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Company Name: United Technologies Corp.
Public Availability Date: January 31, 2008
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
VIA COURIER
November 28, 2007
U.S. Securities and Exchange Commission
Division of Corporate Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: United Technologies Corporation Securities Exchange Act of 1934: Rule
14a-8(i)
Ladies and Gentlemen:
This letter is submitted on behalf of United Technologies Corporation, a
Delaware corporation (the "Company"), pursuant to Rule 14a-8(j) under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). On October
4, 2007, the Company received a letter dated October 2, 2007 (a copy of which is
attached hereto as Exhibit A) from the AFL-CIO Reserve Fund (the "Proponent")
requesting that the Company include a shareowner proposal (the "Proposal") in
the Company's 2008 proxy statement.
The Proposal asks that the Board of Directors "adopt principles for health care
reform based upon principles reported by the Institute of Medicine: 1. Health
care coverage should be universal. 2. Health care coverage should be continuous.
3. Health care coverage should be affordable to individuals and families. 4. The
health insurance strategy should be affordable and sustainable for society. 5.
Health insurance should enhance health and well being by promoting access to
high-quality care that is effective, efficient, safe, timely, patient-centered
and equitable."
This letter sets forth the reasons for the Company's belief that it may omit the
Proposal from the proxy statement and form of proxy (collectively, the "Proxy
Materials") relating to the Company's 2008 annual meeting of shareowners
pursuant to Rules 14a-8(i)(7), 14a-8(i)(3) and 14a-8(i)(6) and under the
Exchange Act. Pursuant to Rule 14a-8(j)(2) under the Exchange Act, enclosed are
six (6) copies of this letter, including exhibits. By copy of this letter, the
Company is notifying the Proponent of its intention to omit the Proposal from
the Proxy Materials.
The Company intends to file its definitive 2008 Proxy Materials with the
Securities and Exchange Commission (the "Commission") on or about February 22,
2008, and the annual meeting of shareowners of the Company is scheduled to occur
on or about April 9, 2008. It would be appreciated if the Staff's response to
this request could be provided by February 14, 2008, which is the date by which
the Company will need to finalize its Proxy Materials in order to meet its
current timetable for filing and distribution of the materials.
Discussion
I. The Company may omit the Proposal pursuant to Rule
14a-8(i)(7) because it relates to the Company's ordinary business operations.
Under Rule 14a-8(i)(7). a company may properly exclude a proposal dealing with a
matter relating to the conduct of the company's ordinary business operations.
The subject matter of the Proposal appears to involve the Company's health care
coverage policies for its employees.
The Staff has long recognized that proposals concerning health and other welfare
benefits for a corporation's employees relate to its ordinary business
operations, and has consistently allowed omission under Rule 14a-8(i)(7) of such
proposals. See, e.g., General Motors Corporation (March 9, 2007) (excluding
proposal seeking report on implications of rising health care expenses and
company's response to issue); Target Corporation; (February 27, 2007) (same)
("Target, 2007") 3M Company (February 20, 2007) ("3M, 2007") (same); Kohl's
Corporation (January 8, 2007) (same); SBC Communications Inc. (January 9, 2004)
(excluding proposal requesting that unmarried sexual partners of employees be
excluded from health care plans); International Business Machines Corporation
(January 21, 2002) ("IBM", 2002) (excluding proposal requiring provision of
information about health costs and supporting the establishment of a national
health insurance system); International Business Machines Corporation (January
15, 1999) (excluding proposal seeking change in scope of employee health care
coverage).
The intent of Rule 14a-8(i)(7) is to conform to "the policy of most state
corporate laws," which is "to confine the resolution of ordinary business
problems to management and the board of directors, since it is impracticable for
shareholders to decide how to solve such problems at an annual shareholder's
meeting." SEC Release 34-40018 (May 21, 1998). The Commission has found that "[t]he
policy underlying the ordinary business exclusion rests on two central
considerations." The first is whether the proposal involves tasks "so
fundamental to management's ability to run a company on a day-to-day basis that
they could not, as a practical matter, be subject to shareholder oversight." Id.
"The second consideration relates to the degree to which the proposal seeks to
`micro-manage' the company by probing too deeply into matters of a complex
nature upon which shareholders, as a group, would not be in a position to make
an informed judgment." Id. This "may come into play in a number of
circumstances, such as where the proposal involves intricate detail, or seeks to
impose specific time frames or methods for implementing complex policies." Id.
Although Rule 14a-8(i)(7) permits the exclusion from proxy materials of
proposals that relate to a company's "ordinary business," the Staff has
permitted inclusion of certain proposals that it determined involved a
"significant social policy." In this regard, we respectfully submit that since
the 1990s, the Staff has consistently disagreed with shareowners who have sought
to characterize proposals on health care reform as relating to something other
than ordinary business. "In all of those earlier cases advocating or otherwise
promoting national health care coverage or similar insurance, the staff
uniformly concurred with corporations that proposals on this subject could be
omitted from their proxy materials under the ordinary business exclusion."
(Target, 2007, citing International Business Machines Corporation (January 13,
2005). For example, in PepsiCo, Inc. (March 7, 1991) (PepsiCo., 1991"), the
Staff concluded that a proposal calling for the establishment of a board
committee to evaluate "the impact of a representative cross section of the
various health care reform proposals being considered by national policy makers
on the company" could be excluded as pertaining to ordinary business. Notably,
despite the purported policy orientation of the proposal considered in PepsiCo,
1991, the Staff found no significant social policy issue that would override the
ordinary business exclusion. See also 3M, 2007 ("the mere assertion that a
proposal involving employee health care benefits touches upon larger societal
issues does not alter the basic nature of how the proposal impacts the
registrant, i.e., its employee benefit plans which are matters dealing with
ordinary business operations").
In addition, we note that if the Proposal's focus is not the Company's health
care policies but rather the Company's position with respect to the United
States' health care regime (which possibility is discussed in Part II below),
the Staff has in a number of no-action letters concurred that a proposal is
excludable under Rule 14a-8(i)(7) where it seeks to involve a company in the
political or legislative process. See, e.g., General Motors Corp. (April 7,
2006) (excluding proposal requesting that the company petition the U.S.
government for improved corporate average fuel economy standards); IBM, 2002. In
this regard, we note the language in the Proposal's supporting statement to the
effect that "in our opinion, health care reform also is a central issue in the
presidential campaign of 2008", "the cost of health care has put a tremendous
weight on the U.S. economy" and that "the current situation is not sustainable
in a global, competitive workplace".
II. The Company may
omit the Proposal pursuant to Rule 14a-8(i)(3) or Rule 14a-8(i)(6) because it is
vague and indefinite.
Under Rule 14a-8-(i)(3), a company may properly exclude a proposal if the
proposal or the supporting statement contains materially false or misleading
statements in violation of the Commission's proxy rules, including Rule 14a-9.
