Name: JPMorgan Chase & Co.
Public Availability Date: February 15, 2008
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January 11, 2008
Direct Dial (202) 955-8653
Client No. C 62344-00015
Fax No. (202) 530-9677
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 Kenneth Steiner 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 Kenneth Steiner (the "Proponent"), who has appointed John Chevedden to act
on his behalf (the "Proponent's Representative").
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(b)
and Rule 14a-8(f)(1) because the Proponent has failed to substantiate his
eligibility to submit the Proposal. A copy of the Proposal, which requests that
the Company adopt cumulative voting, is attached to this letter as Exhibit A.
BACKGROUND
The Proponent submitted the Proposal to the Company by facsimile on November 13,
2007, and it was received by the Company on that day. See Exhibit A. The
Proponent did not include with the Proposal evidence demonstrating satisfaction
of the ownership requirements of Rule 14a-8(b). Furthermore, the Company
confirmed that the Proponent does not appear on the records of the Company's
stock transfer agent as a shareholder of record. Accordingly, because the
Company was unable to verify the Proponent's eligibility to submit the Proposal
from its records, the Company sought verification from the Proponent of his
eligibility to submit the Proposal. Specifically, the Company sent via Federal
Express a letter to the Proponent on November 15, 2007, which was within 14
calendar days of the Company's receipt of the Proposal, notifying the Proponent
of the requirements of Rule 14a-8 and how the Proponent could cure the
procedural deficiency; specifically, that a shareholder must satisfy the
ownership requirements under Rule 14a-8(b) (the "Deficiency Notice"). A copy of
the Deficiency Notice is attached hereto as Exhibit B. The Company also sent via
email a copy of the Deficiency Notice to the Proponent's Representative on
November 15, 2007. The Deficiency Notice requests that the Proponent provide
proof of ownership that satisfies the requirements of Rule 14a-8 and provides
further guidance regarding those requirements.
Federal Express tracking records indicate that the Deficiency Notice was
delivered to the Proponent at 2:28 P.M. on November 20, 2007. See Exhibit C. In
response to the Deficiency Notice, the Proponent's Representative sent to the
Company via email on November 20, 2007, a letter dated November 19, 2007, from
Mark Filiberto, President of DJF Discount Brokers, purporting to substantiate
the Proponent's eligibility to submit the Proposal (the "Proponent's Response").
A copy of the Proponent's Response is attached hereto as Exhibit D.
ANALYSIS
The Proposal May Be Excluded under Rule 14a-8(b) and Rule 14a-8(f)(1) Because
the Proponent Failed to Establish the Requisite Eligibility to Submit the
Proposal.
The Company may exclude the Proposal under Rule 14a-8(f)(1) because the
Proponent did not substantiate eligibility to submit the Proposal under Rule
14a-8(b). Rule 14a-8(b)(1) provides, in part, that "[i]n order to be eligible to
submit a proposal, [a shareholder] must have continuously held at least $2,000
in market value, or 1, of the company's securities entitled to be voted on the
proposal at the meeting for at least one year by the date [the shareholder]
submit[s] the proposal."
Rule 14a-8(f) provides that a company may exclude a shareholder proposal if the
proponent fails to provide evidence of eligibility under Rule 14a-8, including
the continuous ownership requirements of Rule 14a-8(b), provided that the
company timely notifies the proponent of the problem and the proponent fails to
correct the deficiency within the required time. The Company transmitted to the
Proponent in a timely manner (within 14 days) the Deficiency Notice, which
informed the Proponent of Rule 14a-8(b)'s ownership requirements. The
Proponent's Response, dated November 19, 2007, however, fails to satisfy the
requirements set out in Rule 14a-8(b).
Rule 14a-8(b) allows proponents to demonstrate their beneficial ownership of a
company's securities by providing a written statement from the "record" holder
of the securities verifying that, as of the date the proposal was submitted, the
proponent had continuously held the requisite number of company shares for at
least one year. Staff Legal Bulletin No. 14 (July 13, 2001) further states that
such a written statement "must be from the record holder of the shareholder's
securities, which is usually a broker or bank" and that a written statement from
an investment adviser is insufficient "unless the investment adviser is also the
record holder."
In the Proponent's Response to the Deficiency Notice, the Proponent's
Representative provided a letter from DJF Discount Brokers ("DJF"). That letter
states, "As introducing broker for the account of Kenneth Steiner ... held with
National Financial Services Corp. as custodian, DJF Discount Brokers hereby
certifies that as of the date of this certification Kenneth Steiner is and has
been the beneficial owner of 1350 shares of JP Morgan Chase" for at least one
year prior to the Proponent's submission of the Proposal to the Company. See
Exhibit D. As the DJF letter notes, DJF serves as the Proponent's introducing
broker, and the Proponent's shares are purportedly held by National Financial
Services Corp. as custodian. Introducing brokers do not hold custody of
securities, either directly or through an affiliate, and therefore, are not
"record" holders as specified in Rule 14a-8(b)(2)(i). Thus, DJF is not, by its
own admission, a record owner of the company's securities. The Company also has
verified that DJF is not listed in their records as an owner of the Company's
securities.
