a-8(i)(3)The Proposal is Contrary to the
Commission's Proxy Rules
Rule 14a-8(i)(3) permits the exclusion of a shareholder proposal "if the
proposal or supporting statement is contrary to any of the Commission's proxy
rules..." Here, the Proposal seeks to dismantle the Commission's existing
framework for regulating proxy materials to the detriment of the Company and the
shareholders at large by (1) providing an end-run around the carefully crafted
filtering mechanisms of Rule 14a-8(i), and (2) selectively and only partially
complying with the procedural and eligibility requirements of Rule 14a-8 for
access to the Company's proxy materials. The Proposal's attempt to exempt the
Company's shareholders from the requirements of Rule 14a-8 and replace them with
an independent proxy access paradigm is patently inconsistent with the existing
proxy rules, as explained below, and the Proposal should thus be excluded
pursuant to Rule 14a-8(i)(3).
Faced with a shareholder proposal substantially similar to that advanced by the
Proponent, the Staff concurred that such proposal could be properly excluded
pursuant to Rule 14a-8(i)(3). See State Street Corporation (Feb. 3, 2004). State
Street argued that it could exclude the proposal on multiple grounds, but the
crux of its argument was that the proposal violated Rule 14a-8(i)(3) by removing
the company from the framework of the Commission's proxy rules on shareholder
proposals. Although the Proposal at hand includes additional procedural and
eligibility requirements akin to those of Rule 14a-8, such as length limitations
and holding requirements, the Proposal still shares the same fundamental flaw
evident in the State Street proposal of undermining the Commission's carefully
crafted regulatory framework.
Indeed, if the Proposal were implemented, a shareholder could circumvent the
enumerated bases on which a company may validly exclude a proposal under Rule
14a-8(i). The Proposal does not restrict the subject matter of any proposed
Bylaw amendment, nor restrict amendments motivated by personal grievances or
specialized interests, nor does it provide grounds for the company to omit
conflicting, substantially implemented, irrelevant or immaterial proposals,
among other things, from its proxy materials. Permitting these types of
shareholder proposals in the Company's proxy materials would lead to less
effective corporate governance, as the Company and other shareholders would
inevitably waste time and resources considering, for example, proposals that
relate to an immaterial part of its business, narrow interests not shared by the
other shareholders at large, or proposals that relate to the ordinary business
operations of the Company not properly within the purview of an individual or
small group of shareholders.
Focusing for instance on the rationale underlying Rule 14a-8(i)(4) (excluding
proposals based on personal grievances), the Commission explained that the
purpose of the Rule was "to insure that the security holder proposal process
would not be abused by proponents attempting to achieve personal ends that are
not necessarily in the common interest of the issuer's shareholders generally,"
See Securities Exchange Act Release No. 34-20091 (August 16, 1983), and that the
cost and time involved in dealing with such abuse "do a disservice to the issuer
and its security holders at large." See Securities Exchange Act Release No.
34-19135 (Oct. 14, 1982). Similarly, a shareholder, lacking the knowledge,
experience and more comprehensive understanding of the Company's affairs that
the Board of Directors and management have, should not be permitted to make
proposals related to the ordinary business operations of the Company in the
Company's proxy materials. While shareholders have unilateral authority to amend
the Bylaws under Delaware law and can initiate an independent proxy solicitation
to do so, Rule 14a-8(i) properly tempers a shareholder's ability to access the
Company's proxy materials with filtering mechanisms designed to improve the
quality of shareholder engagement with the Company. In the absence of any such
constraints, the Proposal would impose substantial new obligations on the
Company that are contrary to Rule 14a-8 and the Staff's guidance.
