Company Name: JPMorgan Chase & Co.
Public Availability Date: February 11, 2008
Document Sections: INQUIRY LETTER
APPENDIX 1
APPENDIX 2
APPENDIX 3
APPENDIX 4
INQUIRY LETTER
INQUIRY LETTER
APPENDIX 5
APPENDIX 6
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January 10, 2008
Direct Dial (202) 955-8522
Fax No. (202) 530-9574
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 the American Federation of State, County and
Municipal Employees Pension Plan and the North Carolina Equity Investment Fund
Pooled Trust Exchange Act of 1934Rule 14a-8
Dear Ladies and Gentlemen:
This letter is to inform you that our client, JPMorgan Chase & Co. (the
"Company"), intends to omit from its proxy statement and form of proxy for its
2008 Annual Meeting of Shareholders (collectively, the "2008 Proxy Materials") a
shareholder proposal and statements in support thereof (the "Proposal") received
from the American Federation of State, County and Municipal Employees Pension
Plan and the North Carolina Equity Investment Fund Pooled Trust (collectively,
the "Proponents").
Pursuant to Rule 14a-8(j), we have:
enclosed herewith six (6) copies of this letter and its attachments; and
concurrently sent copies of this correspondence to the Proponents.
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 Securities and Exchange Commission (the "Commission") or the staff of the
Division of Corporation Finance (the "Staff"). Accordingly, we are taking this
opportunity to inform the Proponents that if the Proponents elect 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).
THE PROPOSAL
The Proposal states:
RESOLVED, pursuant to Section 10.02 of the By-laws of JPMorgan Chase & Co. and
section 109(a) of the Delaware General Corporation Law, the stockholders amend
the By-laws to add the following section 2.10:
"The Corporation shall include in its proxy materials for a meeting of
stockholders the name, together with the Disclosure and Statement (defined
below), of any person nominated for election to the Board ("Candidate") by a
stockholder or group thereof satisfying the requirements of this section 2.10
(the "Nominator"), and shall allow stockholders to vote with respect to such
Candidate on the Corporation's proxy card. A Nominator may nominate up to two
candidates for inclusion in the proxy statement for a meeting, unless more than
one Nominator seeks inclusion of Candidates, in which case (a) each Nominator
may include only one Candidate and (b) Candidates will be included in the order
in which the Nominator satisfies the requirements set forth below, until the
number of Candidates nominated by the Nominators equals (i) 50% of the Directors
to be elected at the meeting minus (ii) one.
A Nominator must:
(a) beneficially own 3% or more of the Corporation's outstanding common stock
for at least two years;
(b) provide written notice received by the Secretary within the time period
specified in Section 1.09(a)(2)(annual meeting) or (b)(2)(special meeting); such
notice shall contain (i) with respect to each Candidate, (A) the information
required by Items 5(b) and 7 of SEC Schedule 14A and (B) such Candidate's
consent to being named in the proxy statement and to serving as a director if
elected; and (ii) with respect to the Nominator, the information required by
Items 4(b) and 5(b) of Schedule 14A (with separate disclosure for each
stockholder in a group) (all disclosure in this section 2.10(b) is the
"Disclosure"); and
(c) execute an undertaking that it agrees to (i) assume all liability arising
out of any violation of law or regulation in connection with the Nominator's
communications with stockholders of the Corporation, including the Disclosure;
(ii) to the extent it uses soliciting material other than the Corporation's
proxy materials, comply with all laws and regulations relating thereto.
The Nominator may furnish a 500-word statement in support of each Candidate's
election (the "Statement"), which the Corporation shall include in the proxy
statement. The Board shall adopt a procedure for timely resolving disputes over
whether the Disclosure and Statement comply with SEC rules, including 14a-9."
A copy of the Proposal, as well as related correspondence with the Proponents,
is attached to this letter as Exhibit A.
The Company intends to file its definitive 2008 Proxy Materials with the
Commission on or about March 31, 2008.
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)(8) because the Proposal would establish procedures relating to a
nomination or election for membership on the Company's Board of Directors.
ANALYSIS
The Proposal May Be Excluded under Rule 14a-8(i)(8) Because the Proposal Would
Establish Procedures Relating to a Nomination or Election for Membership on the
Company's Board of Directors.
In December 2007, the Commission amended Rule 14a-8(i)(8) to state that a
shareholder proposal may be excluded 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." As discussed
below, the Proposal is excludable under Rule 14a-8(i)(8) since by its terms the
Proposal would establish procedures that relate to the nomination and election
of directors.1
A. Adopting Release.
Following the analysis of comments received on the proposed amendment to Rule
14a-8(i)(8) as set forth in Exchange Act Release No. 56161 (July 27, 2007) (the
"Interpretive and Proposing Release"), in December 2007, the Commission adopted
the amendment to Rule 14a-8(i)(8), as proposed. See Exchange Act Release No.