This is not the first time a proponent has attempted to use a letter from DJF to
demonstrate their ownership of securities under Rule 14a-8(b). In the past year,
the Proponent and another proponent represented by the Proponent's
Representative have submitted letters from DJF that used forms identical to the
one used in the Proponent's Response in order to substantiate their eligibility
to submit shareholder proposals. Indicating that such information from
introducing brokers is not sufficient documentary evidence of ownership for
purposes Rule 14a-8(b), the Staff noted that "while it appears that the
proponent provided some indication that it owned shares, it appears that it has
not provided a statement from the record holder evidencing documentary support
of continuous beneficial ownership...." MeadWestvaco Corp. (avail. Mar. 12,
2007); The McGraw Hill Companies, Inc. (avail. Mar. 12, 2007). Thus, the
Proponent has been aware, since long before his submission of the Proposal, of
both the ownership requirements of Rule 14a-8(b) and the inadequacy of letters
from DJF in demonstrating that he has met those requirements.
Moreover, the Staff frequently has found that documentary support from parties
other than the record owner of a company's securities are insufficient to prove
a proponent's beneficial ownership of such securities. In Clear Channel
Communications (avail. Feb. 9, 2006), the proponent submitted a letter from
Piper Jaffrey, a broker-dealer and investment adviser who was not a record owner
of the company's securities. Clear Channel Communications argued in response
that, as noted above, an investment adviser cannot verify ownership under Rule
14a-8(b) unless it is also a record owner of the company's securities. The Staff
concurred and noted in its response that while the proponent had "provided some
indication that it owned shares," it had not "provided a statement from the
record holder." The Staff came to the same conclusion regarding documentary
support of ownership that was supplied from a financial services representative
for an investment company that was not a record owner of the company's
securities in AMR Corp. (avail. Mar. 15, 2004). Similarly, in General Motors
Corp. (avail. Jan. 28, 2002), when a proponent submitted documentation from a
financial consultant, the Staff granted no-action relief under Rule 14a-8(b) and
stated that "the proponent appears to have failed to supply, within 14 days of
receipt of General Motors's request, documentary support sufficiently evidencing
that he satisfied the minimum ownership requirement for the one-year period
required by rule 14a-8(b)." See also Pall Corp. (avail. Sept. 20, 2005)
(concurring with the exclusion of a proposal under Rule 14a-8(b) when the
proponent was not a record owner and failed to submit documentary proof of
beneficial ownership from a record owner).
Thus, despite the information provided in the Deficiency Notice and the
Proponent's previous failure to establish his eligibility to submit a proposal
with a letter from DJF, the Proponent has once again failed to provide
satisfactory evidence that he meets the ownership requirements of Rule 14a-8(b).
Accordingly, we ask that the Staff concur that the Company may exclude the
Proposal under Rule 14a-8(b) and Rule 14a-8(f)(1).
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 Anthony J. Horan, the Company's Corporate
Secretary, at (212) 270-7122.
Sincerely,
/s/
Amy L. Goodman
ALG/pah
Enclosures
cc: Anthony J. Horan, JPMorgan Chase & Co.
Kenneth Steiner
John Chevedden
[APPENDIX 1]
Mr. James Dimon
Chairman
JPMorgan Chase & Co. (JPM)
Corporate Secretary
270 Park Ave
New York NY 10017
Rule 14a-8 Proposal
Dear Mr. Dimon,
This Rule 14a-8 proposal is respectfully submitted in support of the long-term
performance of our company. This proposal is for the next annual shareholder
meeting. Rule 14a-8 requirements are intended to be met including the continuous
ownership of the required stock value until after the date of the respective
shareholder meeting and the presentation of this proposal at the annual meeting.
This submitted format, with the shareholder-supplied emphasis, is intended to be
used for definitive proxy publication. This is the proxy for John Chevedden
and/or his designee to act on my behalf regarding this Rule 14a-8 proposal for
the forthcoming shareholder meeting before, during and after the forthcoming
shareholder meeting. Please direct all future communication to John Chevedden
at:
olmsted7p (at) earthlink.net
(In the interest of company cost savings and improving the efficiency of the
rule 14a-8 process please communicate via email.)
