Mobil Corp.Jan. 29, 1982 INQUIRY LETTER 1Mobil Corporation 150 EAST 42ND STREET NEW YORK, NEW YORK 10017 (212) 883-7428 December 30, 1980 Michael R. Kargula Attorney Adviser Office of Chief Counsel Division of Corporation Finance Room F431 Securities and Exchange Commission Washington, D.C. 20549 Re: Shareholder Proposal for 1981 Annual Meeting Dear Mr. Kargula: Enclosed herein are five copies of a letter, dated September 24, 1981, from Richard Ganulin, Esq., on behalf of Irvin Rauchman ("Proponent"), which sets forth a proposal and statement in support thereof (collectively the "Proposal"), notifying Mobil Oil Corporation, which we assume to be meant to be directed to Mobil Corporation (the "Corporation"), of his intent to present the Proposal for action at the Corporations 1982 Annual Meeting of Shareholders. We submit this letter to request that the staff advise the Corporation that it will not recommend any action to the Commission if the Proposal is omitted form the Corporations proxy statement for the reasons set forth in this letter. Proponents proposal and supporting statement are as follows: "PROPOSAL
The Proposal, if adopted, would require that citizens of certain foreign countries could not be considered for membership on the Corporations Board of Directors. Implementation of the Proposal would be discriminatory and in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e-2. Title VII provides, in part, that: "(a) It shall be an unlawful employment practice for an employer - (1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individuals race, color, religion, sex, or national origin; or (2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individuals race, color, religion, sex, or national origin." (emphasis added). The Guidelines on Discrimination Because of National Origin promulgated by the Equal Employment Opportunity Commission (29 C.F.R., Part 1606) specifically inform the public of unlawful employment practices which discriminate on the basis of national origin. The Guidelines reaffirm the Equal Employment Opportunity Commissions position on national origin discrimination. 1606.1, which deals with national origin discrimination, defines national origin discrimination broadly as including, but not limited to, employment discrimination because of an individuals or his or her ancestors place of origin. The guidelines go on to state that the definition of national origin discrimination is necessarily broad because Title VII protects all individuals from SUPPORTING STATEMENT On October 31, 1980, Mobils directors appointed a Saudi Arabian citizen to its Board of Directors. This individual reportedly has ties to members of the present Saudi Arabian government. Saudi Arabia, of course, makes harmful political use of its oil supply. Mobil, by appointing a Saudi Arabian to its Board of Directors, is, in effect, also approving of Saudi Arabias activities. Other corporations successfully transact business with OPEC countries without appointing citizens of those countries to their boards. Other means are available to obtain a working relationship with OPEC. Mobil has erred by associating with a country that has, for example, provided an abundance of cash and weapons to the Palestine Liberation Organization. A provision in Mobils bylaws excluding citizens of OPEC countries form its Board of Directors will be a step in the right direction. There are qualified American citizens who can contribute to the continued success of Mobil. It is unnecessary for Mobil to prostitute itself to the power of OPEC and become a silent partner to OPECs destructive activities." GROUNDS FOR OMMISSION OF THE PROPOSAL UNDER RULE 14A-8
Rule 14a-8(c)(2) permits a proposal and any statement in support thereof to be omitted from the issuers proxy statement and form of proxy "if the proposal would, if implemented, require the issuer to violate any state law or federal law of the United States, or any law of any foreign jurisdiction, to which the issuer is subject..." national origin discrimination regardless of race or color. In addition to Title VII of the Civil Rights Act of 1964, Section 296 of the New York Executive Law provides that: "It shall be an unlawful discriminatory practice: (1) For an employer...., because of the... national origin...of any individual, to refuse to hire or employ or to bar or to discharge form employment such individual or to discriminate against such individual in compensation or in terms, conditions or privileges of employment." In addition to the above, the Corporation is subject to Executive Order 11246, Equal Employment Opportunity, September 24, 1965. this Executive Order applies to government contractors. Mobil is a "contractor" within the meaning of Section 202 of the Executive Order because it has jet fuel and lube contracts with the United States government. The Executive Order provides for non-discrimination in employment by government contractors and sub-contractors. Section 202 thereof provides, in part, that: "...all Government contracting agencies shall include in every Government contract hereafter entered into the following provisions: "During the performance of this contract, the contractor agrees as follows: (1) The contractor will not discriminate against any employee or applicant for employment because of face, creed, color, or national origin. the contractor will take affirmative action to insure that applicants are employed, and that employees are treated during employment, without regard to their race, creed, color, or national origin." Under Rule 14a-8(c)(2), the staff has permitted the omission of proposals which are discriminatory and in violation of Title VII of the Civil Rights Act of 1964 and state law, Standard Oil Company of California, January 16, 1978. We are of the opinion that adoption and implementation of the Proposal would constitute a violation of the above cited federal and state laws and the Presidential Executive Order. Accordingly, we submit that the Proposal may be omitted form the Corporations proxy statement pursuant to Rule 14a-8(c)(2). B. Rule 14a-8(c)(1) - Not a Proper Subject for Action by Security Holders. The Proposal, requiring that the By-Laws be amended to exclude certain persons form the Board of Directors of the Corporation, is excludable from the Corporations proxy statement pursuant to Rule 14a-8(c)(1) because the Proposal is"... under the laws of the issuers domicile, not a proper subject for action by security holders" because it would not be proper for the Board to comply with the Proposal. Section 141(a) of the Delaware Corporation Law, the law of