Texaco Inc.Jan. 31, 1980 INQUIRY LETTER 1TEXACO INC. 2000 WESTCHESTER AVENUE WHITE PLAINS, NEW YORK 10650 December 21, 1979 Division of Corporate Finance Securities and Exchange Commission 500 North Capitol Street, N.W. Washington, D.C. 20549 Gentlemen: Pursuant to Rule 14a-8(d) under the Securities Exchange Act of 1934, we are enclosing five copies of: (1) shareholder proposal with supporting statement, transmitted to Texaco by the Society of the Holy Child Jesus on November 30, 1979 and by the Sisters of Charity Center on December 5, 1979, along with related correspondence; (2) an opinion of counsel, dated December 19, 1979, setting forth the legal basis for our conclusion that the above proposals may properly be omitted; and (3) our proxy statements for the years 1976 through 1979, which included substantially the same shareholder proposals from various church group shareholders. Also enclosed are four additional copies of this letter. Texaco intends to omit the proposal from its proxy materials under Rule 14a-8(c)(12) on the ground that "substantially the same proposal" was included in Texacos proxy statement relating to Texacos 1976, 1977, 1978 and 1979 Annual Meetings of Stockholders and received, at the time of its latest submission, less than the required percent of the total number of votes cast in regard thereto (i.e., less than 3 percent in both 1978 and 1979, and certainly far less than the higher 6 percent and 10 percent thresholds used in the case of multiple prior submissions.) We request that the Commission concur with our conclusion that the proposal may properly be omitted and state that it will take no action in such event. As more fully set forth in the enclosed opinion of counsel, the current proposal and the proposals submitted in the past four years are substantively the same in that the purpose of each is to restrict activities in South Africa. The proposal to adopt a policy not to make any bulk sales or provide any services to the South African police or military is a restriction on Texaco and its affiliates operations in South Africa and serves the same essential purpose as the proposals to reduce imports into South Africa by one-third, to terminate operations and to curtail expansion (i.e., to express disapproval of the system of Apartheid and restrict the activities of South African military as a close examination of the supporting statements to the proposals will attest.) Any differences between the proposals go only to the degree of restriction. Accordingly, the inclusion of the proposal in the Companys proxy statement would serve no useful purpose since "substantially the same proposal" together with substantially the same supporting arguments included in prior years proxy statement were fully aired and debated at the 1976, 1977, 1978, and 1979 Annual Meetings and the views of Texacos stockholders in opposition thereto were made abundantly clear by their overwhelming vote against such proposals (i.e., 97.282 percent in 1979, 97.811 percent in 1978, 96.3 percent in 1977 and 97.7 percent in 1976.) By copy of this letter, we are notifying both shareholder proponents that we intend to omit the proposal from our proxy material for the reasons set forth and are furnishing them with a copy of the opinion of counsel and proxy statements referred to herein. Very truly yours, CARL B. DAVIDSON CBD:sb Attachments cc: Sister Regina Murphy, S.C. Social Concerns Coordinator Sisters of Charity Center Mount St. Vincent-on-Hudson Bronx, N.Y. 10471 Treasurer of the Corporation Society of the Holy Child Jesus Provincial House 620 Edmonds Avenue Drexel Hill, Pa. 19026 INQUIRY LETTER 2TEXACO INC. 2000 WESTCHESTER AVENUE WHITE PLAINS, N.Y. 10650 December 19, 1979 Securities and Exchange Commission 500 North Capitol Street, N.W. Washington, D.C. 20549 Attention: Office of Chief Counsel Division of Corporation Finance Dear Sirs: Several shareholders of Texaco Inc. have submitted to the company a proposal for inclusion in the managements proxy statement and form of proxy relating to Texacos 1980 Annual Meeting. Copies of the proponents letters, proposed resolution and supporting statement are attached as Exhibit A. The proposal seeks to request the Board of Directors to establish as corporate policy the following: "The corporation and its subsidiaries and affiliates shall not make any bulk sales of products or provide any services directly to the South African police or military and shall make a good faith effort to insure that no customer shall resell to these agencies." The management intends to omit the proposal from its proxy materials, and requests that it be advised whether the staff of the commission would recommend to the Commission that it take any action against Texaco in such event. Rule 14a-8(c)(12) permits a proposal to be omitted from managements proxy materials relating to any meeting of security holders held within 3 calendar years after the latest previous submission of "substantially the same proposal" if such proposal was included in the managements proxy materials relating to any such meeting held within the preceding 5 calendar years, and the earlier proposal received: less than 3 percent of the votes cast thereon if submitted at only one meeting; less than 6% of votes cast thereon at the time of its second submission if submitted at only two meetings; and less than 10% of votes cast thereon at the time of its latest submission if submitted at three or more meetings. Texaco