Company Name: Lowe's Cos., Inc.
Public Availability Date: January 29, 2008
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January 24, 2008
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Lowe's Companies, Inc. Exclusion of Shareholder Proposal Relating to
Sustainability Report
Dear Ladies and Gentlemen:
Lowe's Companies, Inc. (the "Company") hereby requests that the staff of the
Division of Corporation Finance advise the Company that it will not recommend
any enforcement action to the Securities and Exchange Commission (the
"Commission") if the Company excludes the shareholder proposal described below
(the "Proposal") from its proxy materials for its 2008 annual shareholders
meeting. The Proposal was submitted to the Company by Domini Social Investments
(the "Proponent"). As described more fully below, the Proposal is excludible
pursuant to Rule 14a-8(i)(10) because it has been substantially implemented.
A copy of this letter has been provided to the Proponent and emailed to
cfletters@sec.gov in compliance with the instructions found on the Commission's
website and in lieu of our providing six additional copies of this letter
pursuant to Rule 14a-8(j)(2).
The Proposal
The Proposal calls for the adoption by the Company's shareholders of the
following resolution.
"RESOLVED: Shareholders request that the Board of Directors issue a
sustainability report to shareholders, at reasonable cost, and omitting
proprietary information, by December 1, 2008."
A copy of the complete Proposal is attached hereto as Exhibit A.
Discussion
Rule 14a-8 generally requires an issuer to include in its proxy materials
proposals submitted by shareholders that meet prescribed eligibility
requirements and procedures. Rule 14a-8 also provides that an issuer may exclude
shareholder proposals that fail to comply with applicable eligibility and
procedural requirements or that fall within one or more of the thirteen
substantive reasons for exclusion set forth in Rule 14a-8(i).
Rule 14a-8(i)(10) allows the exclusion of a shareholder proposal from a
company's proxy statement if the essential elements of the proposal have been
substantially implemented. The standard for determining whether a proposal has
been substantially implemented is whether a company's particular policies,
practices and procedures compare favorably with the guidelines of the proposal.
The Commission staff's position has been that when a company already has
policies and procedures in place relating to the subject matter of the proposal,
or has implemented the essential objectives of the proposal, the shareholder
proposal has been substantially implemented within the scope of Rule
14a-8(i)(10). The Proposal is excludible because it has been substantially
implemented. The Company already issues sustainability reports addressing the
categories of information mentioned in the Proposal. The Commission's staff
agreed with this position in 2005 and allowed the Company to exclude a
substantially similar proposal. Since the Commission staff's decision, the
Company has produced two additional types of reports that provide even more
information relating to sustainability.
The Company currently produces and publishes annual reports that substantially
implement the written objectives of the Proposal.
Rule 14a-8(i)(10) allows the exclusion of a shareholder proposal from a
company's proxy statement if the essential elements of the proposal have been
substantially implemented. The standard the Commission's staff has applied is
whether a company's particular policies, practices and procedures compare
favorably with the guidelines of the proposal. See Release No. 34-20091 (Aug.
16, 1983); Texaco, Inc. (March 28, 1991). The Commission's staff has
consistently taken the position that when a company already has policies and
procedures in place relating to the subject matter of the proposal, or has
implemented the essential objectives of the proposal, the shareholder proposal
has been substantially implemented within the scope of Rule 14a-8(i)(10). See
See ConAgra Foods, Inc. (June 20, 2005); EMC Corp. (February 14, 2005); The
Talbots, Inc. (April 5, 2002); The Gap, Inc. (March 16, 2001); and Kmart Corp.
(February 23, 2000). Every aspect of the proposal does not need to be addressed
for the proposal to be substantially implemented. See Release No. 34-20091
(August 16, 1983) and Raytheon Company (February 11, 2005).
The Proposal requests that the Company prepare a sustainability report. The
supporting statement indicates that the report should include the Company's
definition of sustainability, as well as a company-wide review of policies,
practices and indicators related to measuring long-term social and environmental
sustainability. As further discussed below, the Company already prepares and
publishes annually on its website several reports that do just that.
A. The Commission's staff has previously determined the Company had implemented
a similar proposal.
