Company Name: Schering-Plough Corp.
Public Availability Date: March 7, 2008
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January 28, 2008
BY HAND DELIVERY
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Schering-Plough Corporation - Shareholder Proposal Submitted by William
Steiner
Ladies and Gentlemen:
On behalf of Schering-Plough Corporation (the "Company"), we are submitting this
letter pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934 to
notify the Securities and Exchange Commission of the Company's intention to
exclude from its proxy materials for its 2008 annual meeting of shareholders a
shareholder proposal (the "Proposal") submitted by William Steiner, with John
Chevedden acting as his proxy (together, the "Proponent"). We also request
confirmation that the staff will not recommend to the Commission that
enforcement action be taken if the Company excludes the Proposal from its 2008
proxy materials in reliance on Rules 14a-8(i)(3) and (i)(2).
A copy of the Proposal and the Proponent's supporting statement, together with
related correspondence received from the Proponent, are attached as Exhibit 1.
In accordance with Rule 14a-8(j), we have enclosed six copies of this letter,
including the exhibits. Copies of this letter and the exhibits are also being
provided simultaneously to the Proponent.
The Company currently intends to file definitive copies of the proxy materials
with the Commission on or about April 18, 2008.
THE PROPOSAL
The Proposal requests that the Company's shareholders approve the following
resolution:
"Resolved, Shareholders request that our Board adopt a bylaw to require that our
company have an independent lead director whenever possible with clearly
delineated duties, elected by and from the independent board members, to be
expected to serve for more than one continuous year, unless our company at that
time has an independent board chairman. The standard of independence would be
the standard set by the Council of Institutional Investors.
The clearly delineated duties at a minimum would include:
Presiding at all meetings of the board at which the chairman is not present,
including executive sessions of the independent directors.
Serving as liaison between the chairman and the independent directors.
Approving information sent to the board.
Approving meeting agendas for the board.
Approving meeting schedules to assure that there is sufficient time for
discussion of all agenda items.
Having the authority to call meetings of the independent directors.
Being available for consultation and direct communication, if requested by
major shareholders."
REASONS FOR EXCLUSION
A. Rule 14a-8(i)(3) - The Proposal is Vague and Indefinite
Rule 14a-8(i)(3) permits exclusion of a shareholder proposal and supporting
statement if either is contrary to the Commission's proxy rules. One of the
Commission's proxy rules, Rule 14a-9, prohibits the making of false or
misleading statements in proxy materials. The staff has indicated that a
proposal is misleading, and therefore excludible under Rule 14a-8(i)(3), if "the
resolution contained in the proposal is so inherently vague or indefinite that
neither the stockholders voting on the proposal, nor the company in implementing
the proposal (if adopted), would be able to determine with any reasonable
certainty exactly what actions or measures the proposal requires." See Staff
Legal Bulletin No. 14B (September 15, 2004).
The staff has consistently deemed a proposal to be impermissibly vague or
indefinite where the proposal calls for the company to adopt, consider or abide
by a standard or set of guidelines established by a third party without
describing the substantive provisions of the standard or guidelines. See, e.g.,
Smithfield Foods, Inc. (July 18, 2003) (permitting exclusion of a proposal
requesting that management prepare a report based upon the "Global Reporting
Initiative" guidelines where the proposal did not contain a description of the
guidelines); Johnson & Johnson (February 7, 2003) (permitting exclusion of a
proposal requesting adoption of the Glass Ceiling Commission's business
recommendations where the proposal did not contain a description of the
recommendations). Indeed, the staff has previously considered a proposal
substantially similar to the Proposal and permitted its exclusion under Rule
14a-8(i)(3). In The Boeing Company (February 10, 2004), the staff considered a
proposal (also submitted by John Chevedden) requesting that the company's board
of directors amend the company's bylaws to require than an independent director
serve as chairman of the board of directors, with the definition of independence
to be based on the definition established by the Council of Institutional
Investors ("CII"). In concurring that the proposal could be excluded under Rule
14a-8(i)(3), the staff indicated that the proposal was vague and indefinite
because it failed to describe CII's definition of "independent director" and
therefore shareholders would not know with any certainty what actions the
proposal would require.