the Corporations state of incorporation, provides in relevant part that: "(a) The business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a Board of Directors, except as may be otherwise provided in this chapter or in its certificate of incorporation." Article 5 of the Corporations Certificate of Incorporation provides in relevant part that: "All powers of the Corporation shall be exercised by or under the direction of the Board of Directors except as otherwise provided herein or required by law." The above provisions explicitly place the authority to manage the Corporation in the Board of Directors. Neither the Delaware Corporation Law nor the Corporations Certificate of Incorporation provide for authority of the shareholders to define the internal structure of the Board of Directors or the means by which the Board of directors carries out its responsibilities. The Proposal, if adopted, would require the Board of Directors to take the action specified therein in contravention of the discretionary authority granted exclusively to the Board of Directors by Section 141(a) of the Delaware Corporation Law. Section 211 of the Delaware Corporation Law gives the shareholders the right to elect directors. The shareholders discretion would be limited by the Proposal in that nationals of certain countries would be ineligible for election to the Board, regardless of their qualifications. In addition, Section 223 of the Delaware Corporation Law prescribes by whom and how vacancies in a board of directors and newly created directorships are to be filled. If the Proposal is to be adopted, the Board of Directors would be unable to comply with Section 223 in filling vacancies to the Board or newly created directorships. Under Section 223, the power and authority to fill board vacancies rests in the board, and, in special circumstances, in the stockholders. Section 223 provides: "$223. Vacancies and newly created directorships
(1) vacancies and newly created directorships resulting form any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director; (2) whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If at any time, by reason of death or resignation or other cause, a corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholders in accordance with the provisions of the certificate of incorporation or the bylaws, or may apply to the Court of Chancery for a degree summarily ordering an election as provided in section 211 of this title. (b) In the case of a corporation the directors of which are divided into classes, any directors chosen under subsection (a) of this section shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be elected and qualified. (c) If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of section 211 of this title as far as applicable. (d) Unless otherwise provided in the certificate of incorporation or by-laws, when one or more directors shall resign from the board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereof to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies. The Corporations Certificate of Incorporation contains no provision dealing with board vacancies. However, the Corporations By-Laws contain provisions on vacancies and board powers. Sections 2 and 8 of Article III (Directors) of the By-Laws, consistent with Section 141(a) and 223 of the Delaware Corporation Law, provide: "Section 2. VACANCIES.
Section 8. POWERS.
The proposal, if adopted by the Corporations shareholders, would request the Board of Directors to fill vacancies on the board in accordance with the procedure prescribed by the Proposal. That procedure requires that the board vacancies be filled with persons designated by someone other than the Corporations Board of Directors; the Proposal prohibits the Board from considering certain persons. Therefore, the Proposal conflicts with the specific provisions of the Delaware Corporation Law and the Corporations Certificate of Incorporation and By-Laws referred to above. Adopting a by-law in accordance with the Proposal, would not be proper because it would be contrary to and prohibited by Delaware law. the delegation, whether by the directors or by the shareholders, to anyone other than board itself of the power and authority to designate the persons who are to become directors of the Corporation is impermissible. The selection or designation of directors is a power which can be exercised only by the board of directors and is not a power which may be delegated by the directors or diminished by the shareholders. Our opinion is supported by Chapin v. Benwood Foundation, Inc., Del. Ch., 402 A.2d 1205 (1979). In Chapin v. Benwood Foundation, Inc., supra, the issue was whether a Delaware non-profit, charitable corporation could legally bind itself by agreement to name designated persons to fill vacancies on the corporations board of trustees as such vacancies occurred. There, as here, the corporations by-laws provided that the corporations board of trustees shall fill vacancies occurring thereon. In holding that such an agreement was invalid, the court said: (402 A.2d at 1210-11): "...The decision here should be controlled by the longstanding rule that directors of a Delaware corporation may not delegate to others those duties which lay at the heart of the management of the corporation. Clarke Memorial College v. Monaghan Land Co., Del. Ch., 257 A.2d 234 (1960); Lehrman v. Cohen, Del. Supr., 43 Del. Ch. 222,222 A.2d 800 (1966); Abercrombie v. Davies, Del. Ch., 35 Del. Ch. 599,123 A. 2d 893 (1956), revd. on other grounds, Del. Supr., 36 Del. Ch. 371,130 A.2d 338 (1957); Adams v. Clearance Corporation, Del. Supr., 35 Del. Ch. 459,121 A.2d 302 (1956); Field v. Carlisle Corporation, 31 Del. 227, 68 A.2d 817 (1949). While none of these cases are directly on point, and while none dealt with the duties of the trustees or directors of a nonstock corporation, the fundamental principle which permeates them all is perhaps best summed up by the statement of Chancellor Seitz in Abercrombie v. Davies, supra, at 123 A.2d 899: So long as the corporate from is used as presently provided by our statutes this Court cannot give legal sanction to agreements which have the effect of removing from directors in a very substantial way their duty to use their own best judgment on management matters. To the same effect see West v. Camden, 135 U.S. 507, 10 S.Ct. 838, 34 L.Ed. 254 (1890); Gilchrist v. Hatch, Ind. App. 100 N.E. 473 (1913), revd on other grounds, 183 Ind. 371, 106 N.E. 694 (1914); Van Slyke v. Andrews, 146 Minn. 316, 178 N.W. 959 (1920); Dubbs v. Kramer, 302 Pa. 455, 153 A. 733 (1931). . . . .