The Proposal is not the first time the Company has received a proposal
requesting a sustainability report. In December 2003, the Company received a
nearly identical proposal from the Proponent, except that that proposal
required, rather than recommended, the sustainability report to be prepared
based on the Global Reporting Initiative's guidelines (the "GRI Guidelines"). In
line with the Commission staff's decisions, the Company was permitted to exclude
that proposal because it was vague, indefinite and misleading. (Lowe's
Companies, Inc. (March 3, 2004)). In December 2004, the Company received a
substantially similar proposal from another proponent that omitted references to
the GRI Guidelines, but requested a sustainability report to disclose its
"social, environmental and economic performance." At that time, the Company was
already producing its annual Social Responsibility Report addressing the
Company's performance in the following categories: Invigorating the Economy,
Contributing to Communities, Protecting the Environment, and Providing
Opportunities to the Public, including employees, customers and suppliers. The
Company asked the Commission's staff to permit exclusion of that proposal from
its proxy statement based on substantial implementation. Based on that Social
Responsibility Report, the Commission's staff determined the Company had
substantially implemented the proposal requesting a sustainability report and
permitted the Company to exclude the proposal from its proxy materials (the
"2005 Decision"). (Lowe's Companies Inc. (March 21, 2005)).
For this year's proxy statement, the Company received the Proposal from the
Proponent. Although the Proposal is worded somewhat differently from the
proposal received in December 2004, the Proposal is substantively the same and
focuses on the same issue as the prior proposala report covering social and
environmental sustainability. There has been no change that would warrant a
departure from the Commission staff's prior decision in 2005. Not only does the
Company continue to produce its Social Responsibility Report annually, but it
has also added two additional types of reports that enhance disclosure and
provide additional details on sustainability, the contents of which are
discussed in Section B below. The Company respectfully requests the Commission's
staff to reaffirm its 2005 Decision and determine that the Proposal has been
substantially implemented.
It is important to note that the Company is aware of the Commission staff's
determination in Wendy's International, Inc. (February 21, 2006) that Wendy's
had not substantially implemented the same proposal submitted to Wendy's by the
Proponent. That determination is clearly distinguishable from the Company's
request. In its response to Wendy's no-action request, the Proponent contended
that the Wendy's report was a "collection of previously disclosed (and often
vague) policies, and additional anecdotal information" and contained no
"information about `indicators'" and "very little information...regarding the
Company's `practices." The Wendy's report did not show any implementation of its
policies or evidence of a company-wide review. As the discussion in Section B
will show, the Company's reports are far more comprehensive, reflect the
implementation of its policies toward sustainability in numerous areas of its
business and provide examples of performance that indicate the Company has
conducted a company-wide review. By the Proponent's own admission, the Company's
Social Responsibility Report in 2005 was "superior to the Wendy's report". See
Section III.C. of Proponent's February 13, 2006 letter to the SEC in response to
Wendy's no-action request (Wendy's International Inc. February 21, 2006). The
Commission's staff agreed with the Proponent's contention that the precedents
cited by Wendy's, including the Company, had superior reports to Wendy's and
declined to grant Wendy's no-action relief based on its substantial
implementation argument. Subsequent to the Commission staff's 2005 Decision and
the Proponent's acknowledgement that the Company's report was superior to
Wendy's in 2006, the Company has added two additional reports disclosing even
more information on the Company's sustainability metrics than in its earlier
report. Together, the Company's three reports do not contain the "weaknesses"
the Proponent identified in the Wendy's report.
When faced with sustainability report proposals, the Commission staff's
decisions consistently indicate a willingness to grant no-action relief when a
company provides actual performance data (The Kroger Co. (April 11, 2007);
ConAgra Foods, Inc. (July 3, 2006); Honeywell International Inc. (February 21,
2007); Raytheon Company (January 25, 2006); and Lowe's Companies, Inc. (March
21, 2005)), as opposed to those companies who have merely made vague statements
of policy or positions (Wendy's International, Inc. (February 21, 2006)) or
present their general views on their website and cross-reference other
disclosure in their filings with the Commission (Terex Corporation (March 18,
2005)). The Company fits into the former category.