The Proposal is substantially similar to, and contains the same flaw as, the
Proponent's prior proposal that was considered by the staff in Boeing. The
Proposal recommends appointment of a lead director who is independent as
determined under "the standard set by the Council of Institutional Investors."
The Proposal also appears to require that the lead director be appointed solely
by a vote of directors who also are independent under the CII's definition. As
was the case in Boeing, the Proposal makes no attempt to describe CII's
definition of independence, leaving shareholders with no understanding of the
independence standard that would govern a director's eligibility to serve as
lead director or to participate in the appointment of a lead director. Moreover,
because the Proposal neither describes CII's standard nor fixes the applicable
standard based on CII's current standard, the Proposal would require the lead
director, and the directors who appoint the lead director, to meet whatever
standard CII may choose to adopt in the future. Because that standard may change
from time to time, without any input from or notice to the Company or its
shareholders, shareholders could not possibly know what standard of independence
they are being asked to approve. And, if the Proposal were adopted, the Company
would have to reassess the independence of directors each time CII chose to
amend its definition of independence, possibly leading to the appointment of a
new lead director or ratification of a prior appointment by a different group of
directors.
The omission of a description of CII's standard of independence (attached as
Exhibit 2) has the potential to significantly mislead investors, who may
conclude, incorrectly, that the standard is the same independence standard
already applicable to the Company's directors under the New York Stock Exchange
("NYSE") listing standards (attached as Exhibit 3) and the Company's own
categorical standards of independence as set forth in the Company's Corporate
Governance Guidelines (attached as Exhibit 4), which are referred to in the
Company's proxy statement as required by Item 407(a)(2) of Regulation S-K. In
fact, the CII's current standard is significantly more stringent than the
independence standards currently applicable to the Company's directors.
Section 303A.02(b)(ii) of the NYSE Listed Company Manual provides that a
director is not independent if the director or a member of the director's
immediate family has received more than $100,000 in direct compensation from the
company during any twelve-month period within the past three years (other than
compensation for services as a director and pension or similar payments
resulting from prior employment by the company). Under the comparable provision
of the CII's standard of independence (Section (d)), a director will not be
considered independent if the director or a relative of the director paid to or
received from the company or an executive officer or any affiliate of the
company, pursuant to a personal contract with the company, more than $50,000 in
the past five years. The CII standard therefore disqualifies a director based on
lesser payments, to a broader category of persons (i.e., including executive
officers and affiliates of the company), over a longer period of time, and also
disqualifies a director based on payments made by, not just to, the director and
family members.
Similarly, neither the NYSE rules nor the Company's Corporate Governance
Guidelines treat Company contributions to a charitable organization with which a
director is affiliated as a bar to independence. Instead, the Company's
Corporate Governance Guidelines provide (in Section (e)) that, if a director is
an executive officer or employee of a charitable organization, or member of the
director's immediate family is an executive officer of a charitable
organization, and the Company contributes to the organization an amount that, in
any single fiscal year, exceeds the greater of $500,000 or 2% of the
organization's gross revenues, the Company will disclose the payments in its
proxy statement. CII's standard of independence, in contrast, provides that a
director will not be considered independent if the director or a relative of the
director has been, at any time during the past five years, an employee or
director of a foundation, university or other non-profit organization that (i)
received from the company, or from executive officers or affiliates of the
company, grants or endowments exceeding the lesser of $100,000 or 1% of the
organization's total annual donations or (ii) was a direct beneficiary of any
donation to such an organization.
CII's current standard of independence not only establishes more bases on which
a director is automatically disqualified as independent, but also provides for a
longer "look back" period for identifying disqualifying relationships. While the
CII standard provides for a five-year look back period from the date the
independence determination is made, the NYSE rules provide for a three-year look
back period, and the Company's Corporate Governance Guidelines provide for a
three-year look back period with respect to certain relationships and a
four-year look back period for other relationships.
Because the Proposal fails to provide shareholders a description of CII's
standard of independence, the Company's shareholders would have no way of
knowing that the standard they are being asked to approve is different from, and
significantly more restrictive than, the independence requirements already
applicable to the Company's directors under the NYSE listing standards and the
Company's Corporate Governance Guidelines, and therefore would result in yet
another set of independence criteria that would have to be satisfied by the
contemplated lead director and those directors eligible to appoint him or her.