included the shareholder proposals regarding South Africa in its proxy statements for the preceeding four years as set forth in the attached Exhibit B. The 1976, 1977, 1978 and 1979 proposals received, respectively, only 2.3%, 3.7%, 2.189% and 2.718% of the votes cast at the Annual Meetings. It is my opinion that they are all substantially similar to the present proposal, and that the latter may accordingly be omitted from Texacos 1980 proxy materials pursuant to Rule 14a-8(c)(12). In Securities Exchange Act Release 12598 (July 7, 1976), the Commission stated that "the purpose of. . . subparagraph (c)(12) is to prevent matters of little interest from consistently being placed before an issuers security holders." In 1976, Texacos shareholders were asked to reverse an investment program in South Africa because, in the view of the proponents, such investment bolstered white oppression of other racial groups, supported the military forces of South Africa, and provided a reserve of petroleum which allegedly flowed to Rhodesia in defiance of international economic sanctions. In 1977, it was asserted that investment in South Africa supports apartheid and the military forces in South Africa, and that South African oil flows to Rhodesia in violation of international sanctions. For these reasons Texaco was to "terminate its present operations in the Republic of South Africa." It is obvious, however, that if Texaco terminated its South African operations, it would be unable to complete the expansion of those operations. Thus, the proposal simply repeated in different language the call for the termination of a planned program of investment and sought to avoid the consequences of this fact by proposing in addition the termination of existing investments. The 1978 proposal again called for Texacos termination of its operations in South Africa, with the supporting statement emphasizing that investment in South Africa strengthens apartheid and white minority rule, and provides strategic petroleum products for South African military forces, thus violating the spirit of the arms embargo. In the 1979 proxy statement the proposal called for a reduction of Texacos imports into South Africa by at least one-third. The supporting statement indicated its purpose was to eliminate sales whose end destination is Rhodesia and expressed the view that the Company "has no business collaborating with apartheid to break international sanctions and to prop up a white settler regime." The current proposal would prohibit any bulk sales of products or providing any service to the South African military. As in past years the preamble and supporting statement are replete with familiar phrases such as "system of white minority rule called apartheid", the "strategic significance of oil. . . a munition of war" and the allegation that oil sales offer both material and moral assistance for the oppressors of the black population. While the church group shareholder proponents have periodically altered to some degree the language of their proposals, a close examination of their preambles and supporting statements indicates that their basic thrust remains identical. That thrust is to restrict to some degree the flow of oil, which is strategically significant to the South African economy and military, as an expression of the proponents disapproval of the system of apartheid and white minority rule. While the proponents have updated the language of the statement from year to year to reflect current events, it is clear that their political motivations and objectives have remained constant. Thus, unless we are completely to exalt form over substance, the inescapable conclusion must be that the current proposal is substantially similar to those submitted by church group shareholders regarding South Africa in prior years. It is submitted that, in this situation the application of Rule 14a-8(c)(12) can be avoided only by ignoring its purpose and emphasizing changes in the form of the proposal, an approach which the commission has expressly disavowed. In Securities Exchange Act Release 12598, the Commission proposed to amend Rule 14(c)(4) (the precedessor of subparagraph (c)(12)) to prevent what the Commission described as the frustration of its intent by changes in the form, coverage or language of a proposal "in a manner that precludes one from saying that it is substantially the same as the prior proposal". In Securities Exchange Act Release 12999 (November 22, 1976), the Commission announced that it had decided to retain the present language of the provision. In doing so, however, the Commission reiterated its concern about abuses of subparagraph (c)(12) and indicated that the staff had been instructed to monitor closely its operation "and to take appropriate action, such as issuing a no-action letter to an affected management, where it is apparent that an effort is being made to present essentially the same proposal to an issuers security holders year-after-year, even though the proposal has not attracted the support required by the rule." All the proposals present the shareholders with the same basic choice between investing in South Africa and conducting operations unfettered by any politically motivated policy restriction, and withdrawing or reducing alleged economic support for the white-dominated government of that country. Texaco believes that the change in the scope of the proposals represents precisely the type of abuse which has