Company Name: Merck & Co., Inc.
Public Availability Date: January 11, 2008
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER
[INQUIRY LETTER]
VIA OVERNIGHT DELIVERY
December 12, 2007
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, N.E.
Washington, DC 20549
Re: Merck & Co., Inc. Shareholder Proposal from Laszlo R. Treiber
Dear Ladies and Gentlemen:
Merck & Co., Inc. (the "Company" or "Merck") has received a shareholder's
proposal (the "Proposal") from Laszlo R. Treiber (the "Proponent") for inclusion
in the Company's proxy materials for the 2008 Annual Meeting of Stockholders
(the "Proxy Materials"). The Proposal requests that the Proxy Materials include
the following proposed resolution:
RESOLVED: I propose that Merck transfer all legal responsibility to those having
been involved in bringing Vioxx to the market to deal with the consequences of
their own actions. Furthermore, I propose that Merck take legal actions against
the same individuals to repair the damages Vioxx caused to the Company's overall
standing with respect to its reputation and finances. In order to prevent the
occurrence of cases such as Vioxx, I propose, that Merck fundamentally change
its Ordinary Business Operations in such a way as to encourage and support
competent ethical scientists to do what they are supposed to do: to produce and
to present valid and correct scientific results in their efforts to discover and
develop valuable and safe drugs. I also propose that Merck review and revise the
status of its executives and managers with respect to their record of
competence, ethical conduct, management of projects and company resources
including employees under their supervision.
For your information, the Proponent is a former Company employee whose
employment was terminated in 1999. Every year since 2000, he has submitted a
shareholder proposal seeking to require the Company to inform shareholders and
others about various aspects of disputes within the Company or to otherwise
address various aspects of the Company's ordinary business operations, such as
supervision of its employees. In each instance, the Division of Corporation
Finance (the "Staff") has agreed that the Company may exclude the Proponent's
proposal.
As described in greater detail below, we believe that the Proposal properly may
be omitted from the Proxy Materials for the following reasons, each of which in
and of itself should be sufficient.
▪ First, we believe the Proposal may be omitted in accordance with Rule
14a-8(i)(4) as it relates to the redress of a personal claim or grievance
against the Company.
▪ Second, we believe that the Proposal may be excluded in accordance with
14a-8(i)(7) as it expressly deals with the Company's ordinary business
operations, including the general conduct of a legal compliance program and
general management of employees.
▪ Third, we believe that the Proposal may be excluded in accordance with
14a-8(i)(3) as contrary to Rule 14a-9 as it impugns character, integrity and
personal reputations without factual foundation.
▪Finally, we believe that the Proposal violates New Jersey law and therefore is
excludable unless it is recast as a recommendation or request to Merck's Board
of Directors (the "Board") under Rule 14a-8(i)(1).
The Proponent's supporting statement for his Proposal is attached as Appendix A.
DISCUSSION
Personal Grievance
The Proponent was employed by the Company in its research department for over 20
years. His employment was terminated in 1999. Every year since 2000 he has
submitted a shareholder proposal alleging various impropriety by the Company and
its personnel, and every year the Division has agreed there was basis to exclude
the proposal. See
Merck & Co., Inc.
(avail. December 21, 2006), Merck & Co., Inc. (avail. December 19, 2005), Merck
& Co., Inc. (avail. January 19, 2005), Merck & Co., Inc. (avail. January 16,
2004), Merck & Co., Inc. (avail. January 23, 2003), Merck & Co., Inc. (avail.
March 7, 2002) and Merck & Co., Inc. (avail. February 9, 2001).
The Proponent is a former employee who continues his campaign to seek redress of
a personal claim or grievance that he has against the Company and senior members
of the Company's research department. The Division repeatedly has stated that
although a proposal does not on its face evidence a personal claim or grievance,
it nevertheless may be excluded if it appears to be part of a campaign designed
to redress an existing personal grievance. See Merck & Co., Inc. (avail. January
23, 2003) (proposal from the Proponent was excludable under Rule 14a-8(i)(4) as
relating to the redress of a personal claim or grievance, or designed to result
in a benefit to the proponent or further a personal interest, which benefit or
interest is not shared with other security holders at large); USX Corporation
(avail. December 28, 1995) (proposal to adopt and maintain a code of ethics);
Texaco, Inc. (avail. March 18, 1993) (proposal regarding limits on executive and
consultant compensation).
