Company Name: Time Warner Inc.
Public Availability Date: February 1, 2008Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
STAFF REPLY LETTER
[INQUIRY LETTER]
January 31, 2008
VIA FASCIMILE AND OVERNIGHT MAIL
Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Time Warner Inc.Proposal Submitted by Lucian Bebchuk
Ladies and Gentlemen:
This letter serves to inform you that Time Warner Inc. (the "Company") hereby
withdraws its letter dated January 10, 2008 to the Securities and Exchange
Commission (the "SEC") requesting that the Staff take a "no-action" position
with respect to the Company's omission from its 2008 proxy materials of the
proposal submitted by Mr. Lucian Bebchuk. Mr. Bebchuk has indicated to the
Company and to the SEC that he is withdrawing his proposal. A copy of Mr.
Bebchuk's letter to the Company and to the SEC withdrawing his proposal is
attached.
If you need any additional information regarding this matter, please do not
hesitate to contact me at (212) 484-8952 or by facsimile at (212) 858-5741.
Sincerely,
/s/
Ann Robertson
Senior Counsel
cc: Lucian Bebchuk
1545 Massachusetts Avenue
Cambridge, MA 02138
Fax: (617) 812-0554
[INQUIRY LETTER]
January 10, 2008
VIA OVERNIGHT MAIL
Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Time Warner Inc.Proposal Submitted by Lucian Bebchuk
Ladies and Gentlemen:
This letter respectfully requests that the staff of the Division of Corporation
Finance (the "Staff") of the Securities and Exchange Commission (the "SEC")
advise Time Warner Inc. (the "Company") that it will not recommend any
enforcement action to the SEC if the Company omits from its proxy statement and
proxy to be filed and distributed in connection with its 2008 annual meeting of
stockholders (the "Proxy Materials") a proposal (the "Proposal") it received
from Lucian Bebchuk (the "Proponent"). The Proposal recommends that the Board of
Directors of the Company (the "Board") "adopt a By-law provision under which the
Corporation, to the extent permitted under federal law and state law, shall
include in its proxy materials for an annual meeting of stockholders any
qualified proposal for an amendment of the By-laws submitted by a proponent, as
well as the proponent's supporting statement if any, and shall allow
stockholders to vote with respect to such a qualified proposal on the
Corporation's proxy card."
The Company intends to omit the Proposal from its Proxy Materials pursuant to
Rule 14a-8(i)(3) under the Securities Exchange Act of 1934 (the "Exchange Act")
because it is contrary to the SEC's proxy rules and pursuant to Rule 14a-8(i)(3)
and Rule 14a-9 under the Exchange Act because it contains impermissibly vague
statements.
Pursuant to Rule 14a-8(j) under the Exchange Act, we are enclosing six copies of
each of this letter and the Proposal (Exhibit A) and correspondence with the
Proponent (Exhibit B). By copy of this letter, the Company hereby notifies the
Proponent as required by Rule 14a-8(j) of its intention to exclude the Proposal
from its Proxy Materials.
Grounds for Omission
The Proposal would be contrary to the SEC's proxy rules and may therefore be
omitted from the Proxy Materials pursuant to Rule 14a-8(i)(3).
The Proposal recommends that the Board "adopt a By-law provision under which the
Corporation, to the extent permitted under federal law and state law, shall
include in its proxy materials for an annual meeting of stockholders any
qualified proposal for an amendment of the By-laws submitted by a proponent, as
well as the proponent's supporting statement if any, and shall allow
stockholders to vote with respect to such a qualified proposal on the
Corporation's proxy card." The Proposal sets forth requirements that a proposal
would need to satisfy in order to be a "qualified proposal."
The Proposal would authorize any stockholder to propose an amendment to the
By-Laws of the Company and would require the Company to include any and all such
proposals in its Proxy Materials provided that (a) the proposed amendment would
be legally valid if adopted, (b) the proposal is submitted to the Company by the
deadline specified by the Company for stockholder proposals to be included in
proxy materials for an annual meeting, (c) the proponent is able to demonstrate
the requisite share ownership and has not submitted other proposals for the
annual meeting, (d) the proposal and supporting statement do not exceed 500
words, (e) the proposal does not substantially duplicate another proposal
previously submitted to the Company by another proponent that will be included
in the proxy materials for the same meeting, and (f) the proposal is not
substantially similar to any other proposal that was voted on by the
stockholders during the preceding three calendar years and failed to receive at
least 3% of the votes cast in such vote. The Proposal leaves out most of the
thirteen subject matter grounds for exclusion of stockholder proposals under
Rule 14a-8(i) and, in the absence of such substantive provisions, would impose
new obligations on the Company and limit the rights of the Company in ways that
are contrary to Rule 14a-8 and the Staff's guidance.
