CompanyName: Verizon Communications Inc.
Public Availability Date: January 25, 2008
Document Sections:INQUIRY LETTER
APPENDIX 1
APPENDIX 2
STAFF REPLY LETTER
[INQUIRY LETTER]
December 19, 2007
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Verizon Communications Inc. 2008 Annual Meeting Shareholder Proposal of
Kenneth Steiner
Ladies and Gentlemen:
This letter is submitted on behalf of Verizon Communications Inc., a Delaware
corporation ("Verizon"), pursuant to Rule 14a-8(j) under the Securities Exchange
Act of 1934, as amended. Verizon has received a shareholder proposal and
supporting statement (the "Proposal") from Kenneth Steiner (the "Proponent"),
for inclusion in the proxy materials to be distributed by Verizon in connection
with its 2008 annual meeting of shareholders (the "2008 proxy materials"). A
copy of the Proposal and the accompanying cover letter, dated October 27, 2007,
is attached as Exhibit A. The Proponent's cover letter states that Mr. John Chevedden is representing Mr. Steiner with respect to shareholder matters,
including the Proposal, and is the Proponent's proxy for all purposes in
connection with the Proposal. For the reasons stated below, Verizon intends to
omit the Proposal from its 2008 proxy materials.
Pursuant to Rule 14a-8(j)(2), enclosed are six copies of this letter and the
accompanying attachments. A copy of this letter is also being sent to the
Proponent and Mr. Chevedden as notice of Verizon's intent to omit the Proposal
from Verizon's 2008 proxy materials.
I. Introduction.
On November 8, 2007, Verizon received a letter from the Proponent containing the
following proposal:
RESOLVED, Special Shareholder Meetings, Shareholders ask our board to amend our
bylaws and any other appropriate governing documents in order that there is no
restriction on the shareholder right to call a special meeting, compared to the
standard allowed by applicable law on calling a special meeting.
Verizon believes that the Proposal may be properly omitted from its 2008 proxy
materials (1) under Rule 14a-8(f) because the Proponent failed to meet the
requirements of Rule 14a-8(b); and (2) under Rule 14a-8(i)(3) because the
Proposal is vague and indefinite and, thus, materially false and misleading in
violation of Rule 14a-9. Verizon respectfully requests the concurrence of the
Staff of the Division of Corporation Finance (the "Staff") of the Securities and
Exchange Commission (the "Commission") that it will not recommend enforcement
action against Verizon if Verizon omits the Proposal in its entirety from its
2008 proxy materials.
II. Bases for Excluding the Proposal.
A. The Proposal May be Excluded from the 2008 Proxy Materials Pursuant to Rule
14a-8(f) Because the Proponent Failed to Supply Documentary Support Evidencing
Satisfaction of the Continuous Ownership Requirements of Rule
14a-8(b)(1).
Rule 14a-8(b)(1) provides that, in order to be eligible to submit a proposal, a
shareholder must have continuously held at least $ 2,000 in market value, or 1%,
of the company's securities entitled to be voted on the proposal for at least
one year prior to the date the proposal is submitted and must continue to hold
those securities through the date of the meeting. If the proponent is not a
registered holder, he or she must provide proof of beneficial ownership of the
securities. Under Rule 14a-8(f)(1), a company may exclude a shareholder proposal
if the proponent fails to provide evidence that it meets the eligibility
requirements of Rule 14a-8(b), provided that the company timely notifies the
proponent of the deficiency and the proponent fails to correct the deficiency
within the required time.
Verizon received the Proposal on November 8, 2007. The submission did not
include documentation establishing that the Proponent had met the eligibility
requirements of Rule 14a-8(b)(1). After determining that the Proponent was not a
shareholder of record, in accordance with Rule 14a-8(f)(1) on November 12, 2007,
Verizon sent a letter to the Proponent via Federal Express, with a copy to Mr.
