THE BELOW IS AN OCR TEXT VERSION OF THE LETTER RECEIVED FROM PERKINS-COIE. I'VE INCLUDED SOME LINKS FOR MY SUPPORTING DATA IN RESPONSE TO THEIR COMMENTS AND WILL UPDATE THEM AS I PUT TOGETHER A RESPONSE. .
KEEP IN MIND THAT MY PROPOSAL WAS SUBMITTED ON 14 NOVEMBER, BEFORE BOEING RESPONDED TO SOME OF MY REQUESTS STARTING ON JUNE 28,2001.
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U.S. Securities and Exchange Commission [ OCR COPY ]
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 December18,2001
Re: Shareholder Proposal Submitted by Don Shuper for Inclusion in The Boeing Company 2002 Proxy Statement
Dear Sir or Madam:
We are counsel to The Boeing Company, a Delaware corporation ("Boeing" or the "Company"). On November 14, 2001, Boeing received a proposed shareholder resolution and supporting statement (together the "Proposal") from Don Shuper ("Proponent") for inclusion in the proxy statement (the "2002 Proxy Statement") to be distributed to the Company's shareholders in connection with its 2002 Annual Meeting.
We hereby notify the Securities and Exchange Commission (the "Commission") and the Proponent of the Company's intention to exclude the Proposal from the 2002 Proxy Statement for the reasons set forth below. We request that the staff of the Division of Corporation Finance (the "Staff') confirm that it will not recommend any enforcement action to the Commission if Boeing excludes the Proposal from its proxy materials.
Further, in accordance with Commission Rule ("Rule")
14a-8(j) under the Securities Exchange Act of 1934, as amended,
on behalf of Boeing the undersigned hereby files six copies of
this letter and the Proposal, which (together with its
supporting statement) are attached to this letter as Exhibit A.
One copy of this letter, with copies of all enclosures, is being
simultaneously sent to the Proponent.
The Proposal
The Proposal relates to the Company's pension plans and states,
in relevant part:
Resolved: Shareholders request the Board adopt the following policy:
(1) All employees vested at the time of conversion be given a choice between their heritage plans or the Pension Value cash-balance plan at time of termination or retirement.
(2) The cash balance plan to provide a monthly annuity at least equal to that expected under the old pension plan, or an actuarially equivalent lump sum.
Summary of Basis for Exclusion
We have advised Boeing that it properly may exclude portions
of the Proposal from its 2002 Proxy Statement and form of proxy
pursuant to Rule 14a-8(i)(3) and Rule 14a-9 because they contain
statements and assertions of fact that are materially false or
misleading. The reasons for our conclusions in this regard are
more particularly described below.
Explanation of Basis for Exclusion
Portions of the Proposal may be omitted pursuant to Rule 14a-8(i)(3) and Rule 14a-9 because they contain statements and assertions of fact that are materially false or misleading.
Rule 14a-8(i)(3) permits a company to exclude a shareholder
proposal from its proxy statement if the 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 m proxy soliciting materials. Rule 14a-9, note (b),
specifically defines as misleading "[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." See also SI Handling Systems, Inc. (May
5, 2000); Philip Morris Companies Inc. (Feb. 7, 1991); Detroit
Edison Co. (Mar. 4, 1983). As described in detail below, the Proposal
contains several allegations that impugn the Company's integrity
by falsely accusing the Company of such conduct, without factual
foundation.
Proponent states in paragraph 2 that "Boeing improperly claimed that it could not comply with eligibility, vesting, benefit and funding requirements by giving employees a choice at retirement or termination." Proponent points to no documentation, analysis, or proof that demonstrates the "impropriety" of the Company's claim. The Company's position in this regard, stated at length in its no- action request letter to the Staff in The Boeing Co. (Feb. 16, 2001), was that implementing the Proposal would expose the Company to risks of noncompliance with the plan's governing instruments and ERISA. Proponent has done nothing to refute or discredit this position.
Proponent alleges in paragraph 3 that "Boeing ignored and declined multiple requests for the summary voting record of State Street which held 69 million employee shares as trustee." Proponent alleged that he was entitled to the information under ERISA Section 104, which entitles ERISA plan participants to certain information. Proponent's allegation is false and misleading in several respects. It is false because the Company has corresponded with Proponent concerning this issue for several months now. It is misleading because it implies that Proponent is entitled to the information requested, when he in fact is not a participant in either of the ERISA plans in question. Moreover, it is misleading because Proponent ignored the Company's response to him that the Company's Confidential Voting Policy prohibits disclosure of the voting information. It also ignores the loyalty and exclusive benefits rules under ERISA.
Proponent states in paragraph 4:
"We believe Boeing has periodically
understated the vested benefits due employees during the last
decade, which could make the new plan appear better as the rate
at which employees earn future benefits can be more or less than
the rate under the old plan(s)." Even
though couched as Proponent's "belief," the statement
should be excluded because it falsely accuses the Company of improper
conduct. Proponent impugns the Company's integrity by falsely
implying, without factual foundation, that the Company intentionally
understated vested benefits under the old plan for the purpose
of making the new plan look better.
