Company Name: Johnson & Johnson
Public Availability Date: January 11, 2008
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 3, 2007
Direct Dial (202) 955-8653
Fax No. (202) 530-9677
Client No. C 45016-01913
VIA HAND DELIVERY
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Shareholder Proposal of Stephen Sacks Exchange Act of 1934Rule 14a-8
Dear Ladies and Gentlemen:
This letter is to inform you that our client, Johnson & Johnson (the "Company"),
intends to omit from its proxy statement and form of proxy for its 2008 Annual
Shareholders Meeting (collectively, the "2008 Proxy Materials") a shareholder
proposal and statements in support thereof (the "Proposal") received from
Stephen Sacks (the "Proponent").
Pursuant to Rule 14a-8(j), we have:
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 shareholder 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, we are 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 this Proposal, a copy of that
correspondence should concurrently be furnished to the undersigned on behalf of
the Company pursuant to Rule 14a-8(k).
BASIS FOR EXCLUSION
We hereby respectfully request that the Staff concur in our view that the
Proposal may be excluded from the 2008 Proxy Materials pursuant to Rule
14a-8(i)(7) because it deals with a matter relating to the Company's ordinary
business operations, namely, employee benefits.
THE PROPOSAL
The Proposal requests that the Company "work to obtain a health insurance plan
(or plans) for domestic employees that will sign up preferred providers who will
bill non-employees at rates no more than the allowed charge for employees. The
allowed charges shall be similar to that of other insurers." A copy of the
Proposal, as well as related correspondence from the Proponent, is attached to
this letter as Exhibit A. On behalf of our client, we hereby respectfully
request that the Staff concur in our view that the Proposal may be excluded from
the 2008 Proxy Materials on the basis described below.
ANALYSIS
The Proposal May Be Excluded under Rule 14a-8(i)(7)
Because It Addresses the Company's Health Insurance Plans, Matters Relating to
the Company's Ordinary Business Operations.
Under well-established precedent, the Company may exclude the Proposal pursuant
to Rule 14a-8(i)(7) because the Proposal concerns the Company's ordinary
business operations, specifically, employee benefits. The ordinary business
exclusion rests on a "general underlying policy" that is "consistent with the
policy of most state corporate laws: to confine the resolution of ordinary
business problems to management and the board of directors, since it is
impracticable for shareholders to decide how to solve such problems at an annual
shareholders meeting." Exchange Act Release No. 40018 (May 21, 1998). This
general policy manifests itself in the Staff's position that "[c]ertain tasks
are so fundamental to management's ability to run the company on a day-to-day
basis that they could not, as a practical matter, be subject to direct
shareholder oversight. Examples include the management of the workforce, such as
the hiring, promotion, and termination of employees, decisions on production
quality and quantity, and the retention of suppliers." Id. In addition, certain
proposals seek "to `micro-manage' the company by probing too deeply into matters
of a complex nature upon which shareholders, as a group, would not be in a
position to make an informed judgment." Id.
The Proposal seeks to micromanage the Company's selection of the health
insurance plans it offers to its employees. The Staff has routinely concluded
that proposals related to employee benefits are properly excludable pursuant to
the ordinary business exclusion. In numerous no-action letters addressing
shareholder proposals relating to employee health plans, the Staff has concurred
that companies could exclude these proposals under Rule 14a-8(i)(7) as relating
to a company's ordinary business operations, namely employee benefits. See,
e.g., General Motors Corp. (avail. Apr. 11, 2007) (concurring with the exclusion
of a proposal requesting that the Board prepare a report examining the
implications of rising health care expenses and how the company is addressing
the issue without compromising the health and productivity of its workforce); Wal-Mart Stores, Inc.
(avail. Mar. 24, 2006) (concurring with the exclusion of a proposal requesting
the company to report on the public assistance benefits used by the company's
employees); International Business Machines Corp.
(avail. Jan. 4, 2006) (concurring with the exclusion of a proposal that would
prohibit the company from providing any health insurance that includes coverage
for sexually transmitted diseases on any company employee, sexual partner or
dependent, with certain exceptions); General Motors Corp. (avail. Mar. 24, 2005)
(concurring with the exclusion of a proposal requesting that the company
establish a committee of directors "to develop specific reforms for the health
cost problem"); Burlington Industries Inc. (avail. Oct. 18, 1999) (concurring
with the exclusion of a proposal that would require the company to adopt a new
retiree health insurance plan offering HMOs and covering "retirees that were
forced out" and to reinstate certain dental benefits for retirees);
International Business Machines Corp. (avail. Jan. 15, 1999) (concurring with
the exclusion of a proposal that would prohibit the company from extending
medical benefits to friends of company employees or retirees); Minnesota Mining and Manufacturing Co. (avail. Feb. 6, 1991) (concurring with the exclusion of a
proposal requesting that the company provide a report concerning determinations
made by the company with respect to employee health care benefits).