PH: 310-371-7872
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278
Your consideration and the consideration of the Board of Directors is
appreciated in support of the long-term performance of our company. Please
acknowledge receipt of this proposal promptly by email.
Sincerely
/s/
Kenneth Steiner
Date 10/27/07
cc: Anthony J. Horan
Corporate Secretary
PH: 212-270-7122
FX: 212-270-4240
PH: 212 270-6000
FX: 212-270-1648
[APPENDIX 2]
[JPM: Rule 14a-8 Proposal, November 13, 2007]
3 - Cumulative Voting
RESOLVED: Cumulative Voting. Shareholders recommend that our Board adopt
cumulative voting. Cumulative voting means that each shareholder may cast as
many votes as equal to number of shares held, multiplied by the number of
directors to be elected. A shareholder may cast all such cumulated votes for a
single candidate or split votes between multiple candidates, as that shareholder
sees fit. Under cumulative voting shareholders can withhold votes from certain
nominees in order to cast multiple votes for others.
Cumulative voting won 54-support at Aetna and 56-support at Alaska Air in
2005. It also received 55-support at GM in 2006. The Council of Institutional
Investors www.cii.org has recommended adoption of this proposal topic. CalPERS
has also recommend a yes-vote for proposals on this topic.
Cumulative voting encourages management to maximize shareholder value by making
it easier for a would-be acquirer to gain board representation. Cumulative
voting also allows a significant group of shareholders to elect a director of
its choice - safeguarding minority shareholder interests and bringing
independent perspectives to Board decisions. Most importantly cumulative voting
encourages management to maximize shareholder value by making it easier for a
would-be acquirer to gain board representation.
The merits of this proposal should also be considered in the context of our
company's overall corporate governance structure and individual director
performance. For instance in 2007 the following structure and performance issues
were reported:
The Corporate Library, http://www.thecorporatelibrary.com, an independent
investment research firm rated our company "High Concern" in executive pay - $41
million for our former Chairman.
We did not have an Independent Chairman or even a Lead Director - Independent
oversight concern.
Nine directors were designated as "Accelerated Vesting" directors due to their
involvement with a board that sped up stock option vesting in order to avoid
recognizing the related cost:
Mr. Burke
Mr. Crown
Mr. Dimon
Ms. Futter
Mr. Gray
Mr. Jackson
Mr. Lipp
Mr. Novak
Mr. Raymond
Mr. Raymond, with 20-years JPM director tenure, chaired our compensation
committee - Independence concern.
Additionally:
We had 2 inside directors and 3 directors with 15 to 20 years tenure each -
Independence concerns.
Five of our directors served on 6 boards rated "D" or "F" by The Corporate
Library: |[NCCDEF] |[UCA1] |[TDC4,M'0) MRS. Futter and',QL,VU]
|[TCC4,MP1,QL,G.24,VU] |[XT] |[ST]|[LC15]|[RS4]1) Mr. Crown |[TA]General
Dynamics (GD) |[ST]2) Ms. Futter |[TA]American International Group (AIG) |[ST]3)
Mr. Gray |[TA]Dell (DELL)|[EL]Pfizer (PFE) |[ST]4) Mr. Jackson |[TA]Home Depot
(HD) |[ST]5) Mr. Cote |[TA]Honeywell (HON) |[ET]
The above concerns shows there is room for improvement and reinforces the reason
to take one step forward now and encourage our board to respond positively to
this proposal:
Notes:
Kenneth Steiner, 14 Stoner Ave., 2M, Grent Neck, NY 11021 sponsored this
proposal.
The above format is requested for publication without re-editing, re-formatting
or elimination of text, including beginning and concluding text, unless prior
agreement is reached. It is respectfully requested that this proposal be
proofread before it is published in the definitive proxy to ensure that the
integrity of the submitted format is replicated in the proxy materials. Please
advise if there is any typographical question.
Please note that the title of the proposal is part of the argument in favor of
the proposal. In the interest of clarity and to avoid confusion the title of
this and each other ballot item is requested to be consistent throughout all the
proxy materials.
The company is requested to assign a proposal number (represented by "3" above)
based on the chronological order in which proposals are submitted. The requested
designation of "3" or higher number allows for ratification of auditors to be
item 2.
This proposal is believed to conform with Staff Legal Bulletin No. 14B (CF),
September 15, 2004 including:
Accordingly, going forward, we believe that it would not be appropriate for
companies to exclude supporting statement language and/or an entire proposal in
reliance on rule 14a-8(i)(3) in the following circumstances:
the company objects to factual assertions because they are not supported;
the company objects to factual assertions that, while not materially false or
misleading, may be disputed or countered;
the company objects to factual assertions because those assertions may be
interpreted by shareholders in a manner that is unfavorable to the company, its
directors, or its officers; and/or
the company objects to statements because they represent the opinion of the
shareholder proponent or a referenced source, but the statements are not
identified specifically as such.