been criticized by the Commission, and which the staff has been directed to control. Very truly yours, WILLIAM C. WEITZEL, JR. WCWjr:sb INQUIRY LETTER 3PAUL M. NEUHAUSER 914 HIGHWOOD STREET IOWA CITY, IOWA 52240 TELEPHONE(319) 353-5615 January 28, 1980 Securities and Exchange Commission 500 North Capitol Street Washington, D. C. 20549 Attention William E. Morley, Special Counsel Division of Corporation Finance Re: Shareholder Proposal Submitted to Texaco, Inc. Dear Sir/Madam: I have been asked by the Society of the Holy Child Jesus (owner of 4,000 shares of common stock of Texaco, Inc.) and by the Sisters of Charity of St. Vincent de Paul (owner of 600 shares of common stock of Texaco, Inc.) (hereinafter collectively referred to as the "Sisters"), to respond to the letter dated December 21, 1979, sent Original Text Illegible Inc.(hereinafter referred to as Original Text Illegible or the "Company"), In which the Company contends that the Sisters shareholder proposal may be excluded by the Company from its proxy statement pursuant to Rule 14a-8 (c)(12). I have reviewed the shareholder proposal, as well as the letter from the Company, together with its accompanying opinion of counsel, and based upon the foregoing, as well as upon a review of Rule 14a-8, it is my opinion that the Sisters shareholder proposal must be included in the Companys 1980 Proxy Statement and is not excludable under Rule 14a-8(c)(12). I The resolution is not excludable pursuant to the terms of Rule 14a-8(c)(12). That rule permits the exclusion of a proposal if "the same" proposal has failed to garner sufficient votes in previous years. Apparently the Company itself concedes that the 1980 proposal is not "the same" proposal as was submitted in previous years since the Companys opinion of counsel, at the end of the second paragraph on page three, states as the conclusion of two pages of analysis, that the 1980 proposal is "similar" to those submitted in prior years. It does not say that it is "the same" as those submitted in previous years. Nor is it surprising that counsel is unable to conclude that the 1980 proposal is "the same" as the 1976, 1977, 1978 or 1979 proposals. In order for a proposal to be "the same" as a prior proposal, it must have the same scope and effect. See, e.g., United Brands Company (March 16, 1978); International Telephone and Telegraph Corporation (February 28, 1979); Abbott Laboratories (February 23, 1979); Cyprus Mine Corporation (February 14, 1979); American Home Products Corporation (February 13, 1979); American Airlines, Incorporated (February 6, 1979); Lockheed Corporation (February 2, 1979). It is abundantly clear that the Sisters proposal does not have the same scope and effect as the previous proposals: 1. The 1976 proposal asked the Company to establish a nonexpansion policy in South Africa. 2. The 1977-78 proposal asked the Company to withdraw from South Africa until apartheid is ended. The 1977-78 proposal has been held not to be "the same" as the 1976 proposal. Texaco, Inc. (February 10, 1977); Standard Oil Company of California (February 7, 1977). 3. The 1979 proposal attempted to cut off oil to Rhodesia by restricting the flow of oil to South Africa. 4. The 1980 proposal asks the Company to support United States export controls by taking steps to assure that its products are not sold to the South African military or police. Thus, in each case, a very different action was requested of the Company and it cannot be said that any of these resolutions has the same scope and effect as does any other of the resolutions. Even if all of the resolutions were deemed to have an underlying concern in common, that would still not constitute them "the same" resolution, since they request the Company to take very different actions. See, e.g., International Telephone and Telegraph Corporation (February 28, 1979); American Home Products Corporation (February 13, 1979); Del Monte Corporation (June 16, 1978); Phelps Dodge Corporation (February 27, 1978); Eastman Kodak Company (February 17, 1978). On the contrary, a few years ago the Commission considered and rejected a proposed Rule change which would have made similarity of the underlying subject matter (as opposed to the specific request) more important. Compare Release 34-12598 (July 7, 1976) with Release 34-12999 (November 22, 1976). This was a wise decision since it is clear that many shareholders might favor one type of action (e.g., no sales to the police or military) who might oppose a very different type of action (e.g., getting out of South Africa completely), although both proposals concerned the same general subject matter (e.g., South Africa). Thus, it is clear that the Sisters 1980 proposal is not excludable pursuant to Rule 14a-8(c)(12). II Texaco has failed to establish that the Sisters have "abused" the shareholder proposal rule by presenting essentially the same resolution year after year. In the first place, it should be noted that the burden of proof is upon the Company to establish that a proposal is excludable under Rule 14a-8(c). See Release 34-12999 (November 22, 1976). Texaco has failed to meet this burden of proof. All that Texaco has done has been to make a naked allegation that there has been an "abuse" without supporting that allegation with either facts or argumentation. such lack of specificity makes it difficult to defend against such charges. Nevertheless, it is important to point out the following reasons why the 1980 