Chevedden via email (the "Initial Notification Letter"), requesting a written
statement from the record owner of the Proponent's shares verifying that the
Proponent beneficially owned the requisite number of shares of Verizon stock
continuously for at least one year prior to the date of submission of the
Proposal. The Initial Notification Letter also advised the Proponent that such
written statement had to be submitted to Verizon within 14 days of the
Proponent's receipt of such letter. As suggested in Section G.3 of Division of
Corporation Finance: Staff Legal Bulletin No. 14 (July 13, 2001) ("SLB No. 14")
relating to eligibility and procedural issues, the Initial Notification Letter
included a copy of Rule 14a-8. Verizon received an email from Mr. Chevedden
confirming receipt of the Initial Notification Letter on November 12, 2007, as
well as confirmation from Federal Express that the Initial Notification Letter
was delivered to the Proponent's residence on November 13, 2007. A copy of the
Initial Notification Letter, together with the evidence of delivery, is attached
as Exhibit B to this letter.
On November 20, 2007, Mr. Chevedden sent to Verizon via email a letter dated
November 19, 2007 (the "Initial Response Letter") from DFJ Discount Brokers ("DFJ"),
as the "introducing broker for the account of Kenneth Steiner,... held with
National Financial Services Corp.," certifying that as of the date of the
Initial Response Letter Proponent is the beneficial owner of 1109 shares of
Verizon Communications Inc. and that the Proponent has held at least $2,000 of
Verizon common stock since August 10, 2000. A copy of the Initial Response
Letter is attached as Exhibit C to this letter.
After determining that DFJ Discount Brokers is not a record holder of Verizon
common stock, in accordance with Rule 14a-8(f)(1) on November 21, 2007, Verizon
sent a second letter to Mr. Chevedden via email (the "Second Notification
Letter"), stating that DFJ Discount Brokers is not a record holder of Verizon
common stock as required by Rule 14a-8(b)(2)(i). The Second Notification Letter
requested that Mr. Chevedden provide a written statement from the record owner
of the Proponent's shares verifying that the Proponent beneficially owned the
requisite number of shares of Verizon stock continuously for at least one year
prior to the date of submission of the Proposal. The Second Notification Letter
also advised Mr. Chevedden that such written statement had to be submitted to
Verizon within 14 days of his receipt of such letter, thereby providing Mr.
Chevedden with additional time beyond the 14-day period following his receipt of
the Initial Notification Letter to provide the referenced written statement
regarding the Proponent's ownership of shares. The Second Notification Letter
also advised Mr. Chevedden that, in accordance with the Proponent's instructions
in his letter dated October 27, 2007, Verizon would direct all correspondence to
Mr. Chevedden and would not send copies to the Proponent. A copy of the Second
Notification Letter is attached as Exhibit D to this letter.
On November 23, 2007, Mr. Chevedden sent Verizon via email a letter dated
November 21, 2007 (the "Second Response Letter") from National Financial
Services LLC. The Second Response Letter certifies that the Proponent "is a
beneficial owner of Verizon Communications Inc. securities and has held a
security position with National Financial Services, LLC, dating back to March,
2005." In a separate paragraph, the Second Response Letter states, "This
purchase consisted of 1109 shares which he held consistently." A copy of the
Second Response Letter is attached as Exhibit E to this letter.
Although the Second Response Letter was timely sent to Verizon, it fails to
satisfy the requirements of Rule 14a-8(b). Pursuant to such Rule, the Proponent
was required to submit a written statement from the record holder of his shares
verifying his continuous ownership of at least $2,000 of Verizon shares from
November 8, 2006 through November 8, 2007. In the Second Response Letter,
National Financial Services does not make any such statement. Instead, as noted
above, the first paragraph of the letter merely indicates that (1) Mr. Steiner
is currently a beneficial owner of Verizon shares (as of November 21, 2007,
which is 13 days after the date of the submission) and (2) Mr. Steiner has held
a security position with National Financial Services since March 2005. It is not
specifically stated that the referenced "security position" is in Verizon stock.
Even if we were to assume that it is, this statement fails to state that Mr.
Steiner owned the requisite amount of stock during the requisite one-year
period. Likewise, the second paragraph of the Second Response Letter does not
clearly address Mr. Steiner's ownership of Verizon stock. It refers to a
purchase of 1109 shares without any reference to (1) what company issued the
shares or (2) when the shares were purchased. As a result, the Second Response
letter provides no statement as to the number or value of Verizon shares owned
by the Proponent at any particular time.
In Section C.1.c. (2) of SLB No. 14, the Staff illustrates the requirement for
specific verification of continuous ownership with the following example:
(2) Do a shareholder's monthly, quarterly or other periodic investment
statements demonstrate sufficiently continuous ownership of the securities?