In addition, shareholders can not possibly know whether and how CII may change
its definition of independence in the future.
The applicable independence standard is the core of the Proposal and clearly
would be material to a shareholder's determination whether to vote for or
against the Proposal. The ostensible purpose of the Proposal is to provide
greater "independent" oversight of management, as noted by the statement in the
supporting statement that "[a] key purpose of the Independent Lead Director is
to protect shareholders' interests by providing independent oversight of
management, including [the Company's] CEO." Accordingly, it is essential that
shareholders understand the meaning of "independence" as used in the Proposal so
that they can assess whether the lead director would in fact provide
"independent oversight" as contemplated by the Proposal. Because the Proposal
fails to provide any information from which shareholders could derive such an
understanding, and would establish a definition of independence that may change
over time as CII amends its standard, shareholders would not know with any
certainty the nature of the action they are being asked to approve, and
therefore the Proposal is impermissibly vague and indefinite.
The Proposal is clearly distinguishable from the proposal considered by the
staff in Clear Channel Communications, Inc. (February 15, 2006), which requested
that the company's board of directors amend the compensation committee charter
to provide that the committee be composed solely of "independent" directors.
Unlike the Proposal, the proposal in Clear Channel included a clear definition
of independence, stating that, "for purposes of this proposal an independent
director is someone whose only nontrivial professional, familial or financial
connection to the corporation, its chairman or its executive officers is his/her
directorship, and who also: (1) is not or has not been, or whose relative is or
in the past 5 years has not been, employed by the corporation or employed by, or
a director of, an affiliate; and (2) complies with Sections (b)-(h) of the
Council of Institutional Investors Definition of Directors Independence as found
on its website at: http://www.cii.org/policies/ind_dir_defn.html."
Because the proposal in Clear Channel included a clear definition of the
independence standard that shareholders were being asked to approve, the
proposal was deemed not to be excludable under Rule 14a-8(i)(3). The Proposal,
in contrast, merely refers to CII's standard of independence, without including
a summary definition or even a reference to the website where CII's standard can
be located. Nor does the Proposal fix the definition of independence based on
CII's current standard, with the result that shareholders can not know what
standard would be applicable to future independence determinations. Accordingly,
the Proposal is similar to those the staff deemed excludable in the Boeing,
Smithfield and Johnson & Johnson letters discussed above and is excludable under
Rule 14a-8(i)3).
B. Rule 14a-8(i)(2) - The Proposal, if Implemented, Would Cause the Company to
Violate State Law
Rule 14a-8(i)(2) allows a company to exclude a proposal if implementation of the
proposal would cause the company to violate any state, federal or foreign law to
which the company is subject. The Company is incorporated under the laws of the
State of New Jersey. As more fully described in the opinion of the New Jersey
law firm of McCarter & English, LLP, attached as Exhibit 5, implementation of
the Proposal would cause the Company to violate Section 14A:6-1(1) of the New
Jersey Business Corporation Act (the "Act") by improperly transferring from the
entire board of directors to a single director, the Independent Lead Director,
authority to manage the business and affairs of the Company, particularly the
authority to determine what information is to be supplied to the board of
directors and to establish the agenda and schedules for meetings of the board of
directors.
Although the Proposal is precatory in that it "requests" that the Company's
board of directors adopt a bylaw, even a precatory proposal is excludable if the
action called for by the proposal would violate state, federal or foreign law.
See Pennzoil Corporation (March 22, 1993) and Badger Paper Mills, Inc. (March
15, 2000).