proposal should not be considered an "abuse" of the shareholder proposal rule: 1. The various proposals have been presented by different shareholders. For example the sole proponent of the 1979 shareholder proposal was the United Church Board for World Ministries (United Church of Christ), owner of 12,036 shares of Texaco. The United Church Board did not sponsor any of the other resolutions submitted in other years. Similarly, the principal sponsor of the withdrawal resolutions in 1977 and 1978 was the United Christian Missionary Society (the Disciples of Christ), owner of 6,000 shares of Texaco. (This resolution was also sponsored by other church groups.) The United Christian Missionary Society has not sponsored any resolution other than the withdrawal resolution. The United Methodist Church World Division sponsored the 1976, 1977 and 1978 resolutions, but not the 1979 or 1980 resolutions. Indeed, no shareholder has sponsored all of the four (1976; 1977-78; 1979 and 1980) resolutions. Moreover, only two shareholders have sponsored more than one resolution. Nor is this surprising. Each of the four resolutions has asked Texaco to take an action very different from that requested by each of the other resolutions. Each of the various church groups (although affiliated with the Interfaith Center on Corporate Responsibility) has its own policies and positions on issues. These policies and positions differ one from another, even on an issue such as South Africa. Some church groups (such as the United Church of Christ) do not, as a matter of policy, sponsor "withdrawal" resolutions. Other church groups will. On the other hand, the question of corporate sanction breaking in Rhodesia has been a top priority for the United Church of Christ. Other church groups have other concerns and priorities. In short, each church group is an independent shareholder with its own priorities, practices and procedures. (In many instances (e.g., the Episcopal Church) each sponsorship must be approved by the vote of the churchs own Board of Directors.) Thus, it is not possible to say that a particular church group, such as the Society of the Holy Child Jesus, is abusing Rule 14a-8 and, in support of that allegation, cite a resolution sponsored solely by another church group. Each is a separate entity and the actions of one cannot be ascribed to the other. In short, the present proponents cannot be accused of abusing the Rule because entirely separate organizations, with separate policies, practices and priorities, have submitted different resolutions in other years. 2. The various proponents have not submitted "essentially the same proposal", the evil referred to in Release 34-12999 (November 22, 1976). Even the underlying concern has not been the same in each year. Thus, contrary to the suggestion made by Texaco, the 1979 proposal was not motivated by hostility to the South African apartheid system. On the contrary, it was an attempt to prevent oil supplies from reaching Rhodesia. This was to be accomplished by decreasing the amount of oil available in South Africa so that there would be no surplus oil available for export to Rhodesia. That the thrust of the 1979 resolution was against corporate sanction-busting and not against apartheid in South Africa is made abundantly clear by the text and reasoning of the Proxy Statement prepared by the United Church to solicit support for the 1979 proposal, a copy of which is attached as Exhibit A. Thus, the underlying motive and concern of the 1979 resolution was entirely different from the underlying motives and concerns of the other proposals cited by the Company. Furthermore, the 1980 proposal bears little resemblance to the earlier South Africa proposals. The earlier resolutions dealt with the overall scope of Texacos South African operations. They were attempts to halt the construction of a new refinery in South Africa (1976) or, failing that, to get Texaco to sell its operations and get out of South Africa (1976) or, failing that, to get Texaco to sell its operations and get out of South Africa entirely (1977-78). These were broad policy resolutions, not tied to specific United States government foreign policy objectives. In contrast, the 1980 resolution is in direct support of United States foreign policy objectives and does not deal with the broader questions raised by Texacos presence in South Africa. Rather, it is an attempt to support United States export controls which prohibit sales to the South African military and police, and is therefore far narrower in scope than the earlier resolutions. In this connection, it should be noted that in 1978 the Department of Commerce issued regulations which prohibit the export from the United States of any product which will be sold to the South African military or police. 15 C.F.R. 385.4(a)(2). The regulations also prohibit shipping to South Africa any products which, although made outside of the United States, are the product of U. S. technology. 