See also: Sun Microsystems, Inc. (July 21, 2005).
Stock will be held until after the annual meeting and the proposal will be
presented at the annual meeting.
Please acknowledge this proposal promptly by email and advise the most
convenient fax number and email address to forward a broker letter, if needed,
to the Corporate Secretary's office.
[INQUIRY LETTER]
January 14, 2008
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
# 1 JPMorgan Chase & Co. (JPM) Shareholder Position on Company No-Action Request
Rule 14a-8 Proposal: Cumulative Voting Kenneth Steiner
Ladies and Gentlemen:
This responds to the company January 11, 2008 no action request - the second of
two company no action requests dated January 11, 2008 regarding broker letters.
The company exhibits include a November 19, 2007 broker letter for 1350 shares
held continuously since 1998 and the accompanying email message:
Forwarded Message
From: olmsted<olmsted7p@earthlink.net>
Date: Tue, 20 Nov 2007 12:28:43 -0800
To: "Anthony J. Horan" <ANTHONY.HORAN@chase.com>
Subject: Rule 14a-8 Proposal (JPM) Broker Letter
Rule 14a-8 Proposal (JPM) Broker Letter
Mr. Horan, Please let me know tomorrow whether or not there is any further
requirement at this point in the rule 14a-8 process in addition to the broker
letter attached.
Sincerely,
John Chevedden
The company fails to explain why it did not respond to the above message,
leading the shareholder party to believe that for 1-1/2 months the broker letter
was acceptable. The company also failed to note that it accepted the Mr. Kenneth
Steiner's broker letter for 1350 shares held continuously since 1998 in the same
format for his 2007 resolution that received 47-support.
The proponent in the non-excluded Alaska Air Group, Inc. (March 1, 2004) case
made the following relevant point:
1) "Shareholder participation in corporate governance via writing and submitting
proposals is defined in simple English in the Question-and-Answer portion of
Commission's instructions. We believe that the most reasonable understanding of
this format is that it expects corporations to communicate with shareholder
proponents to resolve structural and procedural details before appealing for
guidance on disputed points to the Commission. The company declined to take this
approach."
The company fails to note that the company-cited MeadWestvaco and McGraw Hill
resolutions were not excluded:
MeadWestvaco Corp.
WSB No.: 0319200709
Public Availability Date: Monday, March 12, 2007
Abstract:
...A shareholder proposal, which relates to poison pills, may be omitted from
the company's proxy material under rule 14a-8(f) unless the proponent provides
the company within seven calendar days after receiving the company's request
with documentary support of ownership as required by rule 14a-8(b).
McGraw Hill Cos., Inc.
WSB No.: 0319200711
Public Availability Date: Monday, March 12, 2007
Abstract:
...A shareholder proposal, which relates to a simple majority vote, may be
omitted from the company's proxy material under rule 14a-8(f) unless the
proponent provides the company within seven calendar days after receiving the
company's request with documentary support of ownership as required by rule
14a-8(b).
A copy of this letter is forwarded to the company in a non-PDF email. In order
to expedite the rule 14a-8 process it is requested that the company forward any
addition rule 14a-8 response in the same type format to the undersigned.
For these reasons it is requested that the staff find that this resolution
cannot be omitted from the company proxy. It is also respectfully requested that
the shareholder have the last opportunity to submit material in support of
including this proposal - since the company had the first opportunity
Sincerely,
John Chevedden
cc: Kenneth Steiner
Anthony J. Horan<ANTHONY.HORAN@chase.com>
[STAFF REPLY LETTER]
February 15, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: JPMorgan Chase & Co. Incoming letter dated January 11, 2008
The proposal relates to cumulative voting.
Rules 14a-8(b) and 14a-8(f) require a proponent to provide documentary support
of a claim of beneficial ownership upon request. While it appears that the
proponent provided some indication that he owned shares, it appears that he has
not provided a statement from the record holder evidencing documentary support
of continuous beneficial ownership of $2,000, or 1in market value of voting
securities, for at least one year prior to submission of the proposal. We note,
however, that JPMorgan Chase failed to inform the proponent of what would
constitute appropriate documentation under rule 14a-8(b) in JPMorgan Chase's
request for additional information from the proponent. Accordingly, unless the
proponent provides JPMorgan Chase with appropriate documentary support of
ownership, within seven calendar days after receiving this letter, we will not
recommend enforcement action to the Commission if JPMorgan Chase omits the
proposal from its proxy materials in reliance on rules 14a-8(b) and 14a-8(f).
Sincerely,
/s/
Greg Belliston
Special Counsel
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