The Proposal Improperly Delegates the Authority to Manage the Business and
Affairs of the Company to a Single Director
Section 14A:6-1(1) of the Act provides that the business and affairs of a New
Jersey corporation are to be managed by or under the direction of the board of
directors, "except as in this [A]ct or in its certificate of incorporation
otherwise provided." Nothing in the Company's certificate of incorporation
limits the ability of the Company's board of directors in managing and
overseeing the business and affairs of the Company. Courts interpreting this
provision of the Act have determined that the scope of the board's power under
New Jersey law must be construed broadly. See Brooks v. Standard Oil Company,
308 F. Supp. 810, 814 (S.D.N.Y 1969).
The Proposal, if implemented, would empower a single director, the Independent
Lead Director, to approve all "information sent to the board," "meeting agendas
for the board," and "[board] meeting schedules." In the opinion of McCarter &
English, LLP, however, Section 14A:6-1(1) implicitly reserves to the board of
directors as a whole the power and responsibility to determine the information
to be supplied to the board and to establish meeting agendas and schedules. The
effect of the Proposal would be to vest in one director the responsibility for
approving and, by negative implication, the power to veto, the inclusion of
items on the agenda for consideration by the board of directors. For items
included on the agenda, the Proposal would vest in that director authority to
determine the information the board would receive in connection with its
consideration of each item on the agenda and the amount of time the board would
spend considering each item. These extraordinary powers would allow the
Independent Lead Director, acting alone, to exercise the oversight function
vested by New Jersey law in the full board of directors. The Proponent's
intentions are clear from the supporting statement, which states that "[a] key
purpose of the Independent Lead Director is to protect shareholders' interests
by providing independent oversight of management ..." However, by seeking to
transfer the powers of the full board to a single director, the Proposal usurps
the board's authority to oversee the management of the business and affairs of
the Company in violation of Section 14A:6-1(1) of the Act.
In the opinion of McCarter & English, LLP, the Proposal would violate the Act
even if the Proposal were interpreted as calling for the board's appointment of
a one-member committee of the board of directors to serve as Independent Lead
Director. Section 14A:6-9 of the Act provides that the board, if authorized by
the certificate of incorporation or bylaws, may appoint from among its members
one or more committees, each consisting of one or more directors, and that a
duly appointed committee "shall have and may exercise all of the authority of
the board...." Section 14A:6-9 also provides, however, that any committee so
appointed must be appointed "by resolution adopted by a majority of the entire
board." The Proposal, however, would require that the Independent Lead Director
be "elected by and from the independent board members." Because a committee
elected solely by the independent directors, rather than by the full board,
could not be authorized to perform functions reserved to the board of directors,
the Proposal would violate the Act even if the Proposal were interpreted as
calling for appointment of a one-member committee of the board.
The by-laws of a New Jersey corporation, whether adopted by the board of
directors or shareholders, must conform with the Act. See Penn-Texas Corp. v.
Niles-Bement-Pond Company, 34 N.J. Super 373,378 (Ch. Div. 1955) ("A by-law or
amendment to a by-law which is repugnant to any part of our [Act] is illegal and
void. No citation of authority is needed to support this basic principle.")
Because implementation of the Proposal would violate New Jersey law, the
Proposal is excludable under Rule 14a-8(i)(2).
Conclusion
For the reasons set forth above, it is our view that the Company may exclude the
Proposal from its proxy materials pursuant to Rules 14a-8 (i)(3) and (i)(2), and
we request confirmation that the staff will not recommend any enforcement action
to the Commission if the Company so excludes the Proposal.
When a written response to this letter becomes available, please fax the letter
to me at (202) 637-5910 and to the Proponent at (310) 371-7872. Should the staff
have any questions in the meantime, please feel free to call me at (202)
637-5737.
Sincerely,
/s/
Alan L. Dye
cc: John Chevedden
William Steiner
Grace Lee Schering-Plough Corporation
Susan Wolf Schering-Plough Corporation
Enclosures
[APPENDIX 1]
William Steiner
112 Abbottsford Gate
Piermont, NY 10968
Mr. Fred Hassan
Schering-Plough Corporation (SGP)
2000 Galloping Hill Road
Kenilworth, NJ 07033
Rule 14a-8 Proposal
Dear Mr. Hassan,
This Rule 14a-8 proposal is respectfully submitted in support of the long-term
performance of our company. This proposal is submitted 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 efficiency 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 by email.
Sincerely,
/s/
William Steiner
Date 10/12/07
cc: Susan Wolf<susan.wolf@spcorp.com>
Corporate Secretary
PH: 908 298-4000
PH: 908 298-7354
Fax: 908 298-7653
FX: 908 298-7303, 7082
[APPENDIX 2]
[SGP: Rule 14a-8 Proposal, November 29, 2007] 3 - Independent Lead Director
Resolved, Shareholders request that our Board adopt a bylaw to require that our
company have an independent lead director whenever possible with clearly
delineated duties, elected by and from the independent board members, to be
expected to serve for more than one continuous year, unless our company at that
time has an independent board chairman. The standard of indepcndence would be
the standard set by the Council of Institutional Investors.