Proponent's statement also implies that the Company knew for many years prior to actually adopting its cash-balance plan that it would in fact eventually adopt such a plan, which is not the case. Proponent further implies that in an effort to make the cash-balance plan "appear better," the Company began understating the vested benefits of the old pension plans many years prior to adopting the cash-balance plan. Proponent's implication would only make sense if the Company knew, long before it actually did so, that one day it would adopt a cash-balance plan. Such knowledge and intent cannot be ascribed to the Company. In addition, these implications are at odds with the Company's rights under ERISA to amend or terminate its pension plans in its discretion.
Proponent further alleges in paragraph 4 that "Boeing will not provide a copy of their analysis described last year." Again, Proponent alleged that he was entitled the information under ERISA Section 104, which entitles ERISA plan participants to certain information. The Company has advised the Proponent it will not do so because (a) it is not the type of ERISA plan information that must be disclosed; and (b) the analysis does not exist in the form of any individual report or similar document that could be provided to Proponent. The Company's analysis consisted of considering a variety of information and opinions in analyzing the comparative benefits under the pension plans, including, but not limited to, the benefit formulas in the respective plan documents and the benefit outcomes for several hypothetical employees. As has been explained to Proponent, all of these factors made up the "analysis" that led to the Company's conclusion, stated in its 2001 Proxy Statement that "different employees will be impacted differently" and "overall, the PVP provides a level of benefits that is very close to, and in some cases better than the benefits provided by the prior plans."
Proponent contends in paragraph 5 that the Company "uses excess plan investment gains.., to pump-up earnings with non-spendable dollars." This allegation is properly excludable because it impugns the Company's integrity by falsely and misleadingly implying that the Company is using improper accounting procedures to falsify its earnings. In fact, the Company has advised us that its accounting for pension funds is in full material compliance with the accounting treatment mandated by generally accepted accounting principles.
Proponent's discussion of Milsap v. McDonnell Douglas Corp., 162 F. Supp.2d 1262 (N.D. Ok. 2001) is properly excludable because it is irrelevant to the issue of conversion to cash value pension plans and is clearly included to imply that the Company has engaged allegedly improper or illegal conduct. The case does not even concern Company activities, since McDonnell Douglas was not a part of the Company until 1997. Proponent's implication is clear, however: McDonnell Douglas' plant closing in 1994, in an alleged attempt to avoid paying pension and retiree benefits, somehow means the Company's conversion to its Pension Value plan is related and pernicious. This implication is false, misleading and inflammatory. As explained above, such statements that directly or indirectly impugn the Company's integrity or make charges of illegal or immoral conduct are properly excludable. Accordingly, Proponent's reference to and discussion of the case should be deleted.
In addition to the foregoing allegations and statements that impugn the Company's integrity by falsely accusing the Company of improper or illegal conduct, the Proposal also contains numerous statements also excludable under Rule 14a-9 because they inappropriately cast Proponent's opinions as statements of fact, or otherwise fail to appropriately document assertions of fact. See Micron Technology, Inc. (Sept. 10, 2001); DT lndust. (Aug. 10, 2001); Sysco Corp. (Apr. 10, 2001); AT&T Corp. (Feb. 28, 2001). These statements are as follows:
[paragraph 3] ". . despite being incorrectly described on the proxy card as a retiree choice." The 2001 proxy card referred to the proposal as "Give retirees choice of pension plan." This language was completely congruent with Proponent's resolution which requested that non-represented employees "be given a choice between" the Heritage plans and the Pension Value plan.
[paragraph 3] "The California
Public Employees Retirement System supported last year's proposal]
and stated, 'CalPERS advocates non discrimination in retirement.
"' Proponent should specifically identify or provide factual
support in the form of a citation to a specific source for each
of the facts noted in the foregoing statement. Otherwise, the
statement should be deleted altogether. This request is consistent
with the SEC's response to similar requests in several recent
no-action letters. See APW, Ltd (Oct. 17, 2001); General Motors
Corp. (Mar. 29, 2001); Southwest Airlines Co. (Mar. 20, 2001)
[paragraph 7] "encourage the
BOD to keep their previous pension promises by giving an informed
choice to loyal employees." This statement is properly excludable
because it misleadingly suggests that the Company made pension
related promises that it has somehow not kept. The statement is
also misleading because it its vague and indefinite. Proponent
does not specify exactly which promises were allegedly broken.
In addition, Proponent's use of the term "informed"
choice is properly excludable because the Staff specifically asked
him to delete the same term from his 2001 proposal. See The Boeing
Co. (Feb. 16, 2001).
Finally, Proponent has included a reference to his personal website address. The Staff has recently indicated that website addresses are generally not excludable from shareholder proposals per se, but excludable if a target company can demonstrate that "information on the website may be materially false or misleading, irrelevant to the subject matter of the proposal or otherwise in contravention of the proxy rules." Division of Corporation Finance: Staff Legal Bulletin No. 14 (Jul. 13, 2001). Proponent's inclusion of the website address is an attempt to direct shareholders to information the Proponent could not otherwise include in the Proposal due to the 500 word limit imposed on shareholder proposals pursuant to Rule 14a- 8(d). Moreover, because websites are constantly changing, neither the Company, the Staff, nor any other person can be assured of the truth or accuracy of the information that may be accessed at the sites. This is especially true in the case of a proponent's personally constructed website. See, for example, Pinnacle West Capital Corp. (Mar. 11, 1998) (permitting exclusion of personal website).
The reference to Proponent's personal website is properly excludable for an alternative reason as well-its inclusion in the Company's proxy statement would inappropriately identify Proponent. In Staff Legal Bulletin No. 14 (Jul. 13