56914 (Dec. 6, 2007) (the "Adopting Release"). By doing so, the Commission
reiterated and codified its longstanding position that shareholder proposals
relating to procedures for the election of directors are excludable. Prior to
its amendment in December 2007, Rule 14a-8(i)(8) permitted the exclusion of a
shareholder proposal that "relates to an election for membership on the
company's board of directors or analogous governing body." The amended Rule
14a-8(i)(8) now provides that a proposal may be excluded if it "relates to a
nomination or an election for membership on the company's board of directors ...
or a procedure for such nomination or election." In the Adopting Release, the
Commission emphasized that the term "procedures" in the election exclusion
"relates to procedures that would result in a contested election either in the
year in which the proposal is submitted or in any subsequent year," thus
evidencing the Commission's clear intent, consistent with its longstanding
interpretation, that the Rule 14a-8(i)(8) exclusion be applied to exclude
proposals that would result in a contested election of directors, regardless of
whether a contest would result immediately or subsequently. As the Commission
explained in the Adopting Release:
We are acting today to state clearly that the phrase "relates to an election" in
the election exclusion cannot be read so narrowly as to refer only to a proposal
that relates to the current election, or a particular election, but rather must
be read to refer to a proposal that "relates to an election" in subsequent years
as well. In this regard, if one looked only to what a proposal accomplished in
the current year, and not to its effect in subsequent years, the purpose of the
exclusion could be evaded easily.
Specifically, the purpose of the exclusion in Rule 14a-8(i)(8) is to prevent the
establishment of procedures that could circumvent those protections of the
federal proxy rules that are triggered by a proxy contest. As the Commission
explained in the Adopting Release:
[W]ere the election exclusion not available for proposals that would establish a
process for the election of directors that circumvents the proxy disclosure
rules, it would be possible for a person to wage an election contest without
providing the disclosures required by the Commission's present rules governing
such contests. Additionally, false and misleading disclosure in connection with
such an election contest could potentially occur without liability under
Exchange Act Rule 14a-9 for material misrepresentations made in a proxy
solicitation.
The Commission further said that it agreed with the determinations of the Staff
"that shareholder proposals that may result in a contested electionincluding
those which establish a procedure to list shareholder-nominated director
candidates in the company's proxy materials fall within the election
exclusion."
In the Adopting Release, the Commission also emphasized the need for clarity and
certainty in the 2008 proxy season, stating: "It is our intention that this
[amendment] will enable shareholders and companies to know with certainty
whether a proposal may or may not be excluded under Rule 14a-8(i)(8)." The
Commission further noted that the amendment "will facilitate the [S]taff's
efforts in reviewing no-action requests and interpreting Rule 14a-8 with
certainty in responding to requests for no-action letters during the 2008 proxy
season."
B. The Proposal Establishes Procedures Relating to a Nomination or Election for
Membership on the Company's Board of Directors.
In furtherance of this goal, we request that the Commission concur that the
Proposal be excluded under Rule 14a-8(i)(8) because it would establish a
procedure that relates to the nomination and election of directors.
Specifically, the Proposal provides that "Nominators" may nominate candidates
for the Board of Directors and that the names of such candidates must be
included in the Company's proxy materials. This plainly falls within the terms
of Rule 14a-8(i)(8).
We note also that the Proposal, if adopted, may result in contested elections of
directors, as the Company's Board of Directors nominates a sufficient number of
candidates for all available seats on the Board of Directors. If shareholders
nominated director candidates in accordance with the Proposal, the Proposal
would require the Company to include in its proxy materials the additional
candidates who would run in opposition to the Board's candidates for a fixed
number of seats, thus resulting in a contested election.
Accordingly, we believe that the Proposal may be properly excluded from the 2008
Proxy Materials under Rule 14a-8(i)(8), and we request that the Staff concur in
our conclusion.
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 Proponents 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) 955-8522, my colleague, Amy L. Goodman, at (202) 955-8653 or
Anthony J. Horan, the Company's Corporate Secretary, at (212) 270-7122.
Sincerely
/s/
John F. Olson
Enclosures
cc: Anthony J. Horan, JPMorgan Chase & Co.
Gerald W. McEntee, American Federation of State, County and Municipal Employees
Pension Plan
Lisa Schneider, North Carolina Equity Investment Fund Pooled Trust
-----FOOTNOTES-----
1 The Proposal would be excludable under Rule 14a-8(i)(8)i.e., even if the
provision had not been amendedin light of the prior version's text and its
longstanding interpretation by the Commission, including the Commission's
authoritative interpretation in recent rulemaking. See Exchange Act Release No.