Moreover, given that the Proposal strikes primarily at the substantive bases on
which the Company can properly exclude shareholder proposals, the Proposal would
strip the Board of Directors of its discretion to exclude proposals contrary to
the proxy rules. Providing the Company with the discretion to exclude
shareholder proposals on the bases of Rule 14a-8(i) was clearly deliberate on
the part of the Commission since mandating exclusion of certain types of
proposals is well within the Commission's rule-making authority. The proxy rules
recognize that micro-managing the role of the Board of Directors does not serve
the best interests of shareholders and, therefore, provide companies with
reasonable flexibility to determine the contents of their proxy materials based
on the specific facts and circumstances they face.
Furthermore, the existing framework for shareholder proposals is the product of
years of thoughtful policy debate and comments. In the early 1980's, the
Commission considered and rejected alternative approaches to the shareholder
proposal process, including one approach that would have required the inclusion
of any proposal proper under state law, aside from those concerning the election
of directors, and a second approach that would have supplemented the Rule 14a-8
framework by allowing shareholders and companies to develop their own rules and
procedures governing inclusion of shareholder proposals, which is the very
result the Proponent seeks to achieve through his Proposal. See Securities
Exchange Act Release No. 34-19135 (Oct. 14, 1982); Securities Exchange Act
Release No. 34-20091 (August 16, 1983). In 2007, the Commission revisited the
idea of allowing shareholders and companies to develop their own rules and
procedures governing shareholder proposals in its proposing release on
shareholder access. See Securities Exchange Act Release No. 34-56160 (July 27,
2007). After consideration, the Commission once again decided to retain the
existing Rule 14a-8 framework and determined not to alter its position that the
current framework governing shareholder proposals best serves the interests of
shareholders. See Securities Exchange Act Release No. 34-56914 (Dec. 7, 2007).
Since the Commission has repeatedly taken the position that the proxy rules
should not be altered to allow for shareholder or company driven governance of
shareholder proposals in lieu of Rule 14a-8, it follows that the proxy rules
currently do not permit shareholders or companies to develop their own
procedures for inclusion of shareholder proposals. Shareholder proposals that
seek to achieve this same end are, therefore, excludable pursuant to Rule
14a-8(i)(3) as contrary to the proxy rules.
Additionally, the Commission and the Staff have repeatedly commented on the
Commission's role as gatekeeper to the proxy statement and form of proxy through
the process that Rule 14a-8 contemplates. Openly recognizing the crucial role it
plays in regulating the proxy process, the Commission has made clear that
proposals that would curtail or reduce its role are improper. See Securities
Exchange Act Release No. 34-40018 (May 21, 1998) (determining not to adopt
proposals sharing common theme of reducing the role of the Commission and its
staff in the shareholder proposal process due, in part, to resistance among
commentators to any such reduction in the Commission's participation). When
considering proposals that sought to reduce the Commission's involvement in the
review of shareholder proposals, the Commission noted that "some of the
proposals we are not adopting share a common theme: to reduce the Commission's
and its staff's role in the process and to provide shareholders and companies
with a greater opportunity to decide for themselves which proposals are
sufficiently important and relevant to the company's business to justify
inclusion in its proxy materials." Id. The Proponent's attempt to eliminate the
Commission's oversight role through the Proposal directly conflicts with the
Commissions express recognition of the importance of its oversight and its
repeated refusals to adopt rules that reduce its role in favor of more
autonomous shareholders.
Not only does the Proposal seek to establish its own proxy access paradigm, the
Proposal is contrary to the eligibility requirements of Rule 14a-8. While the
qualifications set forth in the Proposal at first appear to mimic the
requirements of Rule 14a-8, the Proposal is in fact inconsistent with the proxy
rules for shareholder proposals. Specifically, Rule 14a-8(b) requires, among
other things, a shareholder submitting a proposal to continue to hold the
company's shares through the date of the annual meeting, in addition to
demonstrating the specified threshold of share ownership and one year holding
period at the time of submission. In direct violation of this eligibility
requirement, the Proposal omits any requirement for a shareholder to
continuously hold their shares through the date of the meeting. This criteria
goes to the fundamental fairness and efficiency of the shareholder proposal
process by ensuring that proponents have substantive and legitimate interests in
the Company before and at the time they are making a proposal. If a proponent
should fail to hold the required number of securities through the date of the
shareholders meeting, Rule 14a-8(f)(2) permits a company to exclude all of that
shareholder's proposals from its proxy materials for the following two years. By
not requiring a proponent to maintain an investment interest in the Company at
the time of the shareholders meeting, the Proposal inappropriately allows a
person without any investment or economic interest in the Company to consume the
time and resources of other legitimate shareholders and the Company.