The Staff has consistently taken the position that vague and indefinite
stockholder proposals are excludable under Rule 14a-8(i)(3) because `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." Staff Legal Bulletin
No. 14B (September 15, 2004). See also Bank of America Corporation (February 12,
2007) (excluding proposal seeking to reduce company's investments until certain
conditions regarding the State of Israel were satisfied); The Procter & Gamble
Company (October 25, 2002) (excluding proposal seeking creation of witness
protection fund for shareowners of public companies); International Business
Machines Corporation (February 2, 2005) (excluding proposal seeking to reduce
executive compensation that the company asserted was subject to multiple
interpretations); and Philadelphia Electric Company (July 30, 1992) (excluding
proposal seeking creation of a shareowner committee because it was so vague and
indefinite that neither the shareowners nor the company would be able to
determine "exactly what actions or measures the proposal requires). In like
fashion, the Staff has permitted the exclusion of vague and indefinite
shareowner proposals under Rule 14a-8(i)(6), which permits exclusion of
proposals that a company lacks the power to implement. The Staff has
acknowledged that a company lacks the power to implement a proposal where
the"proposal is so vague and indefinite that a registrant would be unable to
determine what action should be taken." International Business Machines
Corporation (January 14, 1992).
Similar to the above-cited proposals, the Proposal is vague and indefinite
because it is unclear, based on the language of the Proposal and the supporting
statement, what the Proponent is requesting. What does it mean for the Company's
Board of Directors to "adopt principles"? Is the Proponent requesting that the
board adopt the listed principles in writing, in a fashion akin to the adoption
of a corporate policy statement? Alternatively, is the Proponent requesting that
the Company implement the listed principles and offer health care coverage
benefits meeting all the features of the listed principles? If so, to which
employees? Only those in the United States? How should the Company construe
undefined terms contained in the listed principles, such as "universal",
"continuous", "affordable to individuals and families", "affordable and
sustainable for society" and "high-quality care that is effective, efficient,
safe, timely, patient-centered, and equitable?" Alternatively, is the Proponent
requesting that the Company involve itself in the political or legislative
process by making a normative statement with respect to the United States'
health care system? With respect to health care globally?
The supporting statement amplifies the foregoing ambiguities. The statement that
"principles for health care reform, such as those set forth by the Institute of
Medicine, are essential if public confidence in our Company's commitment to
health care coverage is to be maintained" implies that the focus of the Proposal
is "public confidence in the Company's commitment to health care coverage";
presumably the Company's commitment to health care coverage for its employees,
possibly its employees on a worldwide basis. `Other portions of the supporting
statement suggest that the Proposal has a different focus. For example, the
statement that "many national organizations have made health care reform a
priority ... the American Cancer Society redirected its entire $15 million
advertising budget `to the consequences of inadequate health coverage' in the
United States" and the statement that "47 million Americans without health
insurance results in higher costs, causing an adverse effect on shareholder
value for our Company" suggest that the Proposal's intent is for the Company to
promote health care reform on a national scale. The previously referenced
statement about the 2008 presidential campaign suggests that the Proposal seeks
that the Company involve itself in the political process.
Given these myriad ambiguities and the fact that the Proposal's key terminology
is neither defined nor explained in a manner that would allow shareowners to
understand how the Proposal would operate, it is uncertain what actions
shareowners voting for the Proposal would expect the Company to take, and in
what manner the Company should implement the Proposal if adopted. Accordingly,
the Proposal is excludable under Rule 14a-8(i)(3) and Rule 14a-8-(i)(6).
Conclusion
We respectfully submit, for the foregoing reasons, that the Proposal is
excludable under Rule 14a-8(i)(7), Rule 14a-8(i)(3) and Rule 14a-8(i)(6). We
respectfully request that the Staff confirm that it will not recommend any
enforcement action if the Proposal is omitted in its entirety from the Company's
2008 Proxy Materials.
We would appreciate the Staff notifying us in the event that the Proponent
contacts the Staff with respect to the Proposal as the Proponent is not
obligated to do so. If you have any questions regarding this request or require
additional information, please contact the undersigned at telephone 860-728-7836
or fax 860-660-0245.
Very truly yours,
/s/
Charles F. Hildebrand
Associate General Counsel & Assistant Secretary
cc: Daniel F. Pedrotty, Director, Office of Investment,
American Federation of Labor and Congress of Industrial Organizations
815 Sixteenth Street, N.W.
Washington, D.C 20006
Tel. (202) 637-5379
Fax. (202) 508-6992
[APPENDIX 1]
October 2, 2007
By UPS Next Day Air
Ms. Debra A. Valentine, Vice President, Secretary and Associate General Counsel
United Technologies Corporation
One Financial Plaza
Hartford, Connecticut 06103
Dear Ms. Valentine:
On behalf of the AFL-CIO Reserve Fund (the "Fund"), I write to give notice that
pursuant to the 2007 proxy statement of United Technologies Corporation (the
"Company"), the Fund intends to present the attached proposal (the "Proposal")
at the 2008 annual meeting of shareholders (the "Annual Meeting"). The Fund
requests that the Company include the Proposal in the Company's proxy statement
for the Annual Meeting. The Fund is the beneficial owner of 600 shares of voting
common stock (the "Shares") of the Company, and has held the Shares for over one
year. In addition, the Fund intends to hold the Shares through the date on which
the Annual Meeting is held.
The Proposal is attached. I represent that the Fund or its agent intends to
appear in person or by proxy at the Annual Meeting to present the Proposal. I
declare that the Fund has no "material interest" other than that believed to be
shared by stockholders of the Company generally. Please direct all questions or
correspondence regarding the Proposal to me at (202) 637-5379.
Sincerely,
/s/
Daniel F. Pedrotty
Director
Office of Investment
DFP/ms
opeiu #2, afi-cio
Attachment
[APPENDIX 2]
Shareholder Proposal
RESOLVED: Shareholders of United Technologies Corporation (the "Company") urge
the Board of Directors to adopt principles for health care reform based upon
principles reported by the Institute of Medicine:
1. Health care coverage should be universal.
2. Health care coverage should be continuous.
3. Health care coverage should be affordable to individuals and families.
4. The health insurance strategy should be affordable and sustainable for
society.
5. Health insurance should enhance health and well being by promoting access to
high-quality care that is effective, efficient, safe, timely, patient-centered,
and equitable.
SUPPORTING STATEMENT
The Institute of Medicine, established by Congress as part of the National
Academy of Sciences, issued five principles for reforming health insurance
coverage in a report, Insuring America's Health: Principles and Recommendations
(2004). We believe principles for health care reform, such as those set forth by
the Institute of Medicine, are essential if public confidence in our Company's
commitment to health care coverage is to be maintained.
Access to affordable, comprehensive health care insurance is the most
significant social policy issue in America according to polls by NBC News/The
Wall Street Journal, the Kaiser Foundation and The New York Times/CBS News. In
our opinion, health care reform also is a central issue in the presidential
campaign of 2008.
Many national organizations have made health care reform a priority. In 2007,
representing "a stark departure from past practice," the American Cancer Society
redirected its entire $15 million advertising budget "to the consequences of
inadequate health coverage" in the United States (The New York Times, 8/31/07).