No. A shareholder must submit an affirmative written statement from the record
holder of his or her securities that specifically verifies that the shareholder
owned the securities continuously for a period of one year as of the time of
submitting the proposal. [emphasis in original]
A monthly, quarterly or other periodic investment statement is insufficient
evidence because it only verifies ownership of securities at the beginning and
end of the statement period, but does not verify continuous ownership of the
securities during the statement period or during any other period. Rule
14a-8(b)(2) does not require the company to "connect the dots" and make
inferences about continuous stock ownership. Rather, it is the proponent's
responsibility to provide proof of this in the form of an affirmative written
statement from the record holder of the proponent's stock. The Second Response
Letter cannot be read to provide this assurance without making assumptions and
inferences as to its intended meaning, which may or may not be accurate.
The Staff has consistently taken the position that if a proponent does not
provide documentary support sufficiently evidencing that it has satisfied the
continuous ownership requirement for the one-year period specified by Rule
14a-8(b), the proposal may be excluded under Rule 14a-8(f). See, e.g., General
Motors Corporation (April 5, 2007) (account summary insufficient verification of
continuous ownership); Yahoo! Inc. (March 29, 2007) (broker's letter did not
specifically verify continuous ownership); The Home Depot, Inc. (February 5,
2007) (broker's letter verifying ownership "for the past year" was insufficient
to provide proof of ownership for requisite period); General Electric Company
(January 16, 2007) (brokerage statement insufficient); and International
Business Machines Corporation (November 16, 2006) (broker's letter dated before
date of submission did not verify continuous ownership for requisite period).
While Rule 14a-8(f) requires a company receiving a proposal to notify the
proponent of any procedural or eligibility deficiencies, it does not require
additional notification if the response to the first notification was deficient.
Although it was under no obligation to do so, Verizon gave the Proponent notice
that the Initial Response Letter was deficient and provided the Proponent with
an additional 14 days to correct the deficiency. Any further verification the
Proponent might now submit would be untimely under the Commission's rules.
Therefore, Verizon believes that the Proposal is excludable pursuant to Rule
14a-8(f) because the Proponent failed to remedy the eligibility deficiency after
notification by Verizon.
B. The Proposal May be Excluded Under Rule
14a-8(i)(3) Because It is
Impermissibly Vague and Indefinite and, thus, Materially False and Misleading in
Violation of Rule 14a-9
Verizon also believes that the Proposal may be properly excluded under Rule
14a-8(i)(3). Rule 14a-8(i)(3) permits a company to omit a shareholder proposal
and the related supporting statement from its proxy materials if such "proposal
or 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." The Staff has stated that a proposal
will violate Rule 14a-8(i)(3) when "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." Division of Corporation Finance Staff Legal Bulletin No.
14B (September 15, 2004) ("SLB No. 14B").
The Staff has previously concurred with the exclusion of shareholder proposals
under Rule 14a-8(i)(3) where proposals have failed to define key terms or where
the meaning and application of terms or standards under the proposals "may be
subject to differing interpretations." Fuqua Industries Inc. (March 12, 1991).
See, for example
Berkshire Hathaway Inc. (March 2, 2007) (proposal restricting Berkshire from
investing in securities of any foreign corporation that engages in activities
prohibited for U.S. corporations by Executive Order did not adequately explain
possible meaning of "Executive Order" and extent to which proposal could operate
to bar investment in all foreign corporations);
Prudential Financial, Inc. (February 16, 2007) (proposal urging Board to seek
shareholder approval for "senior management incentive compensation programs
which provide benefits only for earnings increases based only on management
controlled programs" failed to define critical terms and was subject to
differing interpretations);
International Machines Business Corp. (February 2, 2005) (proposal that "the
officers and directors responsible" for IBM's reduced dividend have their "pay
reduced to the level prevailing in 1993" was impermissibly vague and
indefinite);
FirstEnergy Corp. (February 18, 2004) (permitting exclusion of proposal urging
Board to change company's governing documents relating to shareholder approval
of shareholder proposals, because requested vote requirement was vague and
misleading);
General Electric Company (January 23, 2003) (proposal seeking "an individual
cap on salaries and benefits of one million dollars for G.E. officers and
directors" failed to define the critical term "benefits" or otherwise provide
guidance on how benefits should be measured for purposes of implementing the
proposal);
Eastman Kodak Company (March 3, 2003) (proposal seeking to cap executive
salaries at $1 million "to include bonus, perks and stock options" failed to
define various terms, including "perks," and gave no indication of how options
were to be valued);
Johnson & Johnson (February 7, 2003) (proposal calling for a report on the
company's "progress with the Glass Ceiling Report" did not explain the substance
of the report);
Woodward Governor Co. (November 26, 2003) (proposal sought to implement "a
policy for compensation of executives... based on stock growth" and included a
specific formula for calculating that compensation, but did not specify whether
it addressed all executive compensation or merely stock-based compensation);
Pfizer Inc. (February 18, 2003) (proposal that board "shall make all stock
options to management and board of directors at no less than the highest stock
price," and that the stock options contain a buyback provision was impermissibly
vague and indefinite); and
H.J. Heinz Co. (May 25, 2001) (proposal requesting that company implement the
SA8000 Social Accountability Standards did not clearly set forth what SA8000
required of the company).