As discussed in Section B below, the Company prepares and publishes detailed
reports on sustainability in numerous areas of the Company's operations,
including the social and environmental areas referenced in the Proposal's
supporting statement, which provide specific data on the Company's performance
in each of these areas. Lowe's has substantially implemented the Proposal.
B. The Company produces three types of reports that together address all of the
issues raised by the Proposal.
Over the last several years, the Company has produced and continues to produce
and post on its website several types of reports providing data on the Company's
performance toward its sustainability goals. These reports address all of the
issues raised by the Proposal and the "shortfalls" the Proponent identifies in
the Proposal. Links to each of the Company's reports may be found on the
Company's website at http://www.lowes.com/environment. In addition, a copy of
the 2006 Social Responsibility Report, the Lowe's Energy Use Report (the "Energy
Use Report") and the Lowe's Wood Procurement: 2006 (the "Wood Procurement
Report") are attached hereto as Exhibit B, Exhibit C, and Exhibit D,
respectively.
In the Proposal, the Proponent argues that the report the Company currently
produces "falls far short of the report requested by this resolution, lacking
substantive and quantitative measures of Lowe's environmental performance.
Noticeably missing are metrics related to Lowe's energy use, energy efficiency
and conservation; water use and conservation, and quantities of waste
generated." The Proponent also notes a lack of metrics related to the
performance of the Company's wood policy and SmartWaySM Transport Partnership.
To the contrary, the Company provides such data in its three reports.
The Company's annual Social Responsibility Report addresses the Company's
performance in the areas of employment, Company milestones, communities and
environment. The Social Responsibility Report addresses, among other things, the
Company's:
Investments in communities and the economy through the development of new
stores, the creation of new jobs and the provision of employee relief funds and
education scholarships;
Contributions to community and charitable organizations and initiatives
supporting public education, community improvement projects and home safety;
Donations to projects such as conservation initiatives, community
beautification and pediatric hospital renovations;
Policies and performance results relating to recycling efforts and energy
efficiency;
Improving and building homes for seniors and low-income individuals;
Creation of and participation in initiatives for rebuilding from and preparing
for national disasters;
Contributions to multicultural organizations and efforts;
Active pursuit of women and minority-owned suppliers and expansion of the
Company's Women Build program; and
Ethics policies that require the refusal to purchase any goods produced by
child or prison labor and that ensure the right to inspect the factory of any
foreign-made product.
Specifically to the Proponent's contention that the Company's report lacks
performance and metrics as to the environment and energy, the Energy Use Report
discusses the Company's philosophy, policies and efforts towards energy
conservation and provides the indicators the Company uses and specific
performance metrics over the years. Below are a few examples of the numerous
performance disclosures included in the Energy Use Report by category.
Facility energy use.
Provides 3 years of trend data for its stores' average energy use per square
foot and 2 years of the same trend data for its distribution centers.
Green power purchasing.
Indicates that the Company's purchases of green power have increased to 86
million kilowatt-hours in 2007.
Indicates that the Company ranks 14\th/ among Fortune 500 Green Power Partners
and is 6\th/ largest green power purchaser among all retailers.
Solar power generation.
Provides information on the rooftop photovoltaic energy generating systems on
four of the Company's stores in Southern California, including 2006 results that
those systems produced 3.1 kWh of energy (equating to a total savings of 976
tons of Carbon Dioxide, 524 tons of Nitrogen Oxide and 1,727 tons of Sulfur
Oxide).
Discloses that the combined energy generation of these system to date is over
6.7 million kWh, which is enough power to light 14,000 homes for an entire year.
Energy efficiency policy.
Indicates that the Company's energy management team remotely monitors the
Company's stores' energy use, through which it identifies, investigates and
corrects readings that exceed specifications.
Operation and maintenance program.
Indicates the Company continually evaluates and periodically updates building
systems, including high efficiency HVAC replacement, improved maintenance
practices and lighting retrofits to improve efficiency.
Provides that the Company uses trending and alarms to identify energy and
water anomalies so that they can be analyzed and corrected.