John Castellani, president of the Business Roundtable (representing 160 of the
country's largest companies), has stated that 52 percent of the Business
Roundtable's members say health costs represent their biggest economic
challenge. "The cost of health care has put a tremendous weight on the U.S.
economy," according to Castellani, "The current situation is not sustainable in
a global, competitive workplace." (BusinessWeek, July 3, 2007.)
The National Coalition on Health Care (whose members include some of the largest
publicly-held companies, institutional investors and labor unions), also has
created principles for health insurance reform. According to the National
Coalition on Health Care, implementing its principles would save employers
presently providing health insurance coverage an estimated $595-$848 billion in
the first 10 years of implementation.
We believe that the 47 million Americans without health insurance results in
higher costs, causing an adverse effect on shareholder value for our Company, as
well as all other U.S. companies which provide health insurance to their
employees. Annual surcharges as high as $1,160 for the uninsured are added to
the total cost of each employee's health insurance, according to Kenneth Thorpe,
a leading health economist at Emory University. Moreover, we feel that
increasing health care costs further reduces shareholder value when it leads
companies to shift costs to employees, thereby reducing employee productivity,
health and morale.
[INQUIRY LETTER]
VIA OVERNIGHT MAIL
January 15, 2008
U.S. Securities and Exchange Commission
Division of Corporate Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: United Technologies Corporation Securities Exchange Act of 1934: Rule
14a-8(i)
Ladies and Gentlemen:
We refer to the letter dated December 17, 2007 submitted by the AFL-CIO Reserve
Fund (the "Proponent") in response to the no-action request of United
Technologies Corporation, a Delaware corporation (the "Company") dated November
28, 2007, regarding the Proponent's shareholder proposal requesting that the
Company's Board of Directors "adopt principles for health care reform based upon
principles reported by the Institute of Medicine" (the "Proposal"). The
Proponent has asked the Division of Corporation Finance (the "Staff") of the
Securities and Exchange Commission to deny the Company's no-action request.
The Proponent contends that the Proposal is excludable neither under Rule
14a-8(i)(7) as an ordinary business matter nor under Rules 14a-8(i)(3) or
14a-8(i)(6) because it is vague or indefinite. We wish to respond to the
Proponent's letter.
I. Excludability of the Proposal pursuant to Rule 14a-8(i)(7) because it relates
to the Company's ordinary business operations.
The Proponent's letter asserts that the Proposal presents a "significant social
policy," requiring the Company only "to focus externally on health care reform
as a significant social policy issue", and that the Proposal "neither focuses on
the Company's internal health benefits plans, nor on its operations around the
world." With these statements, we believe the Proponent makes clear that the
Proposal seeks to have the Company take a public position on a particular form
of health care coverage, i.e., universal health care based on the principles
reported by the Institute of Medicine. There can be no other purpose for seeking
Board adoption of these principles. Certainly the Proponents are not asking the
Board to privately adopt these principles without some form of public notice;
the Proponent's letter states that "the principles should be adopted in writing.
Otherwise no one would ever know whether they had ever been adopted". The
Proponents clearly seek to have the Board take a position and communicate that
position externally in order to support advocacy of a particular form of health
care. It is noteworthy that the Proponent's letter prominently cites and
attaches a letter of support for health care reform obtained from IBM. The
Proponent's letter also notes that "[o]ther leading business organizations have
recently announced their support for health care reform."
In addition, in order to take the position urged by the Proponent in support of
health care reform while fulfilling their duties as directors, the Company's
Board of Directors would have to receive information, assess the impact of such
principles on the Company and its shareholders, and consider how and whether to
participate in public debate concerning health care reform. The Proponents seek
nothing more than to influence the Board to reach a particular decision on the
question of whether to participate in the political and legislative process, and
what position to take in the political or legislative process.1 The Proposal
urges the Board to take this position without allowing for the possibility that
the directors, in the exercise of their fiduciary duties, might conclude that a
different approach to health care or lobbying would better serve the interests
of the Company and its shareholders. In sum, the Proponents seek to have
shareholders urge the Board to publicly advocate a particular form of health
care coverage, to bolster support for the adoption of health care reform in the
political and legislative process.
The Staff has in a number of no-action letters concurred that a proposal is
excludable under Rule 14a-8(i)(7) as pertaining to a matter of ordinary business
where it seeks to involve a company in the political or legislative process.
See, e.g., Chrysler Corp. (February 10, 1992) (excluding proposal requesting
that the company actively support and lobby for universal health coverage
because the proposal was "directed at involving the Company in the political or
legislative process relating to an aspect of the Company's operations"). See
also no-action letters cited in the Company's no-action request: General Motors
Corp. (April 7, 2006) (excluding proposal requesting that the company petition
the U.S. government for improved corporate average fuel economy standards);
International Business Machines Corporation (January 21, 2002) (excluding
proposal requiring provision of information about health costs and supporting
the establishment of a national health insurance system).
Notwithstanding the Proponent's assertions that the Proposal requires the
Company only to focus externally on health care as a social policy issue, we
respectfully submit that by asserting in its December 17 letter that the
Proposal is similar to proposals calling upon companies to adopt a code of
conduct dealing with human rights - in the Proponent's own words, "statements of
principles that guide a company in dealing with the significant social policy" -
the Proposal also seeks to foster modifications to the Company's employee
benefit programs.
As noted in the Company's no-action request, the Staff has for many years
disagreed with shareholder proponents who have sought to characterize proposals
on health care reform as relating to something other than ordinary business, and
has allowed omission under Rule 14a-8(i)(7) of such proposals. While a number of
the applicable no-action letters cited in the Company's no-action request
involved IBM, those precedents remain valid notwithstanding that IBM may have
recently changed its policy course, as the Proponent notes at length.
The Proponent cites Ford Motor Company (March 1, 2007) as standing for the
proposition that proposals regarding health care coverage that do not involve
reporting on internal risks posed to ordinary business are not excludable under
Rule 14a-8(i)(7). The Proponent attempts to distinguish four other decisions by
the Staff granting no-action relief as involving proposals requiring internal
risk assessments. In fact, while Ford's no-action request perhaps made slightly
different arguments in seeking no-action relief, the four other no-action
requests all involved shareholder proposals and supporting statements that were
verbatim identical to the proposal and supporting statement at issue in the Ford
no-action letter. The Staff granted noaction relief in General Motors
Corporation (March 9, 2007) (excluding proposal seeking report on implications
of rising health care expenses and company's response to issue); Target
Corporation; (February 27, 2007) (same) 3M Company (February 20, 2007) (same);
and Kohl's Corporation (January 8, 2007) (same). Accordingly, the Proponent's
contention that the Ford no-action letter "in no way involved reporting on the
internal risks posed to Ford's ordinary business", while the health care reports
called for by other no-action letters "would have required each company to
conduct internal risk assessments" is demonstrably false.
The Company respectfully submits that the Proposal can be excluded pursuant to
Rule 14a-8(i)(7) since it seeks to impinge on the Company's ordinary business in
both of the manners discussed above: by seeking to involve the Company in the
political or legislative process and by seeking modifications to the Company's
employee benefit programs.