As in the foregoing precedents, the resolution contained in the Proposal is
impermissibly vague and indefinite, because it refers to a "restriction" in
Verizon's bylaws and a "standard" in Delaware law, neither of which exists. The
Proposal requests that the Board "amend our bylaws and other appropriate
governing documents in order that there is no restriction on the shareholder
right to call a special meeting, compared to the standard allowed by applicable
law on calling a special meeting" (emphasis added). Section 211(c) of the
General Corporation Law of Delaware, where Verizon is incorporated, provides
that "Special meetings of the stockholders may be called by the board of
directors or by such person or persons as may be authorized by the certificate
of incorporation or by the bylaws." Verizon's Bylaws provide that the Chairman
of the Board or a majority of the Board may call a special meeting. The law in
many states provides shareholders holding a specified minimum percentage of a
company's stock with the statutory right to call a special meeting. However,
contrary to the statement in the resolution in the Proposal, in Delaware there
is no "standard allowed by applicable law on calling a special meeting." By
asserting that there is such a standard in Delaware law and a restriction on it
in Verizon's Bylaws, the resolution is false and misleading.
Finally, it is entirely unclear how the Proposal, if adopted, would be
implemented. Would implementation of the Proposal require that any shareholder,
even the holder of a single share, can compel the calling of a meeting? Or could
the Verizon Board implement the Proposal by adopting a bylaw providing that
shareholders owning a prescribed percentage of stock for a prescribed period of
time may call a special meeting? Due to the ambiguities raised by the
resolution's false and misleading representations of Delaware law and Verizon's
Bylaws, "any action ultimately taken by the Company upon implementation could be
significantly different from the actions envisioned by shareholders voting on
the proposal." Fuqua Industries, Inc., supra. As SLB No. 14 cited above
recognizes, 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." Accordingly, Verizon believes
that the Proposal may be properly excluded under Rule 14a-8(i)(3).
III. Conclusion.
Verizon believes that the Proposal may be omitted from its 2008 proxy materials
(1) under Rule 14a-8(f) because the Proponent failed to meet the requirements of
Rule 14a-8(b); and (2) under Rule 14a-8(i)(3) because the Proposal is vague and
indefinite and, thus, materially false and misleading in violation of Rule
14a-9. Accordingly, Verizon respectfully requests the concurrence of the Staff
that it will not recommend enforcement action against Verizon if Verizon omits
the Proposal in its entirety from Verizon's 2008 proxy materials.
Verizon requests that the Staff fax a copy of its determination of this matter
to the undersigned at (908) 696-2068 and to Mr. Chevedden at (310) 371-7872.
Kindly acknowledge receipt of this letter by stamping and returning the extra
enclosed copy of this letter in the enclosed self-addressed envelope. If you
have any questions with respect to this matter, please telephone me at (908)
559-5636.
Very truly yours,
/s/
Mary Louise Weber
Assistant General Counsel
Enclosures
cc: Mr. Kenneth Steiner
14 Stoner Ave., 2M
Great Neck, NY 11202
Mr. John Chevedden (by email to olmsted7p@earthlink.net)
[APPENDIX 1]
EXHIBIT "A"
Kenneth Steiner
14 Stoner Ave., 2M
Great Neck, NY 11021
Mr. Ivan G. Seidenberg
Chairman
Verizon Communications Inc. (VZ)
140 West St Fl 38
New York NY 10036
Rule 14a-8 Proposal
Dear Mr. Seidenberg,
This Rule 14a-8 proposal is respectfully submitted in support of the long-term
performance of our company. This proposal is 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 submilted 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 improving the efficiency of the
rule 14a-8 process 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 promptly by email.