The Proposal and supporting statement seek to dictate the Company's selection of
particular benefit plans that the Company offers to its employees by requiring
the Company to offer health insurance plans that comply with specific
restrictions on the types of billing arrangements that the plans may follow. In
the ordinary course of its business, the Company's management considers the
complex issues of the design, maintenance, and administration of the Company's
employee benefit plans, including the health insurance plans the Company offers
to its employees. As the long-established precedent discussed above indicates,
the Staff has consistently found shareholder proposals that impact a company's
decisions relating to the evaluation, selection and ongoing maintenance of
employee health and welfare plans to be excludable under Rule 14a-8(i)(7) as
relating to a company's ordinary business operations. Like the proposals
described above, the Proposal seeks to subject the resolution of this ordinary
business matter to shareholder oversight. The Proposal likewise is excludable
under Rule 14a-8(i)(7) as it interferes with the Company's decision regarding
the type of health insurance plans to offer to its employees. Consequently, the
Staff should concur in the exclusion of the Proposal under Rule 14a-8(i)(7) as
it relates to the ordinary business operations of the Company (i.e., employee
benefits).
CONCLUSION
Based upon the foregoing analysis, we respectfully request that the Staff concur
that it will not recommend enforcement action if the Company excludes the
Proposal from the 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 Steven M. Rosenberg, the Company's Corporate
Secretary and Assistant General Counsel, at (732) 524-2452.
Sincerely,
/s/
Amy L. Goodman
ALG/smw
Enclosures
cc: Steven M. Rosenberg, Johnson & Johnson Stephen Sacks
[INQUIRY LETTER]
Sept. 10, 2007
Mr. Steven M Rosenberg, Corporate Secretary
Johnson and Johnson
New Brunswick, NJ
Dear Mr. Rosenberg:
Please find enclosed my (our) stockholder resolution and discussion to be voted
on at the annual meeting next April. I (Stephen Sacks) previously sent a draft;
the final copy with some minor changes is enclosed.
Microsoft Word shows this to be 482 words (below the SEC maximum of 500 words).
I (actually with my wife, Hilda F Sacks) own 2,947 shares, which has a value
above the SEC requirement of $2,500. We would prefer that this be published in
the name of Stephen Sacks alone; however if necessary it will be acceptable to
publish the dual listingplease let us know on this matter. Enclosed is
documentation showing that we owned the shares at the end of Dec. 2005 and 2006
and documentation showing that we currently own the shares. If there is any
additional documentation you require, please let us know. I (we) will not trade
shares between now through the close of the annual meeting, which I understand
is April 24, 2008. I (we) will attend the annual meeting, and if you wish
present the resolution in any required manner.
Per the letter that accompanied the draft, I am open to consider changes,
including what was mentioned in the letter, which will lead to a recommendation
of a vote in favor by the Board of Directors.
It would be most appreciated if your Proxy Statement did not mention where we
live and preferably also the number of shares we own. This is said for personal
security reasons. However, whatever the final determination on this matter, we
still wish the resolution to be voted on.
It would be appreciated if you will acknowledge receipt of this resolution and
if you could let us know if there is anything more you find necessary for its
publication. Please do not hesitate to get in touch with me (Stephen Sacks) if
the Board of Directors needs clarification of the contents of the resolution.
Sincerely yours,
/s/
Stephen Sacks, Ph.D.
/s/
Hilda F Sacks
[APPENDIX]
Resolved: Johnson and Johnson shall in good faith and in a reasonable time work
to obtain a health insurance plan (or plans) for domestic employees that will
sign up preferred providers who will bill non-employees at rates no more than
the allowed charge for employees. The allowed charges shall be similar to that
of other insurers.
Discussion: For exactly the same medical service by the same provider, the
uninsured are often billed many times the amount billed to someone with
insurance. This situation is absurd. The uninsured include individuals who
cannot afford insurance, and those who cannot get insurance or coverage for
specific conditions. These individuals may seek more timely treatment if they
were billed in a more just manner. Johnson and Johnson has many employees. It is
anticipated that there will be medical providers who will want these employees
as customers and for this privilege be willing to charge non-employees rates no
more than the allowed employee charges. Similarly, insurance companies will want
the Johnson and Johnson account. Some providers and insurers will simply want to
do the right thing.
Note that other than for the nominal cost involved in selecting insurance plans,
there are no other costs to speak of for Johnson and Johnson-or for employees.
The company would not contribute to the expenses of non-employees or be involved
in their medical care. It is anticipated that insurers participating as
described may also include providers billing under he more traditional system.
Provider types will be identified in plan documentation-those billing in a
uniform manner will be identified to the public by the insurance company via the
Internet. It is anticipated that providers as described may not be available for
all categories of medical care. It is also anticipated that Johnson and Johnson
employees may be offered a choice of traditional plans such as the ones they
have now and what is proposed. It is understood that what is proposed may not be
possible in all parts of the country. It is also anticipated that the company
will use what is proposed herein as one criterion, but an important criterion in
evaluating plans. For those who may say "it couldn't work, you won't get
providers and insurers" the response is "you won't know until you try". We
have said "domestic" because insurance related issues are mostly domestic. We
have said "reasonable time period" recognizing that it may take additional time
to identify providers who wish to participate.