II. Excludability of the Proposal pursuant to Rule 14a-8(i)(3) or Rule
14a-(i)(6) because it is vague and indefinite
As a threshold matter, the Proponent would have the Staff refrain from relying
on its own well-settled precedents with respect to vague and indefinite
shareholder proposals simply because the cited cases "have nothing to do with
the adoption of principles on a significant social policy issue." We
respectfully submit that the vagueness and indefiniteness of a shareholder
proposal is not dependent upon its particular subject matter. In any event, the
Staff has excluded as vague and indefinite shareholder proposals purporting to
relate to significant social policy issues. See, e.g., H.J. Heinz Company (May
25, 2001) (excluding proposal requesting that company implement a human rights
standard program).
As for the substance of the Proposal, it remains unclear to the Company what the
Proponent is requesting notwithstanding the Proponent's letter, which appears to
attempt to include clarifications in an effort to avoid no-action relief (e.g.,
"The principles should be adopted in writing. Otherwise, no one would ever know
whether they had ever been adopted").
Based on the Proponent's letter, it now does appear clear (to the Company,
disregarding for the moment how shareholders could be expected to read the
Proposal) that the Proponent wishes the Company to adopt a written statement of
principles based in some fashion on five principles reported by the Institute of
Medicine. However, in considering whether to implement written principles it is
surely necessary to consider the language of the prescribed principles
themselves, and it is here that further confusion arises.
The Proponent's contention that the Proposal "uses no uncertain terms" is
completely unfounded. Each of the five principles is a normative statement
containing vague terminology. While the principles may sound beneficial in the
abstract, directors and shareholders faced with the need to understand the cost
and implications of adopting these principles will have no information as to the
meaning of undefined terms such as "universal", "continuous", "affordable to
individuals and families", "affordable and sustainable for society" and
"high-quality care that is effective, efficient, safe, timely, patient-centered,
and equitable." If health care coverage "should" have certain characteristics,
on what timetable? By what means? Where in the world? The Company has offices in
some 62 countries and does business in approximately 180 countries. Should these
principles apply in all of these countries? If so, should standards differ by
country? Should these principles apply to all of the Company's employees? To
society generally? The list of such unanswered and, in many cases, unanswerable
questions goes on and on.
In sum, the Proposal's key terminology is neither defined nor explained in a
manner that would allow shareholders to understand the content of the prescribed
principles or that would meaningfully guide the Company's Board of Directors in
adopting intelligible principles. Furthermore, for the reasons described above,
it is uncertain what actions shareholders voting for the Proposal would expect
the Company to take.
Conclusion
We respectfully submit, for the foregoing reasons, that the Proposal is
excludable under Rule 14a-8(i)(7), Rule 14a-8(i)(3) and Rule 14a-8(i)(6). We
respectfully request that the Staff confirm that it will not recommend any
enforcement action if the Proposal is omitted in its entirety from the Company's
2008 Proxy Materials.
We would appreciate the Staff notifying us in the event that the Proponent again
contacts the Staff with respect to the Proposal as the Proponent is not
obligated to do so. If you have any questions regarding this request or require
additional information, please contact the undersigned at telephone (860)
728-7836 or fax (860) 660-0245.
Very truly yours,
/s/
Charles F. Hildebrand
Associate General Counsel & Assistant Secretary
cc: Daniel F. Pedrotty, Director, Office of Investment
American Federation of Labor and Congress of Industrial Organizations
815 Sixteenth Street, N.W.
Washington, D.C. 20006
Tel. (202) 637-5379
Fax. (202) 508-6992
-----FOOTNOTES-----
1 We note in particular the language in the Proponent's letter to the effect
that "in the latest Wall Street Journal/NBC News poll, for example, 52 percent
of Americans say the economy and health care are most important to them in
choosing a president, compared with 34 percent who cite terrorism and social and
moral issues ... That is the reverse of the percentages recorded just before the
2004 election. The poll also shows that voters see health care eclipsing the
Iraq war for the first time as the issue most urgently requiring a new
approach."
[INQUIRY LETTER]
January 18, 2008
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: United Technologies Corporation's January 15, 2008 Request to Exclude
Proposal Submitted by the AFL-CIO Reserve Fund
Dear Sir/Madam:
This letter is submitted in response to a second letter to the Commission from
United Technologies Corporation ("United Technologies" or the "Company"), dated
January 15, 2008, claiming that the Company may exclude the shareholder proposal
("Proposal") of the AFL-CIO Reserve Fund ("Fund" or the "Proponent") from its
2008 proxy materials.
I. Introduction
Proponent's shareholder proposal to United Technologies urges:
the Board of Directors to adopt principles for health care reform based upon
principles reported by the Institute of Medicine:
1. Health care coverage should be universal.
2. Health care coverage should be continuous.
3. Health care coverage should be affordable to individuals and families.
4. The health insurance strategy should be affordable and sustainable for
society.
5. Health insurance should enhance health and well being by promoting access to
high quality care that is effective, efficient, safe, timely, patient-centered,
and equitable.
United Technologies argues that the Proposal is excludable because it:
"relates to the Company's ordinary business operations." [Rule 14a-8(i)(7)];
"is vague and indefinite." [Rules 14a-8(i)(3) and 14a-8(i)(6)].
The Company now maintains that the Proposal is "nothing more than an [attempt]
to influence the Board to reach a particular position on the question of whether
to participate in the political and legislative process, and what position to
take in the political or legislative process." United Technologies cites the
same Wall Street Journal/NBC News Poll of December 4, 2007, that Proponent
referenced in its December 17, 2007, letter to the Commission, opposing the
Company's request to exclude the Proposal from its proxy. Instead of disputing
the fact that health care reform is a significant social policy issue, the
Company now argues that this fact is conclusive evidence that the Proposal seeks
to involve the Company in the political or legislative process. Yet, there is
nothing in the Proposal or the Supporting Statement to support this claim. The
Proposal merely urges the Company to adopt principles for health care reform to
protect shareholder value and maintain "public confidence in our Company's
commitment to health care coverage." It is entirely up the Company's directors
and management, not shareholders, to determine whether or not the Company should
become involved in the political or legislative process.
That course of conductadopting principles for health care reformis exactly the
course of conduct undertaken by IBM and Bristol-Meyers Squibb, which each
received identical proposals for their 2008 proxies from Proponent.1
II. The Proposal urges the Board to adopt principles on a significant social
policy issue, not to engage the Company in the political and legislative
process.
The Company would have the Commission believe that the Proposal requires United
Technologies to engage in "the political or legislative process" on "a matter of
ordinary business." The Company is wrong on both counts. First, as Proponent has
demonstrated in its letter to the Commission of December 17, 2007, the Proposal
urges the Board of Directors to adopt principles on a significant social policy
issue, health care reform. The evidence continues to mount that health care
reform is a significant social policy issue.2 Indeed, Bristol-Meyers Squibb,
which initially sought the Commission's approval to exclude a nearly identical
proposal on ordinary business grounds, has withdrawn its request and has adopted
principles for health care reform. IBM, which has successfully opposed proposals
calling for reports on health care costs and lobbying by the company, began a
dialogue with Proponent that resulted in a statement of principles for health
care reform.