The authority to regulate what is required or permitted in a proxy statement or
on a form of proxy is vested exclusively in the Commission, and not individual
shareholders, under Section 14 of the Securities and Exchange Act of 1934 and is
expressed in related Rules and in Regulation 14A. The Proponent's attempt to
vastly expand rights of access to the Company's proxy materials absent
compliance with Rule 14a-8 is flatly inconsistent with the framework for access
to corporate elections carefully crafted by the Commission.
Based on the foregoing, we respectfully request that the Staff concur in our
opinion that the Proposal may be properly excluded pursuant to Rule 14a-8(i)(3)
from the Company's 2008 Proxy Materials.
C. Rule 14a-8(i)(8)The Proposal Relates to the
Nomination or Election for the Company's Board of Directors
Additionally, Rule 14a-8(i)(8), as recently amended, permits the exclusion of a
shareholder proposal "if the proposal relates to a nomination or an election for
membership on the company's board of directors or analogous governing body or a
procedure for such nomination or election." Although director nominations and
elections are not explicitly addressed by the Proposal, the Proponent seeks to
establish a process through which a shareholder could force the Company to
include shareholder nominees in the Company's proxy materials in future years.
Indeed, if effected, the Proposal would enable the Company's shareholders to
amend the Bylaws such that the Company would be compelled to include a proposed
bylaw amendment relating to director nominations or elections and procedures in
its proxy materials.
As the Commission recently explained, Rule 14a-8(i)(8) permits exclusion not
only of a proposal that would result in an immediate election contest but also
any proposal that "would set up a process for shareholders to conduct an
election contest in the future by requiring the company to include shareholders'
director nominees in the company's proxy materials for subsequent meetings." See
Securities Exchange Act Release No. 34-56914 (Dec. 7, 2007) (amending Rule
14a-8(i)(8) in keeping with the Staff's long-standing position that shareholder
proposals involving bylaw amendments related to director election and nomination
procedures can be properly excluded on the basis of Rule 14a-8(i)(8)). In its
discussion of the purpose of Rule 14a-8(i)(8), the Commission emphasized that
"the proper functioning of Rule 14a-8(i)(8) is particularly critical to assuring
that investors receive adequate disclosure in election contests, and that they
benefit from the full protection of the antifraud provisions of the securities
laws." Id.
If the Proposal were included in the 2008 Proxy Materials and adopted by the
Board of Directors pursuant to approval by the Company's shareholders, a
shareholder could then submit for inclusion in the Company's proxy materials for
a subsequent meeting a proposal to amend the Bylaws to provide for inclusion of
shareholder nominees in the Company's proxy materials. Although such a proposal
would clearly be excludable under Rule 14a-8(i)(8), the Company nevertheless
could be compelled to include the proposal in its proxy materials as a result of
the Bylaw amendment that the Proposal seeks to effect. If such a proposal were
made and approved by the shareholders, the stage would be set for an election
contest without compliance with the Commission's rules on contested elections.
Therefore, the effect of the Proposal in subsequent years would be to establish
procedures that ultimately could result in a contested election, without being
subject to the extensive disclosure requirements and protections of the rules
that regulate contested proxy solicitations. This end-run around Rule
14a-8(i)(8) would allow a shareholder to accomplish in two steps a result that
the Commission's rules would prohibit were it sought in one.
Based on the foregoing, we respectfully request that the Staff concur in our
opinion that the Proposal may be properly excluded pursuant to Rule 14a-8(i)(8)
from the Company's 2008 Proxy Materials.