Rule 14a-8(i)(3) permits a company to exclude a proposal "if the proposal or
supporting statement is contrary to any of the Commission's proxy rules ..." The
Proposal seeks to undermine the SEC's existing framework for the inclusion of
stockholder proposals in proxy materials by essentially requiring a company to
"opt out" of Rule 14a-8 and not exercise any judgment or assert any basis for
excluding a proposal to amend the By-laws, other than illegality or a procedural
defect. This has the effect of eliminating the requirement of full compliance
with Rule 14a-8 for access to proxy materials. This attempt to exempt the
Company's stockholders from compliance with many of the requirements of Rule
14a-8 and to preclude the Company from asserting grounds for exclusion of
stockholder proposals to which it is entitled under Rule 14a-8 is clearly
contrary to the SEC's existing proxy rules.
The authority to regulate what is required or permitted in proxy materials is
vested exclusively in the SEC under Section 14 of the Exchange Act and is
expressed in the proxy rules promulgated by the SEC pursuant to Section 14. The
Proponent's attempt to expand stockholders' rights of access to the Company's
proxy materials even for proposals that do not comply with Rule 14a-8 is flatly
contrary to the SEC's carefully crafted framework for stockholder proposals.
The SEC and the Staff have repeatedly emphasized the SEC's role overseeing proxy
materials under the Rule 14a-8. The SEC has clearly noted that proposals that
would curtail the role of the SEC in this process are improper. See Exchange Act
Release No. 34-40018 (May 21, 1998) (in which the SEC elected not to adopt
proposals that would have reduced the role of the SEC and the Staff in the
stockholder proposal process); Exchange Act Release No. 34-20091 (August 16,
1983) (rejecting a proposal that would have required the inclusion of any
proposal proper under state law except those involving the election of directors
and noting that federal regulation of stockholder access to proxy materials "is
in the best interests of shareholders and issuers alike"). When considering
proposals that sought to reduce the SEC's involvement in the review of
stockholder proposals, the SEC noted that "some of the proposals we are not
adopting share a common theme: to reduce the Commission's and its staff's role
in the process and to provide shareholders and companies with a greater
opportunity to decide for themselves which proposals are sufficiently important
and relevant to the company's business to justify inclusion in its proxy
materials." Exchange Act Release No. 34-40018 (May 21, 1998).
The SEC recently reaffirmed the primacy of its regulation of the proxy access
process when it adopted amendments clarifying that the grounds for exclusion of
stockholder proposals under Rule 14a-8(i)(8) apply to procedures for stockholder
nominations or election of directors as well as to specific nominations. In its
proposing release, the SEC stated that "in all cases, [a stockholder proposal]
may be excluded by the company if it fails to satisfy the rule's procedural
requirements or falls within one of the rule's thirteen substantive categories
of proposals that may be excluded." Exchange Act Release No. 34-56161 (July 27,
2007). The Proposal would require the Company to opt out entirely from the
finely calibrated parameters of Rule 14a-8(i)(8) and to circumvent the choices
the SEC has thoughtfully made regarding proper subjects for stockholder
proposals in such complex areas as those relating to the Company's ordinary
business operations.
The proponent's attempt to diminish the SEC's oversight role through the
Proposal is directly counter to the SEC's express recognition of its primary
oversight role and to the SEC's unwillingness to adopt rules that would limit
this oversight role. In addition to being inconsistent with the unambiguous
position of the SEC on this issue, the Proposal, in seeking to supplant the
legal grounds for exclusion of stockholder proposals embedded in Rule 14a-8, is
patently contrary to existing proxy rules and should be properly excluded from
the Company's Proxy Materials. Indeed, the Staff concurred that a proposal, very
similar to the Proposal submitted by the Proponent, seeking to mandate inclusion
in proxy materials of stockholder proposals to amend a company's by-laws could
be properly excluded pursuant to Rule 14a-8(i)(3). See State Street Corporation
(February 3, 2004).
For these reasons, the Company respectfully submits that the Proposal be
excluded from the Proxy Materials pursuant to Rule 14a-8(i)(3).
The Proposal may be omitted from the Proxy Materials under Rule 14a-8(i)(3) and
Rule 14a-9 because it contains impermissibly vague statements.
As noted above, the Proposal clearly appears to be an attempt to contravene and
circumvent the SEC's proxy rules under Rule 14a-8. The Proposal, however, also
contains provisions that are vague and potentially misleading, which could cause
stockholders to be confused about how the Proposal would, in fact, interact with
Rule 14a-8.