The Proposal is worded in mandatory form. For the above reasons, we submit that the Proposal would still be improper under Delaware law even if framed as a recommendation or request. The staff has permitted the omission of a proposal which would have required the board of directors to fill vacancies on the board by nominees recommended by a shareholder committee. Bankamerica Corporation, February 7, 1980, reconsidered March 10, 1980. In that matter the staff stated: "....it appears that under the relevant sections of DCL and the decisions of the Delaware courts it would be impermissble for the Companys board of directors to abdicate its responsibility to exercise its best judgment in filling future vacancies on the board by binding itself to comply with provisions of this proposal. Under the circumstances, this Division will not recommend any enforcement action to the Commission if the management omits the subject proposal from the Companys proxy material." For the above reasons, we submit that the Proposal may be omitted form the Corporations proxy statement pursuant to Rule 14a-8(c)(1). C. Rule 14a-8(c)(8) - Relates to an Election to Office. Rule 14a-8(c)(8) permits a proposal and any statement in support thereof to be omitted from the issuers proxy statement and form of proxy if the proposal related to an election to office. We are aware of the fact that the staff takes the position that a proposal which related to the manner of selecting nominees for election is generally not excludable. (Bank America Corporation, February 7, 1980). However, Proponents Proposal is an effort to oppose the Corporations solicitation on behalf of re-election of one of its nominees for the Board of Directors. As is specifically set forth in the Proponents supporting statement, the Proposal opposes the re-election to the Corporations Board of Suliman S. Olayan, a citizen of Saudi Arabia. In addition, the Proposal impugns the character, integrity and reputation of the Board of Directors and alleges improper conduct, all without factual foundation. for example, the supporting statement says: "This individual reportedly has ties to members of the present Saudi Arabian government. Saudi Arabia, of course, makes harmful political use of its oil supply. Mobil...is, in effect, also approving of Saudi Arabias activities" (emphasis added). It further states that:
The supporting statement concludes:
In Aseco International, March 18, 1980, a proposal was submitted to the company calling for a report on whether certain "conflicts" should have been disclosed in a proxy statement, why board meetings had not been held and why Annual Report on Form 10-K has been filed late. The staff permitted this proposal to be omitted from Aseco Incorporated, proxy material under Rule 14a-8(c)(8) on the grounds that the proposal related to the election to office of the companys board of directors. The staff stated: "...the proposals and supporting statements impliedly call into question the qualifications of Mr. Garripee, in particular, and the remainder of the board in general, individuals who are candidates for re-election; and appear to derogate the quality and integrity of the board members to the extent that the proposals may be deemed an effort to oppose the managements solicitation on behalf of the re-election of these persons. Under the circumstances, this Division will not recommend any action to the Commission if the management omits the proposal form the companys proxy material." Proponents Proposal directly opposes the election of a director and a nominee to the Board and thus relates to an election to office within the meaning of Rule 14a-8(c)(8). The Proposal similarly calls into question the qualifications of the Board of Director, derogates their quality and integrity and may be deemed an effort to oppose managements solicitation on behalf of the re-election of these persons. For the above reasons, we submit that the Proposal may be omitted from the Corporations proxy statement pursuant to Rule 14a-8(c)(8). D. Rule 14a-8(c)(3) - Contrary to the Commissions Proxy Rules, including Rule 14a-9. Rule 14a-8(c)(3) permits a proposal or any statement in support thereof to be omitted form the issuers proxy statement if the proposal or the supporting statement is contrary to any of the Commissions proxy rules and regulations, including Rule 14a-9, which prohibits false or misleading statements in proxy soliciting materials. We submit that the language of the supporting statement quoted in Paragraph C above contains false and misleading statements and is excludable under Rule 14a-8(c)(3). Note (b) to Rule 14a-9 gives the following as an example of what, "depending upon particular facts and circumstances, may be misleading within the meaning of this section": "(b) Material which directly or indirectly impugns character, integrity or personal reputation, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation." the staff has permitted the exclusion of proposals whose implications of improper or illegal conduct were considerably less overt than Proponents supporting statement. In American Telephone & Telegraph Company (January 19, 1977), the staff noted that certain language in the supporting statement "seems to imply that the employees covered by the proposal might engage in improper conduct or wrongdoing". (emphasis added,) In Eastern Utilities Association (March 4, 1975), the proposal suggested that management appoint a committee "to investigate and evaluate present procedures of management...and determine the degree of compliance of the company with the rules and directions of the United States Equal Opportunity Commission". The staff advised that the entire proposal might be violative