Energy efficiency improvements.
Discloses the Company's policy since 2002 to install only highly efficient
rooftop HVAC units on new stores and to replace older units on existing stores
as necessary.
Addresses the Company's use since 2003 of high-performance high-bay T8
fluorescent lighting, including disclosure of performance metrics that indicate
50% of all stores use this lighting system, which has reduced the Company's
sales floor energy consumption over 40%.
SmartWay certified partners.
Describes the SmartWaySM Transport Partnership, the program's primary
components and its goals.
Includes Lowe's specific disclcsures, such as the EPA awarding Lowe's the 2007
SmartWay Environmental Excellence Award and in 2006, roughly 75% of the
Company's truck shipments moved by SmartWay carriers.
Indicates the Company's goal is to have 90% of its shipments through SmartWay
carriers by 2010.
The Proponent alleges that the Company's report does not contain performance
metrics related to its wood policy. However, the Company has been producing a
Wood Procurement Report for several years. The current report includes
information and data regarding the following topics:
Sources of Lowe's wood products by geographic region and, in some instances,
country.
Percentages of Lowe's wood product purchases by wood species as measured by
volume in cubic feet.
Sourcing of Lowe's wood products from sensitive areas, such as tropical
regions, and Lowe's initiatives regarding sourcing alternatives.
Lowe's enforcement practices under its wood policy.
Lowe's certified product volume.
Shifts in wood product mix in response to responsible forest management
practices such as those promoted by the Forest Stewardship Council (FSC).
Listing of Lowe's product lines sourced from a more sustainable wood species
or that have been certified.
Continued coordination with vendors, governments and conservation
organizations on issues and solutions.
Global wood production and consumption.
The Company's reports also reflect its review of practices and indicators the
Company considers when evaluating its progress toward implementing its wood
policy. For example, the Company's Wood Procurement Report discloses that its
product volume reported as certified to a sustainable forest management standard
increased by 41% from 2003 to 2005 and lists more than a dozen products that
have been changed to a more sustainable wood species or to a certified forest
management standard. The Company also discloses that it treats tropical sources
with care in light of the harvesting practices and vulnerabilities of tropical
forests to those harvesting practices. The Wood Procurement Report also
discloses that the Company's volume from the tropics accounts for 1.3% of its
total purchases and will either decrease or move to more responsibly managed
sources, such as those certified to the FSC standard. Another example of the
Company's considerations in implementing its wood policy that is contained in
the Wood Procurement Report is the elimination of Merbau flooring from Indonesia
from the Company's supply chain when the Company independently discovered the
product was not in compliance with its sourcing policy. The Company immediately
halted shipments and began a sell-through process. An alternative product
compliant with the Company's policy was identified for the 2007 year. These
types of disclosure further demonstrate that the Company has substantially
implemented the Proposal.
The current Social Responsibility Report, the Lowe's Energy Use Report and the
Lowe's Wood Procurement report together address all of the categories of
information referred to in the Proposal and provide the data "shortfalls" the
Proponent cited in the Proposal.
The comprehensive disclosure contained in the Company's reports evidence that
the Company already conducts company-wide reviews requested in the Proposal's
supporting statement. In addition, although the Company does not provide a
single, specific definition of sustainability, how the Company defines and
perceives sustainability is found in multiple places throughout the reports.
Following are a few examples of the relevant disclosure by report:
Energy Use Report "We regularly examine how we operate and look for
opportunities to improve...Reducing energy use at stores and distribution
centers reduces operating costs and eases the load placed on power plants
resulting in fewer emissions to the environment. For these reasons, Lowe's
strives to reduce our stores' energy consumption through the use of new
technology and improved practices."
Energy Use Report "By incrementally improving store design with an eye on
energy efficiency, each new store has the potential to open with a more
efficient profile as measured on a kilowatt hour per square foot basis."
Energy Use Report "We recognize and value the opportunity to engage our
shipping partners in a program to further reduce costs and emissions and
SmartWay is the perfect vehicle to stimulate that partnership."