Second, the Proposal in no way urges the Company to involve itself in the
political or legislative process. Instead, it merely urges the Board of
Directors to adopt principles on this significant social policy issue, just as
IBM and Bristol-Meyers Squibb have now done. The Company, however, citing
Chrysler Corporation, 1992 SEC No-Act. LEXIS 143 (February 10, 1992),
mischaracterizes the Proposal as one calling for the Company to participate in
the legislative or political process. But in Chrysler, the proposal specifically
called for lobbying.3 Proponent makes no such request.
The Company also cites General Motors Corporation, 2006 SEC No-Act. LEXIS 426
(April 7, 2006), in which the proposal before GM called upon the company to
"petition the US Government and Congress," among other activities to amend the
federal auto fleet emissions standards then in effect. The Proposal before
United Technologies makes no such request.
The Company also cites International Business Machines Corporation, 2002 SEC
No-Act. LEXIS 85 (January 21, 2002), in which the proposal called upon IBM to
report on:
the estimated average annual cost for employee health benefits in the United
States versus the next five countries with the largest number of IBM employees
and if found to be substantially less, join with other corporations in support
of the establishment of a properly financed national health insurance system as
an alternative for funding employee health benefits.
The Proposal makes no request for a report or data regarding United
Technologies' health benefits operations, nor does it call upon the Company to
join with any other company or organization to support a "national health
insurance system." Instead, like other significant social policy proposals on
human rights, it calls upon the Company to adopt principles on a significant
social policy issue. McDonald's Corporation, 2007 SEC No-Act. LEXIS 378 (March
22, 2007); Costco Wholesale Corporation, 2004 SEC No-Act. LEXIS 806 (October 26,
2004).
The Company notes that Ford Motor Company, 2007 SEC No-Act. LEXIS 296 (March 1,
2007), involved a proposal that was no different than proposals before General
Motors Corporation, 2007 SEC No-Act. LEXIS 325 (March 9, 2007), Target
Corporation, 2007 SEC No-Act. LEXIS 290 (February 27, 2007), 3M Company, 2007
SEC No-Act. LEXIS (February 20, 2007), and Kohl's Corporation, 2007 SEC No-Act.
LEXIS 5 (January 8, 2007). While that may be true, Ford Motor Company presented
no evidence that the report requested by the proposal involved either an
internal risk assessment or ordinary business matters, nor did it claim the
company would become involved in political or legislative activity. Most
important, the Proposal before United Technologies neither calls for a report on
health care costs at the Company, nor does it go to matters of internal risk
assessment. Proponent merely urges the Company to adopt principles on a
significant social policy issue, just as proponents did on human and labor
rights social policy issues in McDonald's Corporation, Id. and Costco Wholesale
Corporation, Id.
III. The Proposal is clear and unambiguous, and United Technologies has failed
to demonstrate that the Proposal is so inherently vague and indefinite as to be
misleading.
The Company cites H.J. Heinz Company, 2001 SEC No-Act. LEXIS 587 (May 25, 2001),
in support of its claim that the Proposal is "vague and indefinite." The
proposal before Heinz called for full implementation of the Council on Economic
Priorities' Social Accountability Standard 5A8000, a complicated process that
would have applied to the entire operations of the company. The Proposal before
United Technologies is more akin to the human rights proposals that presented in
McDonald's Corporation 2007 SEC No-Act. LEXIS 378 (March 22, 2007), and Costco
Wholesale Corporation, 2004 SEC No-Act. LEXIS 806 (October 26, 2004). Those
proposals called for the adoption of a company-wide code of conduct based upon
the International Labor Organization Standards. There was no attempt to require
a specific standard as in H.J. Heinz Company, or a complicated implementation
process involving the company's ordinary business operations. The terms of the
ILO Standard in McDonald's, as the terms of the Institute of Medicine's
Principles for Health Care Reform, were merely cited as a point of reference for
the company to design its own code or principles. IBM, for example, sent a
letter to Proponent on principles for health care reform, while Bristol-Meyers
Squibb posted a statement of principles for health care reform on its website.
Peabody Energy Corporation, SEC No-Action Letter, 2006 SEC No-Act. LEXIS 316
(March 8, 2006), and E.I. du Pont de Nemours and Company, 2004 SEC No-Act. LEXIS
262 (February 11, 2004), also involved adoption of company-wide human rights and
labor standards that were based upon the ILO Standards. The Staff found neither
proposal vague or indefinite.
The Institute of Medicine's Principles are well defined and well regarded.
Indeed, the Institute of Medicine itself was established by the Congress to
articulate and define the significant social policy issue of health care reform.
It has done so and, as in the case of the ILO Standards before McDonald's,
United Technologies has a well-established set of principles upon which to base
its own principles for health care reform.
The Company cites several words from the Institute of Medicine's Principles as
examples of words that it claims are undefined or vague. "Universal,"
"continuous," "affordable" are among them. Each of these words has a plain
meaning in the context of principles. IBM and Bristol-Meyers Squibb have each
adopted the plain meaning of these words for their own principles for health
care reform and, Proponent submits, so can United Technologies.
IV. Conclusion
United Technologies has not met its burden of demonstrating that it is entitled
to exclude the Proposal under Rule 14a-8(g). The Proposal is not excludable
under Rule 148-8(i)(7).
The Proposal is clear and it carefully defines its terms, relying upon the
well-established Principles for Health Care Reform adopted by the Institute of
Medicine. The Proposal may not be excluded under Rule 14a-8(i)(3) and Rule
14a8(i)(6).
Please call me at 202-637-5335 if you have any questions or need additional
information regarding this matter. I have enclosed six copies of this letter for
the Staff, and I am sending a copy to Counsel for the Company.
Sincerely,
/s/
Robert E. McGarrah, Jr.
Counsel
Office of Investment
Enclosures
cc: Charles F. Hildebrand, Associate General Counsel & Assistant Secretary
-----FOOTNOTES-----
1 Letter from Heather L. Maples, Special Counsel, Division of Corporation
Finance, U.S. Securities and Exchange Commission to Amy L. Goodman, Gibson, Dunn
and Crutcher LLP, January 10, 2008. Bristol-Meyers Squibb website posting:
http://www.bms.com/sr/key_issues/content/data/reform.html;\1/ Letter from Randy
MacDonald, Senior Vice President, Human Resources, IBM Corporation, to Dan
Pedrotty, Director, AFL-CIO Office of Investment, December 12, 2007 (attached).
2 Associated Press, December 28, 2007, "Issues rated as `extremely important' in
November [2007], and how that sentiment has changed [in December 2007]: Health
care: 48 percent then, 53 percent now." Associated Press-Yahoo News survey of
1,821 adults was conducted Dec. 14-20, 2007; overall margin of sampling error of
plus or minus 2.3 percentage points. Commonwealth Fund, "The Public's Views on
Health Care Reform in the 2008 Presidential Election," January 15, 2008: 86% of
Americans surveyed say health care reform will be "somewhat important" (24%) or
"very important" (62%).