The Proposal is a variation on the substance of the proposals the Proponent has
been raising for several years and we continue to believe the Proposal properly
may be excluded under Rule 14a-8(i)(4) as related to the redress of a personal
claim or grievance, or designed to result in a benefit to the Proponent or
further a personal interest, which benefit or interest is not shared with other
security holders at large.
Relates to Ordinary Business Operations
Merck is a global research-driven pharmaceutical company dedicated to putting
patients first. Established in 1891, Merck discovers, develops, manufactures and
markets vaccines and medicines to address unmet medical needs. The Company also
devotes extensive efforts to increase access to medicines through far-reaching
programs that not only donate Merck medicines but help deliver them to the
people who need them. Merck also publishes unbiased health information as a
not-for-profit service.
Under Rule 14a-8(i)(7), a shareholder proposal may be excluded if it deals with
a matter relating to a Company's ordinary business operations. The Proposal
expressly proposes that the Company "fundamentally change its Ordinary Business
Operations," and seeks to direct the manner in which the Company manages and
supervises its employees. The Proposal directly relates to the management of the
workforce and operations that are at the core of the Company's business. The
management and supervision of Company employees are fundamental to the conduct
of ordinary business operations of the Company. In addition, the Division has
agreed in the past that a proposal, like this one, from a former employee
seeking to impose certain employment standards on the Company could be excluded
under Rule 14a-8(i)(7) since it dealt with the Company's ordinary business
operations. The Division permitted exclusion of substantially similar proposals
from this Proponent on this basis five times: See Merck & Co., Inc. (avail.
December 29, 2005), Merck & Co., Inc. (avail. January 19, 2005), Merck & Co., Inc. (avail. January 16, 2004), Merck & Co., Inc. (avail. March 7, 2002) and
Merck & Co., Inc. (avail. February 9, 2001).
The Proposal also seeks to dictate a legal compliance program by requiring that
the Company undertake litigation against the people who assisted it in its core
business operations of discovering, developing, manufacturing and marketing
medicine. The Staff regards general conduct of legal compliance program as
relating to a company's ordinary business. See Merck & Co., Inc. (avail.
December 21, 2006),
H&R Block, Inc.
(avail. June 26, 2006) (proposal regarding review of company's sales practices
excludable as relating to ordinary business operations, i.e., general conduct of
a legal compliance program); Halliburton Company (avail. March 10, 2006)
(proposal regarding alleged violations and investigations excludable as relating
to a legal compliance program); ConocoPhillips (avail. February 23, 2006)
(proposal regarding allegations by the proponent relating to prospectus
regarding proposed merger, excludable as relating to general legal compliance
program); Allstate Corporation (avail. February 16, 1999) (proposal regarding
investigation of illegal activity excludable as relating to the general conduct
of a legal compliance program); and Associates First Capital Corporation (avail.
February 23, 1999) (relating to proposal to form committee on predatory lending
practices excludable as legal compliance program).
Because the Proposal seeks to direct the manner in which the Company manages its
employees and further seeks to impose a legal compliance program on the Company,
we believe the Proposal properly should be excluded under rule 14a-8a(i)(7).
Impugns Character
As clarified in Staff Legal Bulletin No. 14B, Rule 14a-8(i)(3) permits exclusion
of proposals as contrary to Rule 14a-9 where statements
directly or indirectly impugn character, integrity, or personal reputation, or
directly or indirectly make charges concerning improper, illegal, or immoral
conduct or association, without factual basis.
The Proposal requires that "Merck transfer all legal responsibility to" and that
"Merck take legal action against" unnamed Merck employees. Thus, without so much
as an attempt at factual basis, the Proposal accuses Merck employees of tortious
and criminal conduct, directly impugning the character, integrity and personal
reputation of the Company and its employees.