The clearly delineated duties at a minimum would include:
Presiding at all meetings of the board at which the chairman is not present,
including executive sessions of the independent directors.
Serving as liaison between the chairman and the independent directors.
Approving information sent to the board.
Approving meeting agendas for the board.
Approving meeting schedules to assure that there is sufficient time for
discussion of all agenda items.
Having the authority to call meetings of the independent directors.
Being available for consultation and direct communication, if requested by
major shareholders.
A key purpose of the Independent Lead Director is to protect shareholders'
interests by providing independent oversight of management, including our CEO.
An Independent Lead Director with clearly delineated duties can promote greater
management accountability to shareholders and lead to a more objective
evaluation of our CEO.
An Independent Lead Director should be selected primarily based on his
qualifications as a Lead Director, and not simply default to the Director who
has another designation on our Board.
Additionally an Independent Lead Director should not be rotated out of this
position each year just as he or she is gaining valuable Lead Director
experience.
We had neither an independent Chairman nor a Lead Director according to The
Corporate Library http://www.thecorporatelibrary.com, an independent investment
research firm.
Please encourage our board to respond positively to this proposal and establish
an independent Lead Director to protect shareholders' interests:
Notes:
William Steiner, 112 Abbottsford Gate, Piermont, NY 10968 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]
February 1, 2008
BY HAND DELIVERY
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Schering-Plough Corporation - Shareholder Proposal Submitted by John
Chevedden on Behalf of William Steiner
Ladies and Gentlemen:
I am writing on behalf of Schering-Plough Corporation to respond.to the letter
sent to the staff by John Chevedden, acting as proxy for William Steiner (the
"Proponent"), expressing disagreement with our conclusion that the Proponent's
shareholder proposal (the "Proposal") is excludable from Schering-Plough's 2008
proxy materials under Rules 14a-8(i)(2) and (i)(3). We have considered the
arguments advanced by the Proponent, and we continue to believe that the
Proposal is excludable on both grounds.
The Proposal seeks an amendment to Schering-Plough's bylaws to require that
Schering-Plough have an independent lead director who meets "[t]he standard of
independence ... set by the Council of Institutional Investors." The Proposal
neither sets forth the Council's independence standard nor directs shareholders
to where the standard may be found. For this reason, shareholders would not be
able to determine with any reasonable certainty what the Proponent's proposed
by-law would require Schering-Plough or its board of directors to do. As we
explained in our prior letter, we believe the omission of a description of the
proposed independence standard renders the Proposal vague and indefinite and
therefore excludable under Rule 14a-8(i)(3).
The Proponent appears to agree that an understanding of the Council's
independence standard is critical to making an informed judgment about the
merits of his Proposal, but he argues that the Proposal does not need to provide
that understanding because most of Schering-Plough's common stock is held by
institutional investors "who already know the core definition of independence by
the Council of Institutional Investors or who are capable of locating it within
minutes." The Proponent's statement articulates exactly Schering-Plough's
concerna material aspect of the Proposal cannot be understood absent reference
to a third party source that is not provided by the Proponent.
A proposal is vague and indefinite if shareholders can not determine its meaning
and consider its merits based on information provided within the four corners of
the proposal. Where shareholders must resort to outside sources to gain an
understanding of a proposal, at a minimum the proposal must provide some
direction to where the information may be found. The Proponent asserts that most
of Schering-Plough's shareholders have access to the internet and therefore can
be expected to find the Council's independence standard on their own, but the
Proposal does not even provide shareholders with an internet address at which
the Council's standard may be found. The complete absence of any guidance
regarding the Council's independence standard or where it might be found burdens
shareholders with the responsibility to research the meaning of the Proposal,
using whatever resources may be available to them. Because the Proposal does not
provide this essential information or at least make it accessible to
shareholders, the Proposal is impermissibly vague and indefinite.
For these reasons as well as those set forth in our original letter, we
respectfully renew our request for the staff's concurrence that Schering-Plough
may exclude the Proposal from its 2008 proxy materials pursuant to Rules
14a-8(i)(2) and 14a-8(i)(3) under the Securities Exchange Act of 1934.