First, the Proposal asks that the Board amend the Company's By-laws to implement
a scheme that contravenes Rule 14a-8, but at the same time the Proposal asks
that the Company do so "to the extent permitted under federal and state law."
Thus, stockholders would be justifiably confused as to whether, and to what
extent, a proposal that seeks to contravene Rule 14a-8 could also be "permitted
under federal ... law."
The confusion about the interaction between Rule 14a-8 and the scheme envisioned
by the By-law amendment would be heightened by a number of other provisions in
the Proposal. The Proposal sets forth requirements that a By-law amendment
proposed by a stockholder would need to satisfy in order to constitute a
"qualified proposal." Although these requirements appear to parallel certain of
the Rule 14a-8 procedural and substantive grounds for excluding stockholder
proposals, the language in the Proposal differs from the language in Rule 14a-8.
For example, the Proposal includes as one of the requirements for a "qualified
proposal" that "the proposed amendment of the By-laws would be legally valid if
adopted," but there is no analogous provision in Rule 14a-8. Rule 14a-8(i)(1)
permits the exclusion of a stockholder proposal that is "not a proper subject
for action by shareholders under the laws of the jurisdiction of the company's
organization." Rule 14a-8(i)(2) permits the exclusion of a stockholder proposal
that "would, if implemented, cause the company to violate any state, federal, or
foreign law to which it is subject." Rule 14a-8(i)(3) permits the exclusion of a
stockholder proposal if the proposal or the supporting statement is "contrary to
any of the Commission's proxy rules, including Rule 14a-9, which prohibits
materially false or misleading statements in proxy soliciting materials." It is
unclear whether the Proposal's concept of "legally valid" is meant to encompass
these standards from Rule 14a-8(i) or whether it is meant to impose a different
standard, which the Proponent does not adequately explain.
In addition, the Proposal includes as one of the requirements for a "qualified
proposal" that "the proposal is not substantially similar to any other proposal
that was voted upon by the stockholders at any time during the preceding three
calendar years and failed to receive at least 3% of the votes cast when so
considered." This standard differs from the resubmission thresholds that the SEC
has established in Rule 14a-8(i)(12).
As these examples illustrate, while the Proposal purports to jettison most of
the SEC's framework of procedural and substantive grounds for excluding
stockholder proposals under Rule 14a-8, it is also written in such a way as to
cast doubt upon how exactly the new framework would interact with the
requirements of Rule 14a-8.
Rule 14a-8(i)(3) permits the omission of a proposal or any statement in support
thereof if such proposal or statement is contrary to any proxy rule or
regulation, including Rule 14a-9, which prohibits materially false or misleading
statements in proxy soliciting material. The Company believes that the Proposal
violates Rule 14a-9 in that it contains impermissibly vague statements and is,
therefore, excludable under Rule 14a-8(i)(3).
The Staff has found that a proposal is misleading if the stockholders, or the
company, would not be able to determine with any reasonable certainty exactly
what actions or measures would be taken in the event the proposal were adopted.
See Alaska Air Group, Inc. (April 11, 2007) (proposal requesting that the board
of the company "complete the appropriate process in 2007 to amend the company's
governance documents (certificate of incorporation and or bylaws) to assert,
affirm and define the right of the owners of the company to set standards of
corporate governance" properly excluded as vague and indefinite). See also
Philadelphia Electric Co. (July 30, 1992) (proposal relating to the election of
a committee of small stockholders to present plans "that will ... equate with
the gratuities bestowed on management, directors and other employees" properly
excluded as vague and indefinite).
The Proposal does not provide adequate guidance to stockholders or the Board as
to the extent to which a proposal that circumvents Rule 14a-8 is "permitted
under federal ... law," nor does it adequately define the intended parameters of
the "qualified proposal" definition. As a result, in considering the Proposal,
the stockholders will not necessarily know what they are voting for and the
Board will not necessarily know how to implement the Proposal if it is approved
by the stockholders.
For these reasons, the Company believes that the Proposal may be omitted from
the Proxy Materials because it contains impermissibly vague statements and is
therefore contrary to Rule 14a-8(i)(3) and Rule 14a-9.
* * * * *
The Company respectfully requests that the Staff confirm that it would not
recommend enforcement action if the Company excludes the Proposal from its Proxy
Materials for the foregoing reasons. If you have any questions or if the Staff
is unable to agree with our conclusions without additional information or
discussions, we respectfully request the opportunity to confer with members of
the Staff prior to issuance of any written response to this letter. Please do
not hesitate to call the undersigned at (212) 484-8952.