of Rule 14a-9 because "the proposal is phrased in a manner that suggests that the management has failed to comply with existing rules and regulations of the U.S. Equal Employment Opportunity Commission, but no factual support has been furnished by the proponent to support that implied allegation". As set forth above, no factual support has been provided by the Proponent to support Proponents charges of improper or illegal conduct by the Corporation. Moreover, even if the staff should deem the Proposal co be Proponents personal opinion, one mans opinion does not constitute a proper factual foundation for Proponents allegations of violations of law and improper conduct. For these reasons, the cited portions of Proponents supporting statement, which allege that the Corporation is engaged in Illegal or improper conduct and allege that such conduct may adversely affect the Corporation is inaccurate, detrimental to the integrity and reputation of the Corporation, its Board and its employees, impugns their character, are without factual foundation and are false and misleading. We submit, based on the above facts, that the cited portions of the supporting statement may be omitted pursuant to Rule 14a-8(c)(3). E. Conclusion. For the above reasons, we request that the staff advise the Corporation that it will not recommend any action to the Commission that it will not recommend any action to the Commission if the Proposal is omitted from the Corporations proxy statement for the 1982 Annual Meeting of Shareholders. Sincerely yours, Kathleen A. Warwick Corporation Securities Counsel KAW:jmb cc: Irvin Rauchman c/o Richard Ganulin, Esq. 3133 Burnet Avenue Cincinnati, Ohio 45229 INQUIRY LETTER 2BMobil CorporationD 150 EAST 42ND STREET NEW YORK, NEW YORK 10017 TELEPHONE(212) 883-7428 January 20, 1982 Michael R. Kargula Attorney Adviser Office of Chief Counsel Division of Corporation Finance Room F431 Securities and Exchange Commission Washington, D.C. 20549 Re: Shareholder Proposal for 1982 Annual Meeting Irvin Rauchman Dear Mr. Kargula: We submit this letter to reiterate that the grounds set forth in our letter, dated December 30, 1981, furnish meritorious bases under Rule 14a-8 for omission of the shareholder proposal and statement in support thereof (collectively the "Proposal") submitted to Mobil Corporation (the "Corporation") by Richard Ganulin, Esq., on behalf of Irvin Rauchman ("Proponent") relating to qualifications for election to, or membership on, the Corporations Board of Directors. Proponents proposal states: "It is resolved that the bylaws of the Corporation are amended to read as follows: Citizens of countries belonging to OPEC are not qualified for election to, or membership on, the Corporations Board of Directors." More specifically, this letter refers to the letter from the Proponent, dated January 10, 1982, in reply to our letter of December 30, 1981. GROUNDS FOR OMISSION OF THE PROPOSAL UNDER RULE 14a-8.
The Corporation contends that implementation of the Proposal would be discriminatory and in violation of: (1) Title VII of the Civil Rights Act of 1964, 42 U.S.C. §2000e-2(a); (2) the Guidelines on Discrimination because of National Origin of the Equal Employment Opportunity Commission; (3) the 14th Amendment to the United States Constitution; (4) the Civil Rights Act of 1866, 42 U.S.C. §1981; (5) Executive Order 11246; (6) the New York Human Rights Law; and (7) the Delaware Fair Employment Practices Act. Title VII of the Civil Rights Act of 1964 (Title VII), 42 U.S.C. §2000e-2(a), provides, in part, that: "It shall be an unlawful employment practice for an employer - (1) to fail or refuse to hire or discharge individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individuals race, color, religion, sex, or national origin; or (2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individuals race, color, religion, sex, or national origin." (emphasis added) Proponent states in his January 10, 1982, letter to the staff of the Commission that "Congress did not intend the term national origin in the Act to embrace citizenship requirements." In support of his proposition, Proponent cites Espinoza vs. Farah Mfg. Co., 414 U.S. 86, 90 (1973). Proponents interpretation of the law set forth in Espinoza is clearly incorrect. The staff is respectfully referred to the opinion of the United States Supreme Court in Espinoza, supra, which states, "Certainly Title VII prohibits discrimination on the basis of citizenship whenever it has the purpose or effect or discriminating on the basis of national origin. The Act proscribes not only overt discrimination but also practices that are fair in form, but discriminatory in operation. Griggs v. Duke Power Co., 401 U.S. 424, 431 (1971)." Espinoza v. Farah Mfg. Co., supra, 414 U.S. at 92 (emphasis added). Proponent further states that "Nothing in the Act makes it illegal to discriminate on the basis of citizenship." In response to that conclusion, the staff is respectfully referred to the Guidelines on Discrimination Because of National Origin of the Equal Employment Opportunity Commission (EEOC). 