Sincerely,
/s/
Kenneth Steiner
Date 10/27/07
cc: Marianne Drost
Corporate Secretary
PH: 212-395-2121
FX: 212-869-3265
FX: 212-921-2971
Mary Louis Weber
Assistant General Counsel
PH: 908-559-5636
FX: 908-696-2068
[APPENDIX 2]
[VZ: Rule 14a-8 Proposal, November 8, 2007]
3 - Special Shareholder Meetings
RESOLVED, Special Shareholder Meetings, Shareholders ask our board to amend our
bylaws and any other appropriate governing documents in order that there is no
restriction on the shareholder right to call a special meeting, compared to the
standard allowed by applicable law on calling a special meeting.
Special meetings allow investors to vote on important matters, such as a
takeover offer, that can arise between annual meetings. If shareholders cannot
call special meetings, management may become insulated and investor returns may
suffer.
Shareholders should have the ability to call a special meeting when they think a
matter is sufficiently important to merit expeditious consideration. Shareholder
control over timing is especially important regarding a major acquisition or
restructuring, when events unfold quickly and issues may become moot by the next
annual meeting.
Fidelity and Vanguard support a shareholder right to call a special meeting. The
proxy voting guidelines of many public employee pension funds, including the New
York City Employees Retirement System, also favor this right. Governance ratings
services, such as The Corporate Library and Governance Metrics International,
take special meeting rights into account when assigning company ratings.
Eighteen (18) proposals on this topic averaged 56%-support in 2007 - including
74%-support at Honeywell (HON) according to RiskMetrics (formerly Institutional
Shareholder Services). Our directors, Mr. Seidenberg and Mr. Stafford, also
served on the Honeywell board.
The merits of this proposal should also be considered in the context of our
company's overall corporate governance structure and individual director
performance. For instance in 2007 the following structure and performance issues
were reported:
The Corporate Library http://www.thecorporatelibrary.com, an independent
investment research firm rated our company:
"D" in Overall Board Effectiveness.
"Very High Concern" in executive pay - CEO pay of $21 million a year.
"High Governance Risk Assessment."
Two of our director receive double-digit withhold votes because they were on
the executive pay committee responsible for this high executive pay:
Mr. Carrion
Mr. Neubauer
We had no Independent Chairman - Independence concern.
Our key Audit Committee chairman had 20-years director tenure - Independence
concern.
No shareholder right to:
1) Cumulative voting.
2) Act by written consent.
3) Call a special meeting.
Additionally:
Eight of our directors also served on boards rated D by the Corporate Library
(increase from 2007):
1) Mr. Seidenberg Honeywell (HON)
2) Mr. Stafford Honeywell (HON)
3) Mr. Neubauer Wachovia (WB)
4) Mr. O'Brien Hilb Rogal & Hobbs (HRH) BlackRock (BLK)
5) Mr. Price MetLife (MET)
6) Mr. Shipley Exxon (XOM)
7) Mr. Lane General Electric (GE)
8) Ms. Moose AES Corp. (AES)
The above concerns shows there is room for improvement and reinforces the reason
to take one step forward now and encourage our board to respond positively to
this proposal:
Notes:
Kenneth Steiner, 14 Stoner Ave., 2M, Great Neck, NY 11021 sponsors 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 (C.F),
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.
[STAFF REPLY LETTER]
January 25, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Verizon Communications Inc. Incoming letter dated December 19, 2007
The proposal relates to special meetings.
There appears to be some basis for your view that Verizon may exclude the
proposal under rule 14a-8(f). We note that the proponent appears to have failed
to supply documentary support sufficiently evidencing that he satisfied the
minimum ownership requirement for the one-year period required by rule 14a-8(b).
Accordingly, we will not recommend enforcement action to the Commission if
Verizon omits the proposal from its proxy materials in reliance on rules
14a-8(b) and 14a-8(f). In reaching this position, we have not found it necessary
to address the alternative basis for omission upon which Verizon relies.
Sincerely,
/s/
Peggy Kim
Attorney-Adviser
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