56161 (July 27, 2007) (confirming the Commission's longstanding position that
shareholder proposals that would result in an election contest, either in the
current year or a subsequent year, may be excluded under Rule 14a-8(i)(8)); see
also Exchange Act Release No. 56914 (Dec. 6, 2007) (reiterating and codifying
after public comment the Commission's longstanding interpretation).
[APPENDIX 1]
EXHIBIT A
November 27, 2007
Via Overnight Mail and Telecopier (212) 270-1240
JPMorgan Chase & Co.
270 Park Avenue
New York, NY 10017
Attention: Anthony J. Horan, Corporate Secretary
Dear Mr. Horan:
On behalf of the AFSCME Employees Pension Plan (the "Plan"), I write to give
notice that pursuant to the 2007 proxy statement of JPMorgan Chase (the
"Company") and Rule 14a-8 under the Securities Exchange Act of 1934, the Plan
intends to present the attached proposal (the "Proposal") at the 2008 annual
meeting of shareholders (the "Annual Meeting"). The Plan is the beneficial owner
of 57,395 shares of voting common stock (the "Shares") of the Company, and has
held the Shares for over one year. In addition, the Plan intends to hold the
Shares through the date on which the Annual Meeting is held.
The Proposal is attached. I represent that the Plan or its agent intends to
appear in person or by proxy at the Annual Meeting to present the Proposal. I
declare that the Plan has no "material interest" other than that believed to be
shared by stockholders of the Company generally. Please direct all questions or
correspondence regarding the Proposal to Charles Jurgonis at (202) 429-1007.
Sincerely,
/s/
GERALD W. McENTEE
Chairman
Enclosure
[APPENDIX 2]
RESOLVED, pursuant to Section 10.02 of the By-laws of JPMorgan Chase & Co. and
section 109(a) of the Delaware General Corporation Law, the stockholders amend
the By-laws to add the following section 2.10:
"The Corporation shall include in its proxy materials for a meeting of
stockholders the name, together with the Disclosure and Statement (defined
below), of any person nominated for election to the Board ("Candidate") by a
stockholder or group thereof satisfying the requirements of this section 2.10
(the "Nominator"), and shall allow stockholders to vote with respect to such
Candidate on the Corporation's proxy card. A Nominator may nominate up to two
Candidates for inclusion in the proxy statement for a meeting, unless more than
one Nominator seeks inclusion of Candidates, in which case (a) each Nominator
may include only one Candidate and (b) Candidates will be included in the order
in which the Nominator satisfies the requirements set forth below, until the
number of Candidates nominated by Nominators equals (i) 50% of the Directors to
be elected at the meeting minus (ii) one.
A Nominator must:
(a) beneficially own 3% or more of the Corporation's outstanding common stock
for at least two years;
(b) provide written notice received by the Secretary within the time period
specified in Section 1.09(a)(2)(annual meeting) or (b)(2)(special meeting); such
notice shall contain (i) with respect to each Candidate, (A) the information
required by Items 5(b) and 7 of SEC Schedule 14A and (B) such Candidate's
consent to being named in the proxy statement and to serving as a director if
elected; and (ii) with respect to the Nominator, the information required by
Items 4(b) and 5(b) of Schedule 14A (with separate disclosure for each
stockholder in a group) (all disclosure in this section 2.10(b) is the
"Disclosure"); and
(c) execute an undertaking that it agrees to (i) assume all liability arising
out of any violation of law or regulation in connection with the Nominator's
communications with stockholders of the Corporation, including the Disclosure;
(ii) to the extent it uses soliciting material other than the Corporation's
proxy materials, comply with all laws and regulations relating thereto.
The Nominator may furnish a 500-word statement in support of each Candidate's
election (the "Statement"), which the Corporation shall include in the proxy
statement. The Board shall adopt a procedure for timely resolving disputes over
whether the Disclosure and Statement comply with SEC rules, including Rule
14a-9."
SUPPORTING STATEMENT
For the third quarter of 2007, JPMorgan took $1.3 billion in markdowns on $40.6
billion of leveraged loans and $339 million in markdowns on $6.8 billion of CDOs.
Management stated that it expects home equity portfolio quarterly losses to rise
to $250 to $270 million over the next few quarters. We believe our company has
done a bad job managing risk in its debt underwriting.
In our view, access to the proxy is the most effective mechanism for ensuring
board accountability. We believe that greater accountability would benefit
JPMorgan and enhance stockholder value.