29 C.F.R. §1606.5 (1980). The EEOC is invested with the authority and responsibility of enforcing Title VII. The EEOCs Guidelines state: "Citizenship Requirements In those circumstances where citizenship requirements have the purpose or effect of discriminating against an individual on the basis of national origin, they are prohibited by Title VII. See Espinoza v. Farah Mfg. Co., Inc., 414 U.S. 86, 92 (1973)." Proponent would exclude from the Corporations Board of Directors all persons who are citizens of countries belonging to OPEC. Therefore, the proposed by-law would violate Title VII by unlawfully discriminating against every citizen from an OPEC country if that person has or her national origin in an OPEC country. Proponents by-law would achieve exactly such unlawful discrimination as to a present member of the Corporations Board of Directors. The Proposal would exclude from the Corporations Board of Directors a present member of that Board, Mr. Suliman S. Olayan. Mr. Olayan is not only a citizen of Saudi Arabia, a member nation of OPEC, he also has his national origin in that country. Therefore, Proponents by-law would operate to discriminate against Mr. Olayan on the basis of his national origin and not merely on the basis of his citizenship. The Congressional intent of Title VII makes clear that Congress in its wisdom directed that its statute be liberally enforced. "The purpose of Title VII of the Civil Rights Act is to eliminate discrimination in employment based on race, color, religion, sex, or national origin. House Judiciary Comm. Report No. 914, 88th Cong., 1st Sess. 26 (1963), as amended, The courts have accorded a liberal interpretation to Title VII in order to effectuate this Congressional purpose. See Franks v. Bowman Transportation Co., Inc., 424 U.S. 747, 96 S.Ct. 1251, 47 L.Ed. 2d 444 (1976); Griggs v. Duke Power Co., 401 U.S. 424, 429-30, 91 S.Ct. 849, 28 L.Ed. 2d 158 (1971); Rogers v. Equal Employment Opportunity Commission, 454 F. 2d. 234, 238 (5th Cir. 1971), cert. denied, 406 U.S. 957, 92 S.Ct. 2058, 82 L.Ed. 2d. 343 (1972). Congress clearly included in the objectives of Title VII the elimination of job discrimination in professional fields. Equal Employment Opportunity Commission v. Rinella & Rinella, 401 F. Supp. 175, 179-80 (N.D. Ill. 1975); Kohn v. Royall, Koegel & Wells, 59 F.R.D. 515 (S.D.N.Y. 1973), appeal dismissed, 496 F. 2d. 1094 (2d Cir. 1974). Lucido v. Cravath, Swaine & Moore, 425 F. Supp. 123, 126 (S.D.N.Y. 1977). It is clear that the Proposal seeks to impose its discriminatory animus, in violation of Title VII, through the pretext of discriminating against Mr. Olayan on the basis of citizenship, which itself constitutes a violation of federal law. See, infra. The Proposal violates Title VII because it has the effect, proscribed by Title VII and the EEOCs Guidelines, of excluding a person form the Board of Directors because of national origin. Therefore, the Proposal constitutes the merest pretext for discrimination in violation of Title VII. Moreover, Proponents proposal also discriminates between national origins by permitting any person outside the OPEC countries from sitting on the Board of Directors. The EEOC has confirmed that the granting of a benefit to aliens of one nationality, while denying the same benefit to aliens of another nationality indicates discrimination on the basis of national origin in violation of Title VII. EEOC Decision No. 77-26 (1977), CCH /6575. Proponent also argues that "directors...are not to be construed as employees under the Act," citing Spirides v. Reinhardt, 613 F.2d 826, 831-883 sic (D.C. Cir. 1979). Proponents position is untenable because of an incorrect statement of the law, and reliance upon an opinion that contradicts his position. Spirides involves a suit under Title VII filed by an employee of a federal government agency. Plaintiff alleged that he was terminated because of sex discrimination. The United States District Court for the District of Columbia granted defendants motion to dismiss. The Court of Appeals held that the trial court erred in placing virtually exclusive reliance on contract language as indicative of whether plaintiff was an employee of the defendant. It held that the lower court should have reviewed all circumstances in considering the elements of plaintiffs relationship with the defendant. Of particular significance is the Court of Appeals statement that: "Even if the District Court had made this finding of non-employee status after applying the proper principles of the law, that would not have been the end of the matter." (emphasis added). Spirides, supra, at 832. Thus the Court of Appeals concluded "we need not reach the question of whether the District Courts finding was clearly erroneous, however, because the District Court applied an erroneous legal standard in holding that Spirides was outside the reach of Title VII." Therefore, the case cited by Proponent neither addresses the question of the protection of a director by Title VII, nor supports the proposition for which it was cited. A determination of whether a person is protected by Title VII does not require an "employer-employee" relationship. The language of Title VII indicates a "Congressional intent to define discrimination in the broadest possible terms and to include the entire scope of the working environment within the ambit of Title VII. Lucido, supra, 425 F. Supp. at 126. "Title VII defines "employee" as "an individual employed by an employer" but no where are there words of limitation that restrict references in the Act to "any individual" as comprehending only an employee of an employer. Nor is there any good reason to confine the meaning of any individual to include only former employees and applicants for employment, in addition to present employees." Sibley Memorial Hospital v. Wilson, 488 F. 2d 1338, 1341 (D.C. Cir. 1970). Accord, Puntolillo v. New Hampshire Racing Commission, 375 F. Supp. 1089 (D.N.H. 1970). Proponent alleges that directors of a corporation are not to be construed as "employees" within the purview of Title VII. In asserting this conclusion, Proponent contravenes Congress intent for the legislation. Title VII does not require an employer-employee relationship as a jurisdictional or procedural prerequisite to finding a violation of its provisions on national origin. The