3 "ONE or more Chrysler officers and/or directors SHALL actively support and
lobby for UNIVERSAL HEALTH coverage (sic) ..." Chrysler Corporation, 1992 SEC
No-Act. LEXIS 143 (February 10, 1992).
[INQUIRY LETTER]
December 17, 2007
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: United Technologies Corporation's Request to Exclude Proposal Submitted by
the AFL-CIO Reserve Fund
Dear Sir/Madam:
This letter is submitted in response to the claim of United Technologies
Corporation ("United Technologies" or the "Company"), by letter dated November
28, 2007, that it may exclude the shareholder proposal ("Proposal") of the
AFL-CIO Reserve Fund ("Fund" or the "Proponent") from its 2008 proxy materials.
I. Introduction
Proponent's Proposal to United Technologies urges:
the board of directors to adopt principles for health care reform based upon
principles reported by the Institute of Medicine:
1. Health care coverage should be universal.
2. Health care coverage should be continuous.
3. Health care coverage should be affordable to individuals and families.
4. The health insurance strategy should be affordable and sustainable for
society.
5. Health insurance should enhance health and well being by promoting access to
high-quality care that is effective, efficient, safe, timely, patient-centered,
and equitable.
United Technologies argues that the Proposal is excludable because it:
"relates to the Company's ordinary business operations." [Rule 14a-8(i)(7)];
"is vague and indefinite." [Rules 14a-8(i)(3) and 14a-8(i)(6)].
Citing SEC Release 34-40018 (May 21, 1998), the Company would have the
Commission believe that the Proposal "involves tasks `so fundamental to
management's ability to run a company on a day-to-day basis that they could not,
as a practical matter, be subject to shareholder oversight.'" Nothing could be
further from the truth. Contrary to the Company's assertions, the Proposal in no
way seeks "to `micro-manage' the company by probing too deeply into matters of a
complex nature upon which shareholders, as a group, would not be in a position
to make an informed judgment."
This Proposal and the supporting statement present a significant social policy
issue. The Commission has determined that such issues "transcend the day-to-day
business matters" of a company. (Exchange Act Release No. 40018, May 21, 1998).
Ford Motor Company, 2007 SEC No-Act. LEXIS 296 (March 1, 2007). The Proposal
focuses the Company on "the public's health," rather than on "an internal
assessment of the liabilities that the company faces as a result of its
operations that may adversely affect ... the public's health." (Staff Legal
Bulletin No. 14C (CF), June 28, 2005). The Proposal is a proper matter for
shareholder consideration. Indeed, in 2008, IBM, a leading company that in the
past successfully sought to exclude shareholder proposals calling for reports on
health care costs and reform, has decided not to do so with a proposal that is
virtually identical to the Proposal before United Technologies. Instead, IBM has
written to the Proponent and adopted the principles for health reform that are
contained in the Proposal.1
II The Proposal is not excludable under Rule 14a-8(i)(7) as an ordinary business
matter because it focuses on significant social policy issues that transcend the
day-to-day business matters of the Company.
A. Health care reform is a significant social policy issue.
The Commission stated in Exchange Act Release No. 40018 that "proposals that
relate to ordinary business matters but that focus on "sufficiently significant
social policy issues ... would not be excludable, because the proposals would
transcend day-to-day business matters...." The Proposal before United
Technologies is just such a proposal. It urges the Board of Directors to adopt
principles for health care reform based upon principles reported by the nation's
leading authority on health care issues, the Institute of Medicine. The Proposal
does not ask the Company to provide any information or reports on its internal
operations. Instead, it asks the Company to focus externally on health care
reform as a significant social policy issue affecting the Company and the
public's health.
Health care reform is, in fact, the most important domestic issue in America.
Public opinion polls by the The Wall Street Journal/NBC News, the Kaiser
Foundation and The New York Times all document its significance. In the latest
Wall Street Journal/NBC News poll, for example, 52 percent of Americans "say the
economy and health care are most important to them in choosing a president,
compared with 34 percent who cite terrorism and social and moral issues ... That
is the reverse of the percentages recorded just before the 2004 election. The
poll also shows that voters see health care eclipsing the Iraq war for the first
time as the issue most urgently requiring a new approach." 2
Many businesses now cite health care costs as their biggest economic challenge.
Indeed, United Technologies is a member of the Business Roundtable, whose
president, John Castellani, has called health care reform a top priority for
business and Congressional action." 3 In September, the CEOs of Kelly Services
and Pitney Bowes, Inc, together with GE's Global Health director, called on
Congress to enact health care reform.4 They joined other leading business
coalitions, including the National Coalition on Health Care and the National
Business Group on Health. The latter's membership consists of 245 major
companies, including 60 of the Fortune 100.5 Each organization maintains that
the cost of health care for business is now greater than it should be and will
continue to rise as long as 47 million Americans who have no health insurance
remain without coverage.
Other leading business organizations have recently announced their support for
health care reform: Divided We Fail, a coalition of the AARP, the Business
Roundtable, the Service Employees International Union (SEIU) and the National
Federation of Independent Business states that it will "make access to quality,
affordable health care and long-term financial security top issues in the
national political debate." 6 In addition, Wal-Mart has joined with SEIU calling
on Congress to enact health care reform.7
Underscoring the significance of health care reform as a major social policy
issue in 2007, the American Cancer Society has taken the unprecedented step of
redirecting its entire $15 million advertising budget "to the consequences of
inadequate health care coverage" in the United States.8
B. The proposal focuses on principles for health care reform as a significant
social policy issue, not as a matter of internal risk assessment.
Proponent's Proposal urges the Company to adopt a statement of principles for
health care reform. It neither asks for a report or this significant social
policy issue, nor does it require any assessment of internal matters of risk
affecting the Company. The Proposal, in fact, is more akin to proposals that
have called upon companies to adopt a code of conduct dealing with human rights.
Such codes are statements of principles that guide a company in dealing with the
significant social policy issue of human rights. The Staff has decided that such
proposals are not excludable as matters relating to ordinary business operations
under Rule 14a-8(i)(7). In both McDonald's Corporation, 2007 SEC No-Act. LEXIS
378 (March 22, 2007), and Costco Wholesale Corporation, 2004 SEC No-Act. LEXIS
806 (October 26, 2004), companies cited "ordinary business operations," to
exclude proposals calling for the adoption of a company code of conduct. The
Staff denied each company's request.
United Technologies narrowly characterizes the Proposal here as one concerned
with "health care coverage policies for its employees." But the plain language
of the proposal and the supporting statement describe "health care reform" in
the context of a significant social policy affecting the Company and the nation.
The Proposal describes "universal" coverage of all Americans and repeatedly
speaks in terms of businesses in the U.S. and the global economy. It cites
research from one of the nation's leading health economists. Dr. Kenneth Thorpe,
that shows companies pay as much as $1,160 in surcharges for each insured
employee to cover the costs of medical care delivered to the 47 million
Americans who are uninsured.9 The supporting statement also describes Dr.