Please acknowledge receipt of this letter and its attachment by date-stamping
the enclosed copy of the first page of this letter and returning it in the
self-addressed stamped envelope provided for your convenience.
Sincerely,
/s/
Ann Robertson
Senior Counsel
cc: Lucian Bebchuk
1545 Massachusetts Avenue
Cambridge, MA 02138
Fax: (617) 812-0554
[APPENDIX 1]
Exhibit A
December 10, 2007
VIA FACSIMILE AND OVERNIGHT MAIL
Time Warner Inc.
Office of the Corporate Secretary
One Time Warner Center
New York, NY 10019
Re: Shareholder Proposal of Lucian Bebchuk
To Corporate Secretary:
I am the owner of 200 shares of common stock of Time Warner Inc. (the
"Company"), which I have continuously held for more than 1 year as of today's
date. I intend to continue to hold these securities through the date of the
Company's 2008 annual meeting of sharebolders.
Pursuant to Rule 14a-8. I enclose herewith a shareholder proposal and supporting
statement (the "Proposal") for inclusion in the Company's proxy materials and
for presentation to a vote of shareholders at the Company's 2008 annual meeting
of shareholders.
Please let me know if you would like to discuss the Proposal or if you have any
questions.
Sincerely,
/s/
Lucian Bebchuk
[APPENDIX 2]
RESOLVED that stockholders of Time Warner Incorporated recommend that the Board
of Directors adopt a By-law provision under which the Corporation. to the extent
permitted under federal law and state law. shall include in its proxy materials
for an annual meeting of stockholders any qualified proposal for an amendment of
the By-laws submitted by a proponent, as well as the proponent's supporting
statement if any, and shall allow stockholders to vote with respect to such a
qualified proposal on the Corporation's proxy card. A qualified proposal refers
in this resolution to a proposal that satisfies the following requirements:
(a) The proposed amendment of the By-laws would be legally valid if adopted:
(b) The proponent submitted the proposal and supporting statement to the
Corporation's Secretary by the deadline specified by the Corporation for
stockholder proposals for inclusion in the proxy materials for the Annual
Meeting:
(c) The proponent beneficially owned at the time of the submission at least
$2,000 of the Corporation's cutstanding common stock for at least one year, and
did not submit other stockholder proposals for the Annual Meeting:
(d) The proposal and its supporting statement do not exceed 500 words;
(e) The proposal does not substantially duplicate another proposal previously
submitted to the Corporation by another proponent that will be included in the
Corporation's proxy materials for the same meeting; and
(f) The proposal is not substantially similar to any other proposal that was
voted upon by the stockholders at any time during the preceding three calendar
years and failed to receive at least 3% of the votes cast when so considered.
SUPPORTING STATEMENT:
Statement of Professor Lucian Bebchuk: In my view, the ability to place
proposals for By-law amendments on the corporate ballot could in some
circumstances be essential for stockholders ability to use their power under
state law to initiate By-law amendments. In the absence of ability to place such
a proposal on the corporate ballot, the costs involved in obtaining proxies from
other stockholders could deter a stockholder from initiating a proposal even if
the proposal is one that would obtain stockholder approval were it to be placed
on the corporate ballot. Current and future SEC rules may in some cases allow
companiesbut do not currently require them to exclude proposals from the
corporate ballot. In my view, even when SEC rules may allow exclusion, it would
be desirable for the Corporation to place on the corporate ballot proposals that
satisfy the requirements of a qualified proposal. I urge even stockholders who
believe that no changes in the Corporation's By-laws are currently desirable to
vote for my proposal to facilitate stockholders' ability to initiate proposals
for By-law amendments to be voted on by their fellow stockholders.
I urge you to vote for this proposal.
[STAFF REPLY LETTER]
February 1, 2008
Ann Robertson
Senior Counsel
Time Warner Inc.
One Time Warner Center, 14th Floor
New York, NY 10019-8016
Re: Time Warner Inc.
Dear Ms. Robertson:
This is in regard to your letter dated January 31,
2008 concerning the shareholder proposal submitted by Lucian Bebchuk for
inclusion in Time Warner's proxy materials for its upcoming annual meeting of
security holders. Your letter indicates that the proponent has withdrawn the
proposal, and that Time Warner therefore withdraws its January 10, 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: Michael J. Barry
Grant & Eisenhofer P.A.
Chase Manhattan Centre
1201 North Market Street
Wilmington, DE 19801
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