EEOC has confirmed this in its decisions on Title VII. "By its terms Title VII speaks not of employees but of persons aggrieved." "Throughout the Title and its legislative history Congress indicated its intent to deal with more than the conventional employer-employee situation... Courts have held that no employer-employee relationship need exist, only control over access....and denial of such access by reference to invidious criteria." EEOC Decision No. 75-249, CCH 6457 (1975) (emphasis added). Far from requiring an "employer -employee" relationship, the federal courts have confirmed the EEOCs international of Title VII that a determination of whether a person is protected by Title VII depends merely upon whether the person is "aggrieved." "Title VII....does not use the term "employee". The phrase is rather, the "person aggrieved"; and that term can certainly be taken as comprehending individuals who do not stand in a direct employment relationship with an employer. The fact that the Act purports to provide remedies for a class broader than direct employees is a strong indication that the proscriptions contemplated by Section 703(a)(1) reach beyond the immediate employment relationship." Sibley Memorial Hospital v. Wilson 488 F. 2d 1338, 1341 (D.C. Cir. 1970) (emphasis added). Indeed, a person seeking redress under Title VII need not establish that be had an employment relationship with the entity charged with the discrimination. "A person claiming to be aggrieved may never have been an employee of the defendant.... An aggrieved person obviously is any person aggrieved by any of the forbidden practices...The use U.S.C. §2000e-5 of the language a person claiming to be aggrieved shows a Congressional intention to define standing as broadly as is permitted by Article III of the Constitution. Hackett v. McGuire Brothers, Inc., 445 F. 2d 442, 445-46 (3rd Cir. 1971). Therefore, the mere denial of access to any position on the basis of discriminatory criteria gives rise to Title VII liability, despite the absence of an employer-employee relationship between the defendant and the plaintiff. Sibley Memorial Hospital v. Wilson, 488 F. 2d 1338, 1342 (D.C. Cir. 1973); Williams v. Southern Ry. System, 15 FEP Cases 959, 964 (S.D. Ohio 1976); Puntolillo v. New Hampshire Racing Commission, 325 F. Supp. 1089 (D.N.H. 1974). Despite the fact that Title VII requires no employee-employer relationship as a jurisdictional or procedural prerequisite, Mr. Olayan would satisfy this criterion, because he is paid as a Director of the Corporation. Mr. Olayan is a member of the Corporations Board of Directors Nominating Committee and the Public Issues Committee. He is an an alternate member of the Audit Committee and the Compensation and Management Incentive Committee. Mr. Olayan is paid a retainer by the Corporation of $18,000 per year and receives $500 plus travel allowances where appropriate for each meeting of the Board of Directors or a Committee of the Board attended. Because Mr. Olayan is paid for his services to the Corporation, a clear employer-employee relationship exists. In addition to violating Title VII, Proponents Proposal would also violate the Civil Rights Act of 1966, 42 U.S.C. §1981, which prohibits discrimination against aliens. Graham v. Richardson, 403 U.S. 365, 377-78 (1971); Takahashi v. Fish and Game Commission, 334 U.S. 410, 419-20 (1948); Guerra v. Manchester Terminal Corp., 498 F. 2d 641 (5th Cir. 1974). "But Congress has not seen fit to impose any burden or restriction on aliens...after their entry into the United States. Rather, it has broadly declared: "All persons within the jurisdiction of the United States shall have the same right in every State and territory...to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens... 42 U.S.C. §1981. The protection of this statute has been held to extend to aliens as well as to citizens. Takahashi, 334 U.S. at 419 n.7... Moreover, this Court has made it clear that, whatever may be the scope of the constitutional right of interstate travel, aliens lawfully within this country have a right to enter and abide in any State in the Union on an equality of legal privileges with all citizens under non-discriminatory laws. Takahashi, 334 U.S. at 420..." Graham v. Richardson, supra, 403 U.S. at 377-78. Moreover, Congress, in the enactment of a comprehensive legislative plan for the nation-wide control and regulation of immigration and naturalization, has broadly provided: All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of person and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other. May 31, 1970 16 Stat 140, 144, c. 114, 8 USCA §41. The protection of this section has been held to extend to aliens as well as to citizens citations omitted. Consequently the section and the Fourteenth amendment on which it rests in part protect all persons against state legislation bearing unequally upon them either because of alienage or color." Takahashi, supra, 834 U.S. at 419-20 (emphasis added). Proponents by-law also violates the Fourteenth Amendment to the United States Constitution, because it seeks to deprive a person of protections secured under New York and Delaware state law solely because of that persons national origin and alien status. "The fourteenth Amendment provides Nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. It has long been settled, and it is not disputed here, that the term person in this context encompasses lawfully admitted resident aliens as well as citizens of the United States and entitles both citizens and aliens to the equal protection of the laws of the State in which they reside." Graham v. Richardson, supra, 403 U.S. at 371 (emphasis added). It is clear that the federal