Wood Procurement Report "...the world's forests support the ecological and
climate processes upon which biodiversity and human life depend. Lowe's is
concerned about the protection of these critical resources and recognizes that,
through the wood products we sell, our company can play an important role in
determining whether these forests will remain for future generations."
Wood Procurement Report "...sustainable management of forests guarantees a
source not only of product but of habitat and ecosystems for generations to
come."
Wood Procurement Report "Promoting sustainable forestry practices ensures
that today's needs are met without compromising the forests for future
generations."
Social Responsibility Report "...sorne thingsimportant, defining
characteristicsnever change, such as our sense of responsibility and commitment
to the communities...We strive to make good decisions that benefit people and
the communities in which we do business."
Social Responsibility Report "We're not just about home improvement; we're
also about protecting the planet."
Social Responsibility Report... `green' and Universal Design elements for
"saving energy and preparing for a future that might hold any number of personal
challenges."
Social Responsibility ReportLowe's contributions [to the National Trust for
Historic Preservation] "focused on keeping precious slices of American history
vibrant for future generations to experience."
These reports demonstrate that (i) the Company has policies and procedures in
place relating to the subject matter of the Proposal and (ii) the Company has
implemented the essential objectives of the Proposal. The Proposal has,
therefore, been substantially implemented.
Conclusion
The Proposal should be excluded pursuant to Rule 14a-8(i)(10) because it has
already been substantially implemented by the Company. We respectfully request
your confirmation that the Division of Corporation Finance will not recommend
any enforcement action to the Commission if the Proposal is omitted from the
Company's proxy statement for the reasons stated above.
Please feel free to call me at (704) 331-3519, or my colleague, Dumont Clarke,
at (704) 331-1051 if you have any questions or comments.
Very truly yours,
Moore & Van Allen PLLC
/s/
Ernest S. DeLaney III
ESD/krh
Enclosures
[APPENDIX 1]
December 11, 2007
Gaither M. Keener, Jr.
Sr. Vice President, General Counsel and Secretary
Lowe's Companies, Inc.
1000 Lowe's Boulevard
Mooresville, NC 28117
Via UPS
Re: Shareholder Proposal Requesting Sustainability Report
Dear Secretary:
I am writing to you on behalf of Domini Social Investments, the manager of a
socially responsible family of funds, including the Domini Social Equity Fund.
We are submitting the enclosed shareholder proposal for inclusion in the next
proxy statement in accordance with Rule 14a-8 of the General Rules and
Regulations of the Securities Act of 1934. We have held more than $2,000 worth
of Lowe's Companies shares for greater than one year, and will maintain
ownership of the required number of shares through the date of the next
stockholders' annual meeting. A letter verifying our ownership of Lowe's
Companies shares from State Street Bank, custodian of our Portfolio, is
enclosed. A representative of Domini will attend the stockholders' meeting to
move the resolution as required by SEC Rules.
We would welcome the opportunity to discuss this proposal with you. I can be
reached at (212) 217-1112 and at kshapiro@domini.com.
Sincerely,
/s/
Karen Shapiro
Shareholder Advocacy Associate
Encl.
[APPENDIX 2]
Exhibit A
SUSTAINABILITY REPORT
Whereas:
Investors increasingly seek disclosure of companies' sccial and environmental
practices in the belief that they impact shareholder value. Many investors
believe companies that are good employers, environmental stewards, and corporate
citizens are more likely to be accepted in their communities and to prosper
long-term.
Mainstream financial companies are increasingly recognizing the links between
sustainability performance and shareholder value. According to research
consultant Innovest, major investment firms including Schroders, T. Rowe Price,
and Legg Mason, subscribe to information on companies' social and environmental
practices to help make investment decisions.
Sustainability refers to development that meets present needs without impairing
the ability of future generations to meet their own needs. The Dow Jones
Sustainability Group defines corporate sustainability as "a business approach
that creates long-term shareholder value by embracing opportunities and managing
risks deriving from economic, environmental and social developments."
Globally, over 2,300 companies issued reports on sustainability issues in 2006 (www.corporateregister.com),
including retailers such as Target, Best Buy, and Staples. An earlier study
found that more than half of the global Fortune 250 issue such reports (KPMG
International Survey of Corporate Responsibility Reporting 2005).