D. Rule 14a-8(i)(3) and Rule 14a-9The Proposal is Misleading Because It
Contains Confusing, Indefinite and Vague Statements
Rule 14a-8(i)(3) and Rule 14a-9 prohibit materially false or misleading
statements in a company's proxy materials. The Staff has consistently taken the
position that vague and indefinite proposals may be excluded under Rule
14a-8(i)(3) and Rule 14a-9 where "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." Staff Legal Bulletin No. 14B (September 15, 2004); See
Philadelphia Electric Company (July 30, 1992); Alaska Air Group, Inc. (April 11,
2007)(company permitted to exclude as being vague and indefinite a proposal
requesting that the board of a company "complete the appropriate process in 2007
to amend the company's governance documents (certificate of incorporation and or
bylaws) to assert, affirm and define the right of the owners of the company to
set standards of corporate governance").
By selectively complying with Rule 14a-8, the Proposal is inherently confusing,
vague and indefinite. The Proposal asks that the Board of Directors amend the
Bylaws to implement a scheme that contravenes Rule 14a-8, but at the same time
asks that the Company do so "to the extent permitted under federal and state
law." In reviewing the Proposal, the shareholders would be justifiably perplexed
as to whether, and to what extent, a proposal that seeks to contravene Rule
14a-8 and establish its own proxy access framework, could also be permitted
under federal law. Furthermore, one of the Proposal's requirements for a
"qualified proposal" is that the proposed bylaw amendment be "legally valid if
adopted." Again, it is unclear whether the Proponent's concept of "legally
valid" is meant to encompass the standards from Rule 14a-8(i) or whether it is
meant to impose a different standard, which the Proponent does not adequately
explain.
In effect, the Proposal does not provide sufficient guidance to shareholders or
the Board of Directors as to the extent to which a proposal that circumvents
Rule 14a-8 is "permitted under federal and state law," nor does it adequately
define the intended parameters of what constitutes a "qualified proposal."
Consequently, in considering the Proposal, the Company's shareholders may be
confused as to whether the Proposal is legally valid and permissible under the
proxy rules and the Board of Directors will not have any reasonable certainty as
to how to implement the Proposal if it is approved by the shareholders. Because
of the inherent contradictions in the Proposal's provisions, how its proposed
framework would interact with the requirements of Rule 14a-8 is ambiguous and
confusing, and thereby misleading.
For these reasons, we respectfully request that the Staff concur in our opinion
that the Proposal may be properly excluded pursuant to Rule 14a-8(i)(3) and Rule
14a-9 from the Company's 2008 Proxy Materials.
E. Rule 14a-8(i)(1) and (2)The Proposal is Improper Under Delaware Law and if
Implemented, Would Cause the Company to Violate Delaware Law
The Company may also properly exclude the Proposal pursuant to Rule 14a-8(i)(1),
which permits exclusion of any shareholder proposal that is not a proper subject
for action by shareholders under the jurisdiction of the company's organization,
and Rule 14a-8(i)(2), which permits exclusion of any shareholder proposal that,
if implemented, would cause the Company to violate state law. For the reasons
set forth in greater detail in the Opinion, we believe that the Proposal, if
implemented, would violate the Delaware General Corporation Law ("DGCL") and is
thus not a proper subject for action by shareholders under Delaware law.
If implemented, the resulting bylaw would cause the Company to contravene
Sections 141(a) and 146 of the DGCL by preventing the Board of Directors from
fulfilling its fiduciary duty to manage the business and affairs of the Company.
The Proposal seeks to deprive the Board of its ability to determine the matters
to be included in the Company's proxy statement for action by shareholders
including whether "qualified proposals" may be excluded from the proxy
materials.