Thorpe's finding that universal health insurance coverage would save employers
presently providing health insurance an estimated $595-$848 billion in the first
10 years of implementation.10
Just as the human rights proposals in McDonald's Corporation and Costco
Wholesale Corporation involved companies in the U.S. and the global economy and
the significant social policy issue of human rights, the Proposal here focuses
on the Company in the U.S. and the global economy and health care as a
significant social policy issue.
C. While proposals calling for reports on health care have generally been
excluded as matters involving an analysis of internal risk, Proponent's proposal
calls for an entirely different measure: the adoption of principles for health
reformon a matter of significant social policy.
The Company repeatedly cites cases involving IBM in support of its request to
exclude the Proposal. Proponents did, in fact, submit an identical proposal to
IBM for inclusion in the company's 2008 proxy. Unlike United technologies,
however, IBM chose not to file a No-Action Letter with the Commission. Instead,
IBM began a dialogue with the Proponent. IBM and the Proponent reached an
agreement on the text of a letter that IBM will send to the Proponent,
describing its principles for health care reform.11 Proponent will provide this
letter to the Company and the Commission as soon as it is received.
In Ford Motor Company, 2007 SEC No-Act. LEXIS 296 (March 1, 2007), the Staff
agreed that a proposal requesting that the board prepare a report "examining the
implications of rising health care expenses and how Ford is addressing this
issue without compromising the health and productivity of its workforce," could
not be excluded as ordinary business under rule 14a-8(i)(7). The proposal
requested a report focused exclusively on health care costs as a significant
social policy issue. Both the proposal and the supporting statement contained
extensive documentation on health care costs. Both carefully framed the issue as
one that in no way involved reporting on the internal risks posed to Ford's
ordinary business, including its employee benefits operations.
The Company, however, cites Staff decisions on proposals that centered on
matters of internal risk assessment and company finances relating to employee
benefits plans. General Motors Corporation, 2007 SEC No-Act. LEXIS 325 (March 9,
2007), involved what GM described as "a significant expense for General Motors,
and managing health care costs for GM employees and retirees and their
dependents is a key factor in GM's business operations." Id. Target Corporation,
2007 SEC No-Act. LEXIS 290 (February 27, 2007), also involved reporting on
health care costs, a matter the company dealt with in the ordinary course of
business. 3M Company, 2007 SEC No-Act. LEXIS (February 20, 2007), and Kohl's
Corporation, 2007 SEC No-Act. LEXIS 5 (January 8, 2007) both involved the same
proposal, calling for a report on health care costs at each company. Unlike the
Proponent's Proposal, which calls for the adoption of principles on a
significant social policy issue, the health care reports called for by the
proposals in 3M Company and Target Corporation would have required each company
to conduct internal risk assessments.
SBC Communications Inc., 2004 SEC No-Act. LEXIS 13 (January 9, 2004), contrary
to the Company's assertion, bears no relation at all to the Proponent's
Proposal. The SBC proposal involved a request that unmarried sexual partners of
employees be excluded from the company's health care plansa matter clearly
centered on the ordinary business operations of SBC.
Proponent's request is an entirely different matter, asking the Company to focus
on a significant social policy issue. While the Company, of course, maintains
its own health benefits plans, Proponent's Proposal in no way seeks to
micro-manage those plans or request data concerning their operation.
International Business Machines Corporation, 2002 SEC No-Act. LEXIS 85 (January
21, 2002), also cited by the Company, involved a proposal that called upon IBM
to "share with its stockholders the estimated average annual cost for employee
health benefits in the United States versus the next five countries with the
largest number of IBM employees" and commence a lobbying campaign for national
health insurance. Proponent's Proposal contains nothing that would require
sharing health benefits costs information with shareholders. Nor is there any
request to the Company to commence a lobbying campaign for national health
insurance. Instead, the Proposal asks the Company to adopt a statement of
principles for health care reform. While the Proposal does state Proponent's
opinion that health care reform is a significant issue in the presidential
campaign of 2008, it merely requests the board to adopt principles for health
are reform. It contains no request for other action. It is entirely up to the
Company's board of directors and management to take any actions they may deem
necessary on health care reform or, for that matter, on any other matter
relating to its internal operations with respect to health care benefits.
The Company cites International Business Machines Corporation (January 15, 1999)
"(excluding proposal seeking change in scope of employee health care coverage)"
as additional support for its request to exclude the Proponent's Proposal. The
proposal before IBM, unlike the Proposal before the Company, involved a request
to prohibit "IBM from extending medical benefits to friends of IBM employees or
retirees." The Proponent in no way seeks to request the Company to adjust its
health benefit plans. The plain language of the Proposal calls for the adoption
of principles for health care reform, not an employee benefit plan adjustment.
Summing up its argument, the Company cites a conclusion originally asserted by
IBM, International Business Machines Corporation, 2005 SEC No-Act. LEXIS 60
(January 13, 2005), that the Staff has "uniformly concurred with corporations on
this subject [to exclude proposals] "advocating or otherwise promoting national
health care coverage or similar insurance." The Company's reliance upon
International Business Machines is misplaced. Not only is it abundantly clear
that health care reform in 2007 is a significant social policy issue, but IBM's
characterization of the Staff's position in 2005 was made in the context of a
proposal that would have had, inter alia, the IBM board of directors produce a
detailed report on company health care costs in the United States and in every
country in which it did business. In addition, the IBM board would have had to
examine "'universal health care through the public sector' as an alternative to
our [IBM's] existing `company-paid social insurance system.'" The Proposal
before United Technologies, unlike the proposal before IBM, neither focuses on
the Company's internal health benefits plans, nor on its operations around the
world. Instead, it asks the board of directors to adopt principles to address
the significant social policy issue of health care reform.
III. The Company has failed to demonstrate that the Proposal is so inherently
vague and indefinite as to be misleading.
The Proposal urges the board of directors to adopt principles for health care
reform based upon the principles reported by the Institute of Medicine (IOM). It
then spells out the IOM's principles, which are stated clearly and concisely.
The IOM report, Insuring America's Health: Principles and Recommendations
(2004), is cited in the Supporting Statement, together with a brief description
of the IOM as an institution established by the Congress as a part of the
National Academy of Sciences. The plain language of the Proposal makes it clear
what is being requested of the board of directors: they are free to choose to
adopt the language of the IOM's principles, or they can adopt a variation based
upon those principles. Equally important, the Proposal does not attempt to
micro-manage the board of directors or management. Once the principles for
health care reform are adopted by the board of directors, the Proposal requests
no other action.
The Company, however, in support of its claim that the Proposal is vague and
indefinite, cites Commission decisions in cases that have nothing to do with the
adoption of principles on a significant social policy issue. Bank of America
Corporation, 2007 SEC No-Act. LEXIS 177 (February 12, 2007), involved a proposal
to annually reduce investments by 5 percent, "until such time as certain
conditions regarding the State of Israel are satisfied." The Proposal before the
Company sets forth no vague conditions and uses no uncertain terms. It asks the
Company to adopt principles for health care reform based upon the clearly stated
principles articulated by the Institute of Medicine.