[APPENDIX 3]
November 27, 2007
Via Overnight Mail and Telecopier (212) 270-4240
JPMorgan Chase & Co.
270 Park Avenue
New York, NY 10017
Attention: Anthony J. Horan, Corporate Secretary
Dear Mr. Horan:
On behalf of the AFSCME Employees Pension Plan (the "Plan"), I write to provide
you with verified proof of ownership from the Plan's custodian. If you require
any additional information, please do not hesitate to contact me at the address
above.
Sincerely,
/s/
Charles Jurgonis
Plan Secretary
Enclosure
[APPENDIX 4]
November 27, 2007
Lonita Waybright
A.F.S.C.M.E.
Benefits Administrator
1625 L Street N.W.
Washington, D.C. 20036
Re: Shareholder Proposal Record Letter for JP MORGAN (cusip 4662SH100)
Dear Ms Waybright:
State Street Bank and Trust Company is Trustee for 57,395 shares of JP Morgan
common stock held for the benefit of the American Federation of State, County
and Municiple Employees Pension Plan ("Plan"). The Plan has been a beneficial
owner of at least 1% or $2,000 in market value of the Company's common stock
continuously for at least one year prior to the date of this letter. The Plan
continues to hold the shares of JP Morgan stock.
As Trustee for the Plan, State Street holds these shares at its Participant
Account at the Depository Trust Company ("DTC"). Cede & Co., the nominee name at
DTC, is the record holder of these shares.
If there are any questions concerning this matter, please do not hesitate to
contact me directly.
Sincerely,
/s/
Kevin Yakinrowsky
[INQUIRY LETTER]
November 28, 2007
Mr. Charles Jurgonis
American Federation of State, County and Municipal Employees
1625 L Street, N.W.
Washington, DC 20036
Dear Mr. Jurgonis:
This will acknowledge receipt of the letter dated November 27, 2007, from Gerald
McEntee, advising JPMorgan Chase & Co. of the intention of the AFSCME Employees
Pension Plan (Plan), to submit a proposal to be voted upon at our 2008 Annual
Meeting. The proposal requests a By-Law amendment establishing a process for
shareholder access.
We also acknowledge receipt of the letter dated November 27, 2007 from State
Street, verifying that AFSCME Employees Pension Plan are the beneficial owners
of shares of JPMorgan Chase common stock with a market value of at least
$2,000.00 in accordance with Rule 14a-8(b)(2) of the Securities and Exchange
Commission.
Sincerely,
/s/
[INQUIRY LETTER]
November 28, 2007
Via Overnight Mail and Telecopier (212) 270-4240
JPMorgan Chase & Co.
270 Park Avenue, Floor 35
New York, NY 10017
Attention: Anthony J. Horan, Corporate Secretary
Dear Mr. Horan:
As Treasurer of the State of North Carolina, I am the sole Trustee for the North
Carolina Equity Investment Fund Pooled Trust (the "Trust"). On behalf of the
Trust, I write to give notice that pursuant to the 2007 proxy statement of
JPMorgan Chase (the "Company") and Rule 14a-8 under the Securities Exchange Act
of 1934, the Trust intends to cosponsor the attached proposal (the "Proposal")
submitted to the Company under separate cover by the AFSCME Employees Pension
Plan for consideration at the 2008 annual meeting of shareholders (the "Annual
Meeting"). The Trust is the beneficial owner of 5,441,156 shares of voting
common stock (the "Shares") of the Company. In addition, the Trust intends to
hold the Shares through the date on which the Annual Meeting is held. A copy of
our proof of ownership is enclosed.
I represent that the AFSCME Employees Pension Plan or one of the Proposal's
cosponsors intends to appear at the Annual Meeting to present the Proposal.
Please direct all questions or correspondence regarding the Proposal to Lisa
Schneider, Director of Corporate Governance, at 919-508-1040.
Sincerely,
/s/
Richard H. Moore
Enclosure
[APPENDIX 5]
RESOLVED, pursuant to Section 10.02 of the By-laws of JPMorgan Chase & Co. and
section 109(a) of the Delaware General Corporation Law, the stockholders amend
the By-laws to add the following section 2.10:
"The Corporation shall include in its proxy materials for a meeting of
stockholders the name, together with the Disclosure and Statement (defined
below), of any person nominated for election to the Board ("Candidate") by a
stockholder or group thereof satisfying the requirements of this section 2.10
(the "Nominator"), and shall allow stockholders to vote with respect to such
Candidate on the Corporation's proxy card. A Nominator may nominate up to two
Candidates for inclusion in the proxy statement for a meeting, unless more than
one Nominator seeks inclusion of Candidates, in which case (a) each Nominator
may include only one Candidate and (b) Candidates will be included in the order
in which the Nominator satisfies the requirements set forth below, until the
number of Candidates nominated by Nominators equals (i) 50% of the Directors to
be elected at the meeting minus (ii) one.