Section 141(a) of the DGCL articulates the fundamental Delaware law principle
that the business and affairs of a corporation shall be managed by or under the
direction of its board of directors. As explained in the Opinion, Section 146 of
the DGCL further contemplates that a board must approve a matter before agreeing
to submit it to shareholders as part of the company's proxy statement, other
than as required by federal law through Rule 14a-8. Moreover, under Delaware
law, "directors cannot agree to surrender to others the duties of corporate
management which the statutes impose upon them," Rosenblatt v. Getty Oil Co., No
5278, 1983 WL 8936, at *18 (Del. Ch. Sept. 19, 1985), aff'd
493 A.2d 929 (Del.
1985), and the fact that shareholders approve a corporate action does not
exonerate directors who do not exercise proper business judgment consistent with
their fiduciary duties. Smith v. Van Gorkom, 488 A. 2d 858, 873 (Del. 1985).
However, it is precisely such an abdication of the Board of Directors' Section
141(a) duties that the Proposal seeks to implement.
Because directors are charged with fiduciary responsibility for the management
of the corporation's business, they are also responsible for decisions about the
use of corporate property. A fundamental element of the Board of Directors'
Section 141(a) obligation is its authorship and dissemination to shareholders of
the corporate proxy materials. However, the Proposal, if implemented, would
mandate that the Board of Directors abandon its critical fiduciary
responsibility by requiring the inclusion of shareholder proposals irrespective
of the Board of Directors' good faith determination; indeed, going forward, that
responsibility would permanently (unless and until the bylaw is amended or
repealed) be vested in the Proponent (who drafted it) and the one-off majority
of shareholders (who approved it).
The Proposal would require inclusion of any number, perhaps dozens, of
shareholder proposals for amendments to the Bylaws that, for instance, are
immaterial to the Company's business or relate to personal grievances or
ordinary business functions. The costs of reviewing and responding to each
proposal and engaging legal counsel to determine which proposals are "qualified
proposals" could be substantial, as would the distraction to management and
shareholders. Notwithstanding the express language of Delaware law to the
contrary, the Proposal would take away the Board of Directors' ability to
determine in its informed business judgment that the publication and mailing of
a lengthy proxy statement filled with such superfluous proposals is not in the
best interests of the Company and its shareholders and not a prudent use of
corporate funds. The dereliction of the directors' fiduciary obligations
mandated by the proposed bylaw is thus clearly inconsistent with the role of the
Board of Directors contemplated by Sections 141(a) and 146 of the DGCL, and the
Proposal is therefore not a proper subject for action by shareholders under
Delaware law.
We also note that, although the Proposal "recommends" that the Company adopt the
proposed bylaw amendment, even a precatory proposal is excludable if the action
called for by the proposal would violate state, federal or foreign law. See,
e.g., MeadWestvaco Corporation (Feb. 27, 2005) (concurring that a proposal
recommending amendment of the company's bylaws to require majority stockholder
approval to authorize certain levels of executive compensation is excludable
under Rule 14a-8(i)(2)).
For the foregoing reasons and in the legal opinion of the Company's Delaware
counsel, Morris, Nichols, Arsht & Tunnell, LLP, attached hereto as Attachment C,
the Proposal may be properly excluded from the 2008 Proxy Materials under Rules
14a-8(i)(1) and (2).
F. Conclusion
Based on the foregoing, we respectfully request that the Staff concur in our
opinion that the Proposal may be properly excluded pursuant to Rules
14a-8(i)(1), (2), (3), and (8), and Rule 14a-9 from the Company's 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. Should you
disagree with the conclusions set forth herein, we respectfully request the
opportunity to confer with you prior to the determination of the Staff's final
position. Please do not hesitate to call me at (415) 773-5918 or Richard Smith
at (415) 773-5830, if we may be of any further assistance in this matter.
Very truly yours,
/s/
Brett Cooper
cc: Professor Lucian Bebchuk
Michelle Banks
Richard V. Smith
[APPENDIX]
December 13, 2007
VIA FACSIMILE AND OVERNIGHT MAIL
Lauri M. Shanahan
Corporate Secreinry
The Gap Incorporated
Two Folsom St.