If you have any questions or need additional information, please free to contact
me at (202) 637-5737. When a written response to this letter is available, I
would appreciate your sending it to me by fax at (202) 637-5910 and to the
Proponent by fax at (310) 371-7872.
Sincerely,
/s/
Alan L. Dye
cc: John Chevedden Grace K. Lee Susan Ellen Wolf
[INQUIRY LETTER]
January 31, 2008
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
# 1 Schering-Plough Corporation (SGP)
Shareholder Position on Company No-Action Request
Rule 14a-8 Proposal: Independent Lead Director
William Steiner
Ladies and Gentlemen:
The company's January 28, 2008 no action request purported precedents imply that
the Glass Ceiling Commission's business recommendations and the Global Reporting
Initiative guidelines are of the same concern and understanding to investors as
standards of director independence.
The company stretches to claim without a reason that the specified Council of
Institutional Investors standard of independence could be confused with another
standard of independence that is not even mentioned in the resolution. The
company then devotes 5 paragraphs to this stretch, starting at the end of page
3.
The company "no way of knowing" argument fails to note that just as it
encourages its shareholders to access proxy materials via electronic access,
that these same shareholders can easily access the widely-known Council of
Institutional Shareholders core definition of independence via the Internet. The
following quote is from the 2007 company proxy (bold added after the heading):
Electronic Access to Proxy Materials and Financial Report
This proxy statement, the 2006 financial report to shareholders and the company
overview are available on Schering-Plough's website at www.scheringplough.com.
You can save Schering-Plough postage and printing expense by consenting to
access these documents over the internet. If you consent, you will receive
notice next year when these documents are available with instructions on how to
view them and submit voting instructions. If you are a shareholder of record,
you may sign up for this service by logging onto the internet at
https://www.giveconsent.com/sgp. If you hold your shares through a bank, broker
or other holder of record, contact the record holder for information regarding
electronic delivery of materials. Your consent to electronic delivery will
remain in effect until you revoke it. If you choose electronic delivery, you may
incur costs, such as telephone and internet access charges, for which you are
responsible.
The company fails to note that more than 80% of its shares are held by
institutional shareholders, who already know the core definition of independence
by the Council of Institutional Investors or who are most capable of locating it
within minutes.
The company does not provide any information on any purported history of change
of the core definition of independence by the Council of Institutional
Investors.
The company fails to take into consideration that the internet access of its
shareholders is probably at an all-time high. The company makes no comparison of
the internet usage of its shareholders currently, as measured by its own
internet voting, compared to internet usage on the dates of the company's'
purported precedents.
Nonetheless the company summarizes its argument as "shareholders would have no
way of knowing" about the standard they are being asked to approve.
Additionally the company has not provided any historical information that a term
that a few shareholders might not be familiar with will create a mad dash for
their yes-votes after the company advises them to vote no.
The company essentially argues that if a small minority of shareholders might
not fully understand a term in an otherwise clear proposal, then all
shareholders should be held back and excluded from voting on the topic.
The company outside opinion, if valid, would outlaw lead directors for New
Jersey corporations. The company has not provided any evidence on whether or not
there are any remaining Jersey corporations with lead directors, based on the
foundation of the outside opinion.
According to The Corporate Library, accessed at
http://www.boardanalyst.com/companies/custom/company_profile.asp?CompID=13680
James G. Cullen is the lead director of a major New Jersey corporation, Johnson
& Johnson (JNJ).
The company does not address a logical conclusion of its argument that could
bind the company position in knots, that the Chairman of a New Jersey
corporation would be outlawed from approving information sent to board members.
It would seem that under the outside opinion concept of New Jersey corporate
law, the entire board would need to have a meeting before each meeting to
determine which information would be provided to directors prior to each
meeting.
The company does not address another logical conclusion of its argument, that
every director of a New Jersey corporation would be compelled to cast a vote on
every item at every meeting attended even if there is a clear conflict of
interest.
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 proposalsince the company had the first opportunity
Sincerely,
John Chevedden
cc: William Steiner
Susan Wolf<susan.wolf@spcorp.com>
[INQUIRY LETTER]
February 5, 2008
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
# 2 Schering-Plough Corporation (SGP)
Shareholder Position on Company No-Action Request
Rule 14a-8 Proposal: Independent Lead Director
William Steiner
Ladies and Gentlemen:
A key point of the company February 1, 2008 supplement is that the company does
not contest the following core text of the January 31, 2008 shareholder letter:
The company's January 28, 2008 no action request purported precedents imply that
the Glass Ceiling Commission's business recommendations and the Global Reporting
Initiative guidelines are of the same concern and understanding to investors as
standards of director independence.