The Proposal also requires the reader to assume that the Company and its
employees have engaged in some unspecified improper and illegal conduct which
justifies commencing litigation, again without any attempt at factual basis.
Because the Proposal without factual basis directly impugns the character,
integrity and personal reputation of Merck employees and makes charges of
improper and illegal conduct, it should be excluded from the Proxy Materials
under rule 14a-8(i)(3).
Improper Under State Law
Rule 14a-8(i)(1) permits exclusion of a proposal that is not a proper subject
for action by shareholders under the laws of the jurisdiction of the company's
organization. Depending on the subject matter, Rule 14a-8(i)(1) notes that "some
proposals are not considered proper under state law if they would be binding on
a company if approved by shareholders." Merck is a corporation organized and
existing under the laws of the State of New Jersey. The Proposal would be
binding on the Company and therefore would violate N.J.S.A. Sec. 14A:6-1(1),
which provides that "The business and affairs of a corporation shall be managed
by or under the direction of its board, except as in this act or in its
certificate of incorporation otherwise provided."
As the Securities Exchange Commission noted in adopting the predecessor to Rule
14a-8(i)(1)
it is the Commission's understanding that the laws of most states do not
explicitly indicate those matters which are proper for security holders to act
upon but instead provide only that the `business and affairs of every
corporation organized under this law shall be managed by its board of directors'
or words to that effect. Under such a statute, the board may be considered to
have exclusive discretion in corporate matters. Accordingly, proposals by
security holders that mandate or direct the board to take certain action may
constitute an unlawful intrusion on the board's discretionary authority under
the typical statute.
Exchange Act Release No. 34-12999 (November 22, 1976).
I am licensed to practice law and a member in good standing of the Bar of the
State of New Jersey. I have reviewed the New Jersey Business Corporation Act
(the "Act") and the Company's certificate of incorporation (the "Certificate").
Nothing in the Act or the Certificate suggests that any entityother than the
Boardis responsible for the business and affairs of the Company. The Division
consistently has held that such proposals may be excluded unless they are recast
in the form of requests. See, for example, American Electric Power Company, Inc.
(avail. February 18, 2003) and Lucent Technologies Inc. (avail. November 6,
2001). To the extent required by Rule 14a-8(j)(2)(iii), this letter is intended
to constitute a letter of opinion of counsel. Because it would violate New
Jersey law, the Proposal should be excluded unless it is recast as a
recommendation or request to the Board.
CONCLUSION
Based on the foregoing, we respectfully request that the Staff not recommend any
enforcement action to the Commission if the Company omits the Proposal from its
Proxy Materials for its 2008 Annual Meeting of the Stockholders pursuant to Rule
14a-8(i)(4), Rule 14a-8(i)(7), Rule 14a-8(i)(3) or Rule 14a-8(i)(1).
If the Staff believes that it will not be able to concur in our view that the
Proposal may be omitted, we would very much appreciate the opportunity to
discuss this issue in more detail with the appropriate persons before issuance
of a formal response.
In accordance with Rule 14a-8(j)(2), we have enclosed six copies of this letter
and six copies of the Proposal, including the statement in support thereof. An
additional copy is included, which we ask that you use to acknowledge receipt of
this submission by date stamping and returning to me in the enclosed
self-addressed envelope.
By copy of this letter to Mr. Treiber, the Company is notifying the Proponent of
its intention to omit the Proposal from the Proxy Materials.
For the Staff's information, the Company anticipates beginning to print its
proxy card on or about February 29, 2008.
If you have any questions regarding this matter or require further information,
please contact me at (908) 423-4883.
Thank you for your time and consideration.
Very truly yours,
MERCK & CO., INC.
By: /s/
Hilary M. Wandall
Attorney
Corporate Legal
Enc.
cc: Laszlo R. Treiber, Ph.D
[INQUIRY LETTER]
September 13, 2007
Laszlo R. Treiber, Ph.D.