government has aggregated unto itself supreme and exclusive power to regulate the rights of aliens lawfully in the United States. Congress has denied to the states any power to regulate the status of aliens lawfully in the United States. A fortiori, Proponent cannot lawfully through his by-law alter the legal rights of aliens, when Congress has proscribed all other legal entities form so doing. "Where the federal government, in the exercise of its superior authority in this field, has enacted a complete scheme of regulation...states cannot, inconsistently with the purpose of Congress, conflict or interfere with, curtail or complement, the federal law, or enforce additional or auxiliary regulations." Hines v. Davidowitz, 312 U.S. 52 at 66-67 (1941). "The Federal Government has broad constitutional powers in determining what aliens shall be admitted to the United States, the period they remain, regulation of their conduct before naturalization, and the terms and conditions of their naturalization citation omitted. Under the Constitution the states are granted no such powers; they can neither add to nor take from the conditions lawfully imposed by Congress upon admission, naturalization and residence of aliens in the United States or the several states. State laws which impose discriminatory burdens upon the entrance or residence of aliens lawfully within the United States conflict with this constitutionally derived federal power to regulate immigration, and have accordingly been held invalid. citations omitted *** The Fourteenth Amendment and the laws adopted under its authority thus embody a general policy that all persons lawfully in this country shall abide in any state on an equality of legal privileges with all citizens under non-discriminatory laws." Takahashi, supra, 334 U.S. at 419-420. Proponent omits any response to the Corporations position, as set forth in its letter of December 30, 1981, to the staff of the Commission, that the Proposal also violates Executive Order 11246, Equal Employment Opportunity, September 24, 1965. this Executive Order applies to government contractors. The Corporation is a "contractor" within the meaning of Section 202 of the Executive Order because it has jet fuel and lube contracts with the United States government. The Executive Order Provides for non-discrimination in employment by government contractors and sub-contractors. Section 202 therefore provides, in part, that: "...all Government contracting agencies shall include in every Government contract hereafter entered into the following provisions: "During the performance of this contract, the contractor agrees as follows: (1) The contractor will not discriminate against any employee or applicant for employment because of race, creed, color, or national origin. The contractor will take affirmative action to insure that applicants are employed, and that employees are treated during employment, without regard to their race, creed, color, or national origin." As is further set forth in the December 30, 1981, letter, and to which the Proponent has made no response, the Proposal also violates section 296 of the New York Executive Law which provides that: "It shall be an unlawful discriminatory practice: (1) For an employer..., because of the...national origin...of any individual, to refuse to hire or employ or to bar or to discharge from employment such individual or to discriminate against such individual in compensation or in terms, conditions, or privileges of employment." The Proposal also violates the law of the Corporations state of incorporation, Delaware. Section 711 of the Delaware Fair Employment Practices Act states: "Unlawful Employment Practices: Employer Practices.- (a) It shall be an unlawful practice for an employer. (1) to fail or refuse to hire or to discharge any individual otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individuals race, color, age, religion, sex, or national origin; or (2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individuals race, color, age, religion, sex, or national origin." (emphasis added). Under Rule 14a-8(c)(2), the staff has permitted the omission of proposals which discriminatory and in violation of Title VII of the Civil Rights Act of 1964 and state law, Caldor, February 23, 1981. Caldor involved a proposal relating to the nomination of a Hispanic or Puerto Rican man or woman to the Board of Directors. See also Union Oil Company of California, January 29, 1981, relating to a minority representative on the Board and Standard Oil Company of California, January 16, 1978. We are of the opinion that the adoption and implementation of the Proposal would constitute a violation of the above cited federal, and state laws, and the Presidential Executive Order. Accordingly, we submit that the Proposal may be omitted form the Corporations proxy statement pursuant to Rule 14a-8-(c)(2). B. Rule 14a-8(c)(1) - Not a Proper Subject for Action by Security Holders. Proponent argues that since the Delaware Corporation Law, the law of the Corporations State of Incorporation, states that the by-laws may prescribe qualifications for directors and also provides that shareholders may adopt or amend the by-laws, that the Proposal is, therefore, a proper subject for action by security holders under Rule 14a-8(c)(1). While the by-laws of a corporation may be amended by its shareholders to impose qualifications for directors, this Delaware provision cannot be viewed solely in the abstract. In United States v. Columbia Gas & Electric Corporation, 36 F.Supp. 488(D.Del., 1941), it was held that irrespective of Delaware law, a Federal Court in an antitrust action the to right to impose certain requirements as to the qualifications