A Nominator must:
(a) beneficially own 3% or more of the Corporation's outstanding common stock
for at least two years;
(b) provide written notice received by the Secretary within the time period
specified in Section 1.09(a)(2)(annual meeting) or (b)(2)(special meeting); such
notice shall contain (i) with respect to each Candidate, (A) the information
required by Items 5(b) and 7 of SEC Schedule 14A and (B) such Candidate's
consent to being named in the proxy statement and to serving as a director if
elected; and (ii) with respect to the Nominator, the information required by
Items 4(b) and 5(b) of Schedule 14A (with separate disclosure for each
stockholder in a group) (all disclosure in this section 2.10(b) is the
"Disclosure"); and
(c) execute an undertaking that it agrees to (i) assume all liability arising
out of any violation of law or regulation in connection with the Nominator's
communications with stockholders of the Corporation, including the Disclosure;
(ii) to the extent it uses soliciting material other than the Corporation's
proxy materials, comply with all laws and regulations relating thereto.
The Nominator may furnish a 500-word statement in support of each Candidate's
election (the "Statement"), which the Corporation shall include in the proxy
statement. The Board shall adopt a procedure for timely resolving disputes over
whether the Disclosure and Statement comply with SEC rules, including Rule
14a-9."
SUPPORTING STATEMENT
For the third quarter of 2007, JPMorgan took $1.3 billion in markdowns on $40.6
billion of leveraged loans and $339 million in markdowns on $6.8 billion of CDOs.
Management stated that it expects home equity portfolio quarterly losses to rise
to $250 to $270 million over the next few quarters. We believe our company has
done a bad job managing risk in its debt underwriting.
In our view, access to the proxy is the most effective mechanism for ensuring
board accountability. We believe that greater accountability would benefit
JPMorgan and enhance stockholder value.
[APPENDIX 6]
November 27, 2007.
NC Dapartment of State Treasurer
Attn: Lisa Schneider
325 N. Salisbury Street
Raleigh, NC
27603
To Whom It May Concern,
RE: Certification of Ownership for JPMORGAN CHASE & CO COM CUSIPI. 46625H100
Please be advised that the following beneficial owner held 5,441, 156 shares as
of the close of business on November 26\th/, 2007:
TREASURER OF THE STATE OF N.C. EQUITY INVESTMENT FUND 325 N SALISBURY ST
RALEIGH, NC 27603
Please confact me directly If you have any questions. Thank-you.
Sincerely.
/s/
Melissa Tarasovich
AVP, Mellon Global Securities Services
Phone: (412) 234-2476
Email: tarasovich.mk@melion.com
[INQUIRY LETTER]
November 28, 2007
Ms. Lisa Schneider
Director of Corporate Governance
North Carolina Equity Investment Fund Pooled Trust
325 North Salisbury Street
Raleigh, North Carolina 27603-1385
Dear Ms. Schneider:
This will acknowledge receipt of the letter dated November 27, 2007, from
Richard H. Moore, advising JPMorgan Chase & Co. of the intention of the North
Carolina Equity Investment Fund Pooled Trust, to submit a proposal to be voted
upon at our 2008 Annual Meeting. The proposal requests a By-Law amendment
establishing a process for shareholder access.
We also acknowledge receipt of the letter dated November 27, 2007 from Mellon
Global Securities Services, verifying that North Carolina Equity Investment Fund
Pooled Trust are the beneficial owners of shares of JPMorgan Chase common stock
with a market value of at least $2,000.00 in accordance with Rule 14a-8(b)(2) of
the Securities and Exchange Commission.
Sincerely,
/s/
[STAFF REPLY LETTER]
February 11, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: JPMorgan Chase & Co. Incoming letter dated January 10, 2008
The proposal amends the bylaws to require that
JPMorgan Chase include in its proxy materials the name, along with certain
disclosures and statements, of any person nominated for election to the board by
a stockholder who has beneficially owned 3% or more of JPMorgan Chase's
outstanding common stock for at least two years.
There appears to be some basis for your view that JPMorgan Chase may exclude the
proposal under rule 14a-8(i)(8). Accordingly, we will not recommend enforcement
action to the Commission if JPMorgan Chase omits the proposal from its proxy
materials in reliance on rule 14a-8(i)(8).
Sincerely,
John R. Fieldsend
Attorney-Adviser
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