15 C.F.R. 385.4 (a)(3). Thus, it would seem apparent that the products of Texacos refineries situated outside of the United States, as well as of those situated inside the United States, cannot be shipped to South Africa without violating 15 C.F.R. 385.4(a)(3): An embargo is in effect on the export or reexport to the Republic of South Africa. . . of technical data. . . when the exporter or reexporter knows or has reason to know that the technical data or any product of the data as defined in 379.4(e) which defines it to include the immediate product "produced directly by use of the technical data" and any subsequent products of the immediate product are for delivery to or use by or for the military or police entities of these destinations or for use in servicing equipment owned, controlled or used by these entities. (emphasis supplied) Thus, it is clear that products which are produced using American technology cannot be sold to the South African military or police, whether they are imported into South Africa from the United States or from some other nation. In addition, 15 C.F.R. 385.4(a)(3) may similarly ban the sale to the military or police of products manufactured in South Africa itself, provided the manufacturing process uses United States technology: Users in the Republic of South Africa. . . of technical data that do qualify for export under certain licensing provisions must be informed in writing that the direct product of that data may not be sold or otherwise made available, directly or indirectly, to the military or police entities in those destinations. Therefore, although the regulation is not absolutely clear, it would appear that (assuming all Texaco refineries use American technology) there is an embargo on sales of gasoline to the military and police whether the refining takes place in the United States, or elsewhere outside South Africa, or in South Africa itself. Thus, the 1980 resolution cannot be deemed to be an attempt to rehash the 1976, 1977 and 1978 resolutions, since its core point is to get Texaco to support United States government policy, a matter with which the earlier resolutions did not concern themselves. 3. In Release 34-12999 (November 22, 1976), the Commission recognized that shareholders who had previously voted against a resolution should not have to vote on essentially the same matter presented in a different guise. The underlying assumption of the Releases admonition against such practices is that the votes of the shareholders will be substantially the same when they are once again presented with what is, in essence, the same issue. This underlying rationale for excluding abusive situations involving only formal alterations in the resolution is thus totally inapplicable if the resolution is not one on which the shareholders have already had a chance to express their opinions. Therefore, if the underlying issue is not the same, the second resolution is not an abuse of the Rule. It is our belief that the shareholders have not yet had the opportunity to vote on the issue of whether Texaco should conform its conduct to the spirit (or perhaps the letter) of the United States restrictions on exports to South Africa. The 1976, 1977 and 1978 resolutions were of a more general nature, arose out of a general moral concern about doing business in South Africa, and would have been equally applicable to any American corporation. The 1980 resolution, in contrast, deals with a more specific situation and arises out of a desire to conform Texacos conduct to the underlying objectives of American foreign policy. Consequently, one can assume that some shareholders who were indifferent to the moral concerns raised by the earlier resolutions would nevertheless support a resolution which is intended to lend support to American foreign policy objectives. Therefore, it cannot be assumed that the shareholders will vote the same way in 1980 as they did earlier since new issues are being presented, not the same old issues in a different guise. Thus the underlying rationale for exclusion of "abusive" resolutions is inapplicable in this case. 4. If there has been a substantial change of circumstances between the first submission and the second submission, so that the context in which the resolution appears is totally different, the second submission should not be deemed to be abusive. Thus, if the earlier resolution concerned exports to nation X and, in the interim, the United States had broken diplomatic relations with nation X, a second submission on the same general issue should not be deemed to be abusive. This must follow from the rationale for exclusion, namely that the shareholders will simply revote the same way the second time. If, however, there has been a substantial change in the external context in which the resolution is presented, this rationale will be inapplicable. We submit that there has been a change of circumstances between the submission of the earlier resolutions and the 1980 resolution; namely, the promulgation by the Commerce Department of the restrictions on exports described above and the passage by Congress of a law which prohibits the Export-Import Board from financing exports (i) to the government of South Africa or (ii) which would assist that government "to maintain or enforce apartheid". Because of the economic sanctions which have been imposed by our government on South Africa, there has been a sufficient change in the climate and context so as to prevent the votes in earlier years from being representative of how a shareholder might vote today, particularly on a resolution which dovetails with those economic sanctions. Thus, the 1980 resolution is not abusive. 