Lowe's currently issues a "Social Responsibility Report," that provides data on
the quantities of wood pallets, cardboard, and shrink wrap recycled annually. In
our view, this "report" falls far short of the report requested by this
resolution, lacking substantive and quantitative measures of Lowe's
environmental performance. Noticeably missing are metrics related to Lowe's
energy use, energy efficiency and conservation; water use and conservation, and
quantities of waste generated. The report notes that Lowe's "enacted an
industry-leading wood policy in 2000" and is a "SmartWayTransport Partner," yet
no metrics related to the performance of these programs are provided.
Lowe's website notes, "By investing in people and communities, promoting
measures that protect the environment and providing opportunity in the
workplace, Lowe's is raising the bar in every aspect of the way we conduct our
business." A sustainability report would allow shareholders to evaluate the
veracity of this statement, and to hold the company accountable to this
important commitment.
RESOLVED: Shareholders request that the Board of Directors issue a
sustainability report to shareholders, at reasonable cost, and omitting
proprietary information, by December 1, 2008.
Supporting Statement
The report should include Lowe's definition of sustainability, as well as a
company-wide review of company policies, practices, and indicators related to
measuring long-term social and environmental sustainability.
We recommend that Lowe's use the Global Reporting Initiative's Sustainability
Reporting Guidelines ("The Guidelines") to prepare the report. The Global
Reporting Initiative (www.globalreporting.org) is an international organization
with representatives from the business, environmental, human rights and labor
communities. The Guidelines provide guidance on report content, including
performance in six categories (direct economic impacts, environmental, labor
practices and decent work conditions, human rights, society, and prcduct
responsibility). The Guidelines provide a flexible reporting system that permits
the omission of content that is not relevant to company operations. More than
1,000 organizations use or consult the Guidelines for sustainability reporting.
[INQUIRY LETTER]
January 29, 2008
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Lowe's Companies, Inc. Withdrawal of No-Action Letter Request Regarding the
Shareholder Proposal Relating to Sustainability Report
Ladies and Gentlemen:
In a letter dated January 24, 2008, we, on behalf of our client, Lowe's
Companies, Inc. (the "Company"), requested that the Division of Corporation
Finance not recommend any enforcement action to the Securities and Exchange
Commission if the Company excluded from its proxy materials for its 2008 annual
shareholders meeting a shareholder proposal submitted by Domini Social
Investments (the "Proponent") related to sustainability reporting (the
"Proposal"). For your reference, a copy of the January 24, 2008 no-action
request is attached hereto as Exhibit A.
On January 27, 2008, the Company received via email a letter of the same date
informing the Company that it was withdrawing the Proposal. A copy of the
Proponent's letter is attached hereto as Exhibit B. In reliance on this letter,
we hereby withdraw the January 24, 2008 no-action request relating to the
Proposal.
Please feel free to call me at (704) 331-3519, or my colleague, Dumont Clarke,
at (704) 331-1051 if you have any questions or comments.
Very truly yours,
Moore & Van Allen PLLC
/s/
Ernest S. DeLaney III
ESD/krh
Enclosure
[STAFF REPLY LETTER]
January 29, 2008
Ernest S. DeLaney III
Moore & Van Allen PLLC
Attorneys at Law
Suite 4700
100 North Tryon Street
Charlotte, NC 28202-4003
Re: Lowe's Companies, Inc.
Dear Mr. DeLaney:
This is in regard to your letter dated January 29,
2008 concerning the shareholder proposal submitted by Domini Social Investments
for inclusion in Lowes' proxy materials for its upcoming annual meeting of
security holders. Your letter indicates that the proponent has withdrawn the
proposal, and that Lowe's therefore withdraws its January 24, 2008 request for a
no-action letter from the Division. Because the matter is now moot, we will have
no further comment.
Sincerely,
/s/
William A. Hines
Special Counsel
cc: Karen Shapiro
Shareholder Advocacy Associate
Domini Social Investments
536 Broadway, 7th Floor
New York, NY 10012-3915
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