United Technologies also cites Commission decisions on No-Action Letters in The
Proctor and Gamble Company, SEC No-Action Letter, 202 SEC No-Act. LEXIS 768
(October 25, 2002), Philadelphia Electric Company, SEC No-Action Letter, 1992
SEC No-Act. LEXIS 825 (July 30, 1992), and International Business Machines
Corporation, 2005 SEC No-Act. LEXIS 139 (February 2, 2005), in support of its
argument that the Proposal may be excluded because it is so inherently vague and
indefinite as to be misleading, with the result that neither the shareholders
nor the Company's board of directors would be able to determine, with any
reasonable amount of certainty, what action or measures would be taken if the
Proposal were implemented. A review of these decisions, however, reveals they
are not even remotely on point:
The Procter and Gamble Company excluded a shareholder proposal calling for the
establishment of a fund to provide legal assistance, witness protection and
other unspecified assistance to "victims of retaliation, intimidation and
troubles because they are stockholders/ shareholders ..."
Philadelphia Electric Company excluded a proposal calling for "the election of a
committee of small shareholders who will consider and present to the Company's
board of directors a plan ... `that will in some measure equate with the
gratuities bestowed on Management, Directors, and other employees.'"
International Business Machines Corporation excluded a shareholder proposal
calling for "the officers and directors responsible" for IBM's reduced dividend
payment to have "their pay reduced to the level prevailing in 1993" when the
change occurred.
More relevant are Commission decisions on shareholder proposals requesting the
adoption of human rights principles and standards: McDonald's Corporation, Id.,
Peabody Energy Corporation, SEC No-Action Letter, 2006 SEC No-Act. LEXIS 316
(March 8, 2006), and E.I. du Pont de Nemours and Company, 2004 SEC No-Act. LEXIS
262 (February 11, 2004). In each case, the Staff denied requests to exclude the
proposals under Rule 14a-8(i)(3). Each of these decisions involved the adoption
of company principles or standards for human rights. As in the instant case,
they presented a clear request for board action on a significant social policy
issue and they presented principles or standards upon which the companies might
base their actions. Each company had the requisite power and competence to
determine the proper implementation of the principles. So, too, does United
Technologies.
The Company poses a series of questions, asking, for example, "What does it mean
for the Board of Directors to adopt principles?" Proponents submit that the
answer is clear: the Company is being asked to adopt principles on a significant
social policy issue in order to, as the Proposal states, maintain "public
confidence in our Company's commitment to health care coverage."
The Company asks whether the listed principles should be adopted in writing. Or
whether the principles should be implemented by the Company to offer health
coverage benefits meeting all features of the listed principles. And in which
regions of the world? These questions answer themselves: The principles should
be adopted in writing. Otherwise, no one would ever know whether they had ever
been adopted. As to their implementation, the Proposal merely states that the
Company's board should adopt the principles for health care reform. The mere act
of adopting the principles for health care reform will, as the Proposal states,
maintain public confidence in the Company's commitment to health care coverage.
Just as in the adoption of standards and principles for human rights, it is for
the Board and management to determine how the principles should be implemented,
not the shareholders of United Technologies.
IV. Conclusion
United Technologies has failed to meet its burden of demonstrating that it is
entitled to exclude the Proposal under Rule 14a-8(g).
The Proposal is inherently a signif cant social policy issue that transcends
day-to-day business matters at United Technologies. It is, therefore, not
excludable under Rules 14a-(i)(7) and 14a-8(j).
The Proposal, like others reviewed by the Staff that have dealt with significant
social policy issues, such as health care and human and labor rights, is clear.
It may not be excluded under Rules 14a-8(i)(3) and 14a-8(j).
United Technologies has the requisite competence, power and authority to
implement the Proposal. Staff decisions on similar proposals dealing with the
adoption of principles for human rights have denied requests to exclude under
Rules 14a-8(i)(6) and 14a-8(j).
Consequently, since United Technologies has failed to meet its burden of
demonstrating that it is entitled to exclude the Proposal under Rule 14a-8(g),
the Proposal should come before United Technologies shareholders at the 2008
Annual Meeting.
If you have any questions or need additional information, please do not hesitate
to call me at 202-637-5335. I have enclosed six copies of this letter for the
Staff, and I am sending a copy to Counsel for the Company.
Sincerely,
/s/
Robert E. McGarrah, Jr.
Counsel
Office of Investment
-----FOOTNOTES-----
1 Letter from Randy MacDonald, Senior Vice President, Human Resources, IBM
Corporation, to Dan Pedrotty, Director, AFL-CIO Office of Investment, December
12, 2007 (attached).
2 The Wall Street Journal, December 4, 2007, p. A1.
3 "Business Roundtable Unveils Principles for Health Care Reform," Press
Release, June 6, 2007, http://www.businessroundtable.org//newsroom/document.aspx?qs=5886BF807822B0F19D5448322FB51711FCF50C8.
Accessed December 4, 2007.
4 Presentations by Carl Camden, CEO, Kelly Services; Michael Critelli, Chairman
and CEO Pitney Bowes, Inc. and Robert Galvin, M.D., Director, Global Health,
General Electric Corporation, at Conference on Business and National Health Care
Reform, sponsored by the Century Foundation and the Commonwealth Fund,
Washington, DC, September 14, 2007.
5 "National Health Care Reform: the Position of the National Business Group on
Health," National Business Group on Health, Washington, DC (July, 2006), http://www.businessgrouphealth.org/pdfs/nationalhealthcarereformpositionstatement.pdf
(Accessed December 4, 2007).
6 The Wall Street Journal, November 13, 2007, p. B4.
7 The New York Tunes, February 7, 2007.
8 The New York Times, August 31, 2007.
9 Kenneth Thope, Ph.D., cited in "Paying A Premium: The Added Cost of Care for
the Uninsured," (Families USA, Washington, DC: June 2005), p.4.
10 Kenneth Thorpe, Ph.D., "Impacts of Health Reform: Projections of Costs and
Savings," (National Coalition on Health Care, Washington, DC: 2005), p.14.
11 Final Draft Letter from Randy MacDonald, Senior Vice President, Human
Resources, IBM Corporation, to Daniel F. Pedrotty, Director, Office of
Investment, AFL-CIO, December 12, 2007.
[STAFF REPLY LETTER]
January 31, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: United Technologies Corporation Incoming letter dated November 28, 2007
The proposal urges the board of directors to adopt principles for health care
reform based upon principles specified in the proposal.
We are unable to
concur in your view that United Technologies may exclude the proposal under
rules 14a-8(i)(3) or 14a-8(i)(6). Accordingly, we do not believe that United
Technologies may omit the proposal from its proxy materials in reliance on rules
14a-8(i)(3) or 14a-8(i)(6).
We are unable to concur in your view that United
Technologies may exclude the proposal under rule 14a-8(i)(7). Accordingly, we do
not believe that United Technologies may omit the proposal from its proxy
materials in reliance on rule 14a-8(i)(7).
Sincerely,
/s/
Eduardo Aleman
Attorney-Adviser
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