The company stretches to claim without a reason that the specified Council of
Institutional Investors standard of independence could be confused with another
standard of independence that is not even mentioned in the resolution. The
company then devotes 5 paragraphs to this stretch, starting at the end of page
3.
The company "no way of knowing" argument fails to note that just as it
encourages its shareholders to access proxy materials via electronic access,
that these same shareholders can easily access the widely-known Council of
Institutional Shareholders core definition of independence via the Internet. The
following quote is from the 2007 company proxy (bold added after the heading):
Electronic Access to Proxy Materials and Financial Report
This proxy statement, the 2006 financial report to shareholders and the company
overview are available on Schering-Plough's website at www.scheringplough.com.
You can save Schering-Plough postage and printing expense by consenting to
access these documents over the internet. If you consent, you will receive
notice next year when these documents are available with instructions on how to
view them and submit voting instructions. If you are a shareholder of record,
you may sign up for this service by logging onto the internet at
https://www.giveconsent.com/sgp. If you hold your shares through a bank, broker
or other holder of record, contact the record holder for information regarding
electronic delivery of materials. Your consent to electronic delivery will
remain in effect until you revoke it. If you choose electronic delivery, you may
incur costs, such as telephone and internet access charges, for which you are
responsible.
The company fails to note that more than 80% of its shares are held by
institutional shareholders, who already know the core definition of independence
by the Council of Institutional Investors or who are most capable of locating it
within minutes.
The company does not provide any information on any purported history of change
of the core definition of independence by the Council of Institutional
Investors.
The company fails to take into consideration that the internet access of its
shareholders is probably at an all-time high. The company makes no comparison of
the internet usage of its shareholders currently, as measured by its own
internet voting, compared to internet usage on the dates of the company's'
purported precedents.
Nonetheless the company summarizes its argument as "shareholders would have no
way of knowing" about the standard they are being asked to approve.
Additionally the company has not provided any historical information that a term
that a few shareholders might not be familiar with will create a mad dash for
their yes-votes after the company advises them to vote no.
The company essentially argues that if a small minority of shareholders might
not fully understand a term in an otherwise clear proposal, then all
shareholders should be held back and excluded from voting on the topic.
The company outside opinion, if valid, would outlaw lead directors for New
Jersey corporations. The company has not provided any evidence on whether or not
there are any remaining Jersey corporations with lead directors, based on the
foundation of the outside opinion.
According to The Corporate Library, accessed at
http://www.boardanalyst.com/companies/custom/company_profile.asp?ComplD=13680
James G. Cullen is the lead director of a major New Jersey corporation, Johnson
& Johnson (JNJ).
The company does not address a logical conclusion of its argument that could
bind the company position in knots, that the Chairman of a New Jersey
corporation would be outlawed from approving information sent to board members.
It would seem that under the outside opinion concept of New Jersey corporate
law, the entire board would need to have a meeting before each meeting to
determine which information would be provided to directors prior to each
meeting.
The company does not address another logical conclusion of its argument, that
every director of a New Jersey corporation would be compelled to cast a vote on
every item at every meeting attended even if there is a clear conflict of
interest.
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, and the January 31, 2008 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: William Steiner
Susan Wolf<susan.wolf@spcorp.com>
[STAFF REPLY LETTER]
March 7, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Schering-Plough Corporation Incoming letter dated January 28, 2008
The proposal requests that the board adopt a bylaw to provide for an independent
lead director, using the standard of independence set by the Council of
Institutional Investors.
There appears to be some basis for your view that Schering-Plough may exclude
the proposal under rule 14a-8(i)(3) as vague and indefinite. Accordingly, we
will not recommend enforcement action to the Commission if Schering-Plough omits
the proposal from its proxy materials in reliance on rule 14a-8(i)(3). In
reaching this position, we have not found it necessary to address the
alternative basis for omission upon which Schering-Plough relies.
Sincerely,
/s/
Greg Belliston
Special Counsel
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