16230 Nacido Court
San Diego, CA 92128
Dear Dr. Treiber:
This is to acknowledge your letter dated August 19, 2007 as well as a subsequent
fax dated August 23, 2007 along with your revised proposal regarding "legal
proceedings", which you submitted for inclusion in the proxy materials for the
2008 Annual Meeting of Stockholders. The revised proposal is now under 500 words
as required by SEC regulations.
Very truly yours,
/s/
Debra A. Bollwage
Senior Assistant Secretary
[APPENDIX]
The following quote illustrates one of the fundamental features of the Ordinary
Business Operations of Merck & Co., Inc. ("Merck" or "Company"): "Differences
between you and your supervisors over scientific methodology on the
Basidiomycete project led to charges of insubordination against you which were
the stated basis for the termination of your employment. The Company
acknowledges that the scientific methodology suggested by you was valid and
correct." (Item #7. of a confidential "Agreement" written by Glenn L. Guior
Esq., Assistant Counsel of Merck, April 19, 1999). Evidently, Merck executives,
managers and supervisors act in accordance with the Company's Ordinary Business
Operations when suppressing valid and correct scientific results and only
accepting scientific results for the records that favor their own personal
interests. When Merck allows personal agenda of selected individuals to
supersede scientific results generated by means of valid and correct
methodologies, consequences to the Company and to the public may follow, as seen
in case of Vioxx.
RESOLVED: I propose that Merck transfer all legal responsibility to those having
been involved in bringing Vioxx to the market to deal with the consequences of
their own actions. Furthermore, I propose that Merck take legal actions against
the same individuals to repair the damages Vioxx caused to the Company's overall
standing with respect to its reputation and finances. In order to prevent the
occurrence of cases such as Vioxx I propose, that Merck fundamentally change its
Ordinary Business Operations in such a way as to encourage and to support
competent and ethical scientists to do what they are supposed to do: to produce
and to present valid and correct scientific results in their efforts to discover
and develop valuable and safe drugs. I also propose that Merck review and revise
the status of its executives and managers with respect to their record of
competence, ethical conduct, management of projects and company resources
including employees under their supervision.
SUPPORTING STATEMENTS:
It is unbecoming if not disgraceful for a company of Merck's stature to have
executives whose decisions do not stand up to scientific scrutiny. Rather than
complying with generally accepted professional standards to form and to prove
their opinion, they apparently resort to coercion, slander, retaliation,
deception and lawyers to hide their incompetence and to settle their personal
grievances resulting from their incompetence. The Basidiomycetes project
demonstrates Merck executives' and managers' determination to overcome obstacles
in the way of advancing whatever personal agenda they may have. Obviously, the
higher the financial stakes, the greater their resolve as evidenced by
the discrepancy between Merck's internal communications and information
released to the medical community about Vioxx;
concerns expressed by the editors of the New England Journal of Medicine about
the published results of the clinical trial of Vioxx;
the discrepancy between Statement of Corporate Responsibility as well as
Mission Statement published on Merck's website and its Ordinary Business
Operations;
Merck's legal expenses as compared with its research and development budget.
[STAFF REPLY LETTER]
January 11, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Merck & Co., Inc. Incoming letter dated December 12, 2007
The proposal provides that Merck should transfer all legal responsibility to
those involved in bringing Vioxx to the market; take legal actions against the
same individuals to repair the damages caused by Vioxx to the company; encourage
and support scientists to produce and present valid and correct scientific
results; and review and revise the status of its executives and managers with
respect to their record in the areas set forth in the proposal.
There appears to be some basis for your view that
Merck may exclude the proposal under rule 14a-8(i)(7), as relating to Merck's
ordinary business operations (i.e., management of the workplace). Accordingly,
we will not recommend enforcement action to the Commission if Merck omits the
proposal from its proxy materials in reliance on rule 14a-8(i)(7). In reaching
this position, we have not found it necessary to address the alternative bases
for omission upon which Merck relies.
Sincerely,
/s/
Eduardo Aleman
Attorney-Adviser
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