of directors. The argument was made that the qualification imposed by the court at the request of the Department of Justice was illegal under the laws of Delaware because the shareholders could choose as their directors whomsoever they pleased. The Court rejected this argument. Similarly, in the instant Proposal, shareholders may not amend the by-laws to impose qualifications for directors which would violate federal and state laws and a Presidential Executive Order. For the reasons set forth herein and in our letter of December 30, 1981, we are of the opinion that the Proposal may omitted from the Corporations proxy statement pursuant to Rule 14a-8(c)(1). C. Rule 14a-8(c)(8) - Relates to an Election to Office. The Proposal would prohibit citizens of OPEC countries from election to, or membership on, the Corporations Board of Directors. Mr. S. Olayan, citizen of Saudi Arabia, and presently a member of the Corporations Board of Directors, would be precluded form membership on the Board pursuant to the Proposal. Proponent argues that the Proposal is not directed at a particular individual; however, Proponent argues that the Proposal is not directed at a particular individual; however, Proponent also acknowleges that "the appointment of a Saudi Arabian citizen to Mobils board may have been the stimulus triggering Mr. Rauchmans proposal...." Attached hereto is correspondence which clearly establishes that the Proposal is directed against Mr. Olayan as a member of the Corporations Board. Moreover, as set forth in our letter of December 30, 1981, Proponents supporting statement specifically opposes the reelection to the Corporations Board of Mr. Olayan. In Koppers Company, Inc., February 12, 1981, and Phillips Petroleum Company, February 12, 1981, the staff permitted the omission of which related to the discharge of the Chairman of the Board of Directors and certain directors respectively, Proponents Proposal directly opposes the election of director and nominee to the Board and thus relates to an election to office within the meaning of Rule 14a-8(c)(8). We, therefore, submit that the proposal may be omitted from the Corporations proxy statement pursuant to Rule 14a-8(c)(8). D. Rule 14a-8(c)(3) - Contrary To The Commissions Proxy Rules, including Rule 14a-9. We reiterate the arguments set forth in out December 30, 1981 letter. E. Conclusion. For the above reasons, and for the reasons set forth in our letter of December 30, 1981, we request that the staff advise the Corporation that it will not recommend any action to the Commission if the Proposal is omitted from the Corporations proxy statement for the 1982 Annual Meeting of Shareholders. Sincerely yours, Kathleen a. Warwick Corporate Securities Counsel KAW/ward cc:Irvin Rauchman c/o Richard Ganulin, Esq. 3133 Burnet Avenue Cincinnati, Ohio 45229 STAFF REPLY LETTERJanuary 29, 1982 Kathleen A. Warwick, Esq. Corporate Securities Counsel Mobil Corporation 150 East 42ne Street New York, New York 10017 Re: Mobil Corporation Dear Ms. Warwick: This is in regard to your letters dated December 30, 1981 and January 20, 1982, which were received by the Commission on December 31, 1981 and January 21, 1982, respectively, concerning a request made to Mobil Corporation ("Company") by Mr. Irvin Rauchman ("Proponent") to include one shareholder proposal in the Companys proxy soliciting material for its 1982 annual meeting of security holders. Pursuant to Rule 14a-8(d) under the Securities Exchange Act of 1934, your letters indicated the managements intention to exclude this proposal from the Companys proxy material. Your submission included an opinion of counsel on certain legal questions encompassed by the managements position on the proposal. We also received a letter dated January 10, 1982 from Richard Ganulin, a representative of the Proponent, suggesting that the managements determination to omit the proposal was erroneous. The proposal, the text of which is set forth on pages 1 and 2 of your letter of December 30, 1981, directs the Company to amend its by-laws in order to disqualify citizens of countries belonging to OPEC from membership on the Companys Board of Directors. In your letters you have expressed the opinion that the proposal is excludable form the Companys proxy material under paragraphs (c)(1), (c)(2), (c)(3) and (c)(8) of Rule 14a-8, as well as under Rule 14a-9, and you cite certain reasons in support of that opinion Mr. Ganulin, however, for the reasons stated in his letter on the matter, does not agree with your position. There appears to be some basis for your opinion that the proposal may be omitted form the Companys proxy material under Rule 14a-8(c)(8), since it relates to the election to office of the Companys Board of Directors. In the staffs view, the proposal and supporting statement call into question the qualifications of Mr. Olayan for reelection and thus the proposal may be deemed an effort to oppose the managements solicitation on behalf of the reelection of this person. Under the circumstances, this Division will not recommend any enforcement action to the Commission if the Company omits the proposal from its proxy material. In considering our enforcement alternatives, we have not found it necessary to reach the other bases for omission upon which you rely, although there appears to be some support for those reasons as well. In connection with the foregoing, your attention is directed to the enclosure, which sets forth a brief discussion of the Divisions informal procedures regarding shareholder proposals. Sincerely, Michael R. Kargula Attorney Adviser Enclosure cc: Richard Ganulin, Esq. 3133 Burnet Avenue Cincinnati, Ohio 45229 |
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