San Fruncisco, CA 94105
Re: Shareholder Proposal of Lucian Behchuk
To Lauri M. Shanahan:
I am the owner of 150 shares of common stock of The Gap Incorporated (the
"Company"), which I have continuously held for more than 1 year as of today's
date. I intend to continue to hold these securities through the date of the
Company's 2008 annual meeting of shareholders.
Pursuant to Rule 14a-8. I enclose herewith a shareholder proposal and supporting
statement (the "Proposal") for inclusion in the Company's proxy materials and
for presentation to a vote of shareholders at the Company's 2008 annual meeting
of shareholders.
Please let me know if you would like to discuss the Proposal or if you have any
questions.
Sincerely,
/s/
Lucian Bebchuk
RESOLVED that stockholders of The Gap Incorporated recommend that the Board of
Directors adopt a Bylaw provision under which the Corporation, to the extent
permitted under federal law and state law, shall include in its proxy materials
for an Annual Meeting of stockholders any qualified proposal for an amendment of
the Bylaws submitted by a proponent. as well as the proponent's supporting
statement if any and shall allow stockholders to vote with respect to such a
qualified proposal on the Corporation's proxy card. A qualified proposal refers
in this resolution to a proposal that satisfies the following requirements:
(a) The proposed amendment of the Bylaws would be legally valid if adopted;
(b) The proponent submitted the proposal and supporting statement to the
Corporation's Secretary by the deadline specified by the Corporation for
stockholder proposals for inclusion in the proxy materials for the Annual
Meeting;
(c) The proponent beneficially owned at the time of the submission at least
$2,000 of the Corporation's outstanding conunon stock for at least one year. and
did not submit other stockholder proposals for the Annual Meeting;
(d) The proposal and its supporting statement do not exceed 500 words;
(e) The proposal does not substantially duplicate another proposal previously
submitted to the Corporation by another proponent that will be included in the
Corporation's proxy materials for the same meeting; and
(f) The proposal is not substantially similar to any other proposal that was
voled upon by the stockholders at any time during the preceding three calendar
years and failed to receive at least 3% of the votes cast when so considered.
SUPPORTING STATEMENT:
Statement of Professor Lucian Bebchuk: In my view, the ability to place
proposals for Bylaw amendments on the corporate ballot could in some
circumstances he essenrial for stockholders' ability to use their power under
state law to initiale Bylow amendments. In the absence of ability to place such
a proposal on the corporate ballot, the costs involved in obtaining proxies from
other stockholders could deter a stockholder from initiating a proposal even if
the proposal is one that would obtain stockholder approval were it to be placed
on the corporate ballot. Current and future SEC rules may in some cases allow
companies but do not currently require them - to exclude proposals from the
corporate ballot. In my view, even when SEC rules may allow exclusion, it would
be desirable for the Corporation to place on the corporate ballot proposals that
satisfy the requirements of a qualified proposal. I urge even stockholders who
believe that no changes in the Corporation's Bylaws are carrently desirable to
vote for my proposal to facilitate stockholders' ability to initiate proposals
for Bylaw amendments to be voted on by their fellow stockholders.
I arge you to vote for this proposal.
[STAFF REPLY LETTER]
January 31, 2008
Brett Cooper
Orrick, Herrington & Sutcliffe LLP
The Orrick Building
405 Howard Street
San Francisco, CA 94105-2669
Re: The Gap, Inc.
Dear Mr. Cooper:
This is in regard to your letter dated January 31,
2008 concerning the shareholder proposal submitted by Lucian Bebchuk for
inclusion in The Gap's proxy materials for its upcoming annual meeting of
security holders. Your letter indicates that the proponent has withdrawn the
proposal, and that The Gap therefore withdraws its January 25, 2008 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: Lucian Bebchuk
1545 Massachusetts Avenue
Cambridge, MA 02138
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