Why should Johnson and Johnson use its "clout" to do something that impacts
non-employees? AnswerWhat is proposed herein is in line with the Johnson and
Johnson Credo including community responsibility, better health and being a good
citizen. Better public perception of the company will be a byproduct. We urge
you to vote in favor of this resolution to sustain the spirit of the Credo by
addressing in a concrete manner this important issue.
[INQUIRY LETTER]
Dec. 6, 2007
VIA Post Office Express Mail
Office of the Chief Counsel
Division of Corporation Finance
Security and Exchange Commission
Washington, DC 20549
Re: Gibson, Dunn & Crutcher December 3, 2007 Petition Concerning Stockholder
Proposal of Stephen Sacks Pertaining to Johnson and Johnson
6 copies forwarded, copies to concerned parties.
Dear Ladies and Gentlemen:
I am the author of the proposal in question. My purpose in writing is to point
out some errors in the December 3 Gibson, Dunn & Crutcher Petition and to
provide additional discussion to aid the staff in their deliberations.
In their December 3 analysis Gibson, Dunn and Crutcher cite 1991-1997 no-action
letters that are basically not relevant to the Proposal. The cases they cite
involve writing of specific reports, specific medical benefits to be included in
employee health insurance, establishment of new director's committees to develop
specific reforms, and applicability of insurance to specific groups of
employees. This proposal concerns something to be done outside of Johnson and
Johnson, that is by a health insurance company, and with no change in employee
health insurance benefits or covered employees. The worst-case impact on
employee benefits would be for an insurance company that is preferred by Johnson
and Johnson to indicate that if they had to submit an insurance plan for
consideration in accord with the current proposal, they would change their
benefits or not offer to participate. The current proposal says "good faith
efforts". If such a scenario, which would be a sad commentary on the health care
system, or anything else develops that is not acceptable to the company, I, as
the submitter, would say that they have made a good faith effort and the
initiative should be dropped.
The pejorative word "micromanage" in the petition is, in the submitter's
viewpoint, not appropriate. It could be appropriate if the submitter did
something of the nature of specifying specified pharmaceuticals to be researched
or how they should be manufactured, or specific health benefits that impact
employees. The proposal does not suggest anything of this nature. The Gibson,
Dunn and Crutcher submission states that the proposal seeks to "dictate the
Company's selection of particular benefit plans....by requiring the Company to
offer plans that comply with specific restrictions....(italics all mine). The
proposal does nothing of the sort. The proposal states that the "company will
use what is proposed.. as one criterion, but an important criterion in
evaluating plans." In accord with the proposal the company could select any
preferred plan or benefits. Clearly a plan that does not meet other criteria of
the company would be a non-starter. The proposal simply asks that the company
undertake this process in good faith.
It would be disingenuous to say there isn't any corporate employee benefit
involvement in the proposal. Someone would have to be involved with getting the
word out, informal and formal discussions with insurers and plan selection. Any
stockholder resolution would require some company involvement. With no
anticipated changes in benefits, this employee benefit involvement is really
ancillary. The primary focus of the plan is actually application to the parts of
company's Credo that are outside of the mainline company business. Johnson and
Johnson stands out among corporations with a Credo that is taken very seriously
and is in place of a mission statement. The Credo appears on the back page of
the Johnson and Johnson annual report. A copy of the Credo is attached. The
credo includes words of community responsibility, better health and being a good
citizen. This proposal is addressed to the Credo. We have all seen the Johnson
and Johnson media campaign for nursing; this proposal provides stockholder input
for another initiative to meet the goals of the Credo.
My understanding of current Administration public policy is wider access to
medical care via the private sector. This proposal does just that and is in
accord with this policy. It does not cure well-known medical care problems for
the population at large. But it takes a step in that direction by leveling the
playing field with respect to cost for those without insurance so as to improve
medical access.
In some but not all quarters there is a wish for more stockholder involvement
with their companies. If not this then what would be appropriate, another
proposal regarding board of director's elections or stock options.
Based on the above and the proposal itself I respectfully request that the staff
allow stockholders to vote on the proposal.
Please do not hesitate to contact me if I can be of further help. My phone
number is 703-6310378 and my email address is sacks_special@yahoo.com. I will be
away Dec. 25 to Jan. 10 but I plan to check for phone messages and emails about
every other day.
Sincerely,
/s/
Stephen Sacks, Ph.D.
cc via conventional mail, Steven M. Rosenberg, Johnson and Johnson Amy L.
Goodman, Gibson, Dunn and Crutcher
[STAFF REPLY LETTER]
January 11, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Johnson & Johnson Incoming letter dated December 3, 2007
The proposal provides that Johnson & Johnson shall in good faith and in a
reasonable time work to obtain a health insurance plan for domestic employees
that will sign up preferred providers who will bill non-employees at rates no
more than the allowed charge for employees.
There appears to be some basis for your view that
Johnson & Johnson may exclude the proposal under rule 14a-8(i)(7), as relating
to Johnson & Johnson's ordinary business operations (i.e., employee benefits).
Accordingly, we will not recommend enforcement action to the Commission if
Johnson & Johnson omits the proposal from its proxy materials in reliance on
rule 14a-8(i)(7).
Sincerely,
/s/
Eduardo Aleman
Attorney-Adviser
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