5. The particular abuse about which the Commission appeared to be concerned in Release 34-12999 (November 22, 1976) was that a shareholder would contrive elements of two or more earlier proposals into a "new" proposal which would be, at least in a formal sense, not the same as the earlier proposals. In each no-action letter in which the staff has considered an allegation that an abuse of the Rule was present, the staff has noted that such a worry was in the Commissions mind when the Release was promulgated. See, American Home Products Corporation (February 13, 1979); Del Monte Corporation (June 16, 1978); Newmont Mining Corporation (March 29, 1977). Since the 1980 proposal is not comprised of any portion of any of the earlier proposals, the 1980 proposal cannot be excludable as abusive of the Rule. For the foregoing reasons, the 1980 proposal submitted by the Sisters should not be deemed to be an abuse of the shareholder proposal rule. III In conclusion, we request that the staff inform the Company that the SEC proxy rules require the Company to include the proposal in its proxy statement. It is further respectfully requested that, if the staff disagrees with this position, we be given the opportunity to appear before the commission to discuss the matter with them. We would appreciate your telephoning the undersigned with respect to any questions in connection with this matter or if the staff wishes further information. Very truly yours, Paul M. Neuhauser Attorney at Law PMN:jm cc: Carl B. Davidson Sr. Regina Murphy Society of the Holy Child Jesus Tim Smith STAFF REPLY LETTERJAN 31 1980 Carl B. Davidson, Secretary Texaco, Inc. 2000 Westchester Avenue White Plains, New York 10650 Re: Texaco, Inc. Dear Mr. Davidson: This is in regard to your letter dated December 21, 1979, which was received by the Commission on December 31, 1980, concerning a request made of Texaco, Inc. (the "Company") by the Society of the Holy Child Jesus and by the Sisters of Charity Center to include a shareholder proposal in the Companys proxy soliciting material for the 1980 annual meeting of security holders. Pursuant to Rule 14a-8(d) under the Securities Exchange Act of 1934, your letter indicated the managements intention to exclude this proposal from the Companys proxy material. Your letter also enclosed an opinion of Company counsel on certain legal questions encompassed by the managements position on the proposal, Subsequently, we received a letter dated January 28, 1980 Letter not made available from SEC Public Files from a representative of the proponents, Professor Paul Neuhauser, suggesting that the managements determination to omit the proposal was erroneous. The proposal and related supporting statement, as submitted by the proponents, read as follows: WHEREAS Texaco, through Caltex, is a major investor in South Africa with investments of over $300 million. In South Africa the system of white minority rule called apartheid dominates the lives of the majority black population. The South African Government has refused to Original Text Illegible late in response to the Original Text Illegible movement for Original Text Illegible Instead, they Original Text Illegible repression to Original Text Illegible power. The oil industry plays an extremely strategic role in South Africa today. The U. S. oil companies operate huge refineries, purchase oil on the international spot market for those refineries and sell petroleum products to that government. As a seller to the Government Caltex has no policy specifically prohibiting sales to the South African police and military. In fact under South Africas Official Secrets Act Caltex has been unable to confirm or disclose the amount sold to the policy and military. However, the strategic significance of oil is emphasized by the fact that oil seems to be a "munition of war" under South African law. This point was made in legal advice which Mobil received from its South African attorneys stating "As oil is absolutely vital to enable the army to move, the navy to sail and the air force to fly, it is likely that a South African court would hold that it falls within the definition of munitions of war." We believe there is a need for clear company policy in this area. THEREFORE the shareholders request the Directors to establish the following an corporate policy: The corporation and its subsidiaries and affiliates shall not make any bulk sales of products or provide any services directly to the South African policy or military and shall make a good faith effort to insure that no customer shall resell to these agencies." SUPPORTING STATEMENT In February 1978 the U. S. Department of Commerce issued regulations prohibiting sales by American corporations to the South African military or police of goods containing parts manufactured in the United States or developed by U. S. technology. These regulations were issued "to further U. S. foreign policy regarding the preservation of human rights." We believe the U. S. oil industry should attempt to follow the spirit as well as the letter of these regulations. In our opinion any sales to the military or policy by Caltex South Africa undermines the intent of the law. Sales of this sort offer both material and moral assistance for the ongoing violence and oppression directed against the black population. Caltex has stated that it desires to be a force for change and progress in South Africa. However, as long as Caltex policy allows sales to the repressive police and military we must question whether they are a force for progress of the apartheid status quo. As a result we have proposed the adoption of this policy to insure that bulk sales and services for the policy and military are prohibited. We urge your support of this resolution. In your letter, and the attached opinion of Company counsel, the view $$Line not legible$$ In support of the Companys argument that the proposal may be omitted, Company counsel indicates that shareholder proposals regarding South Africa have been included in the Companys proxy material for the preceding four years. The 1976 proposal called for the Company to adopt a policy against expansion of its operations in South Africa. The 1977 and 1978 proposals requested a Company policy to terminate its South African operations. The 1979 proposal requested a Company policy to reduce the volume of Company products imported into South Africa. Counsel indicates that the 1976, 1977, 1978 and 1979 proposals received, respectively 2.3%, 3.7%, 2.189%, 2.718% of the votes cast at the annual meetings. The 1980 proposal would prohibit bulk sales of products or providing service to the South African military. In counsels view, while the Church group shareholder proponents have periodically altered to some degree the language of their proposals, a close examination of the preambles and supporting statements indicates that their basic thrust remains the same. In counsels opinion, that thrust is to restrict to some degree the flow of oil to the South African economy and military, as an expression of the proponents disapproval of the system of apartheid and white minority rule. In counsels view, the inescapable conclusion must be that the current proposal is substantially similar to those submitted by church group shareholders regarding South Africa in prior years. In Securities Exchange Act Release No. 12999, the Commission instructed the staff to monitor closely the operation of subparagraph (c)(12) of Rule 14a-8 and to take appropriate action, such as issuing a no-action letter to an affected management, where it is apparent that an effort is being made to present essentially the same proposal to an issuers security holders year-after-year, even though the proposal has not attracted the support required by the rule. The Commission went on to say that the provision will be considered available in the future for the omission of a proposal which, although not substantially the same as any one proposal submitted in a prior year, is composed essentially of the elements of two or more proposals that were submitted for a vote in prior years and failed to receive the percentage of the total vote specified in the rule. The proponental representative, however, has expressed the view that the Company has failed to establish that the proponents have "abused" the $$Line not legible$$ 3) the Companys shareholders have not had an opportunity vote on the issue raised by the 1980 proposal; and 4) there has been a change in circumstances in connection with the 1980 proposals, so that the context in which this proposal arises is different than in prior years. After reviewing the submissions by the Company and the proponents representative, it is the Divisions view that there appears to be some basis for the Companys position that the instant proposal may be omitted from the Companys proxy statement. In our view, the instant proposal is composed essentially of the same elements as the 1976, 1978 and 1979 proposals which were submitted for a vote of the Companys shareholders and failed to receive the percentage of the total vote specified in Rule 14a-8(c)(12). 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. As you may be aware, this Division believes its responsibility with respect to matters arising under Rule 14a-8, as with other matters under the proxy rules, is to aid those who must comply with these requirements by offering informal advice and suggestions and to determine, initially, whether it may be appropriate in a particular matter to recommend enforcement action to the Commission. In this context, we have reviewed the materials which you have furnished to us as well as the proponents letter on the matter. While Rule 14a-8(d) does not provide for any communications from shareholders to the Commissions staff, the staff, of course, will always consider information concerning alleged violations of the statutes administered by the Commission and this may include argument as to why it is believed that activities proposed to be taken would be violative of the statute or rule involved. The receipt of such information or argument, however, should not be construed as changing the staffs informal procedures and proxy review into a formal or adversary procedure. The enforcement judgment the staff has reached does not and cannot purport to "adjudicate" the merits of the Companys posture in this matter. Only a district court can decide whether the Company is obligated to include the instant proposal in its proxy materials. Accordingly, our discretionary determination not to recommend enforcement action to the Commission does not preclude the proponents, or any shareholder of the Company, from pursuing any rights they may have against the Company in a district court, should the management omit this proposal from the Companys proxy material. Sincerely, William E. Morley Special Counsel cc: Sister Regina Murphy, S.C. Social Concerns Coordinator Sisters of Charity Center Mount St. Vincent-on-Hudson Bronx, New York 10471 Treasurer of the Corporation Society of the Holy Child Jesus Provincial House 620 Edmonds Avenue Drexel Hill, Pennsylvania 19026 Paul M. Neuhauser, Esq. 914 Highwood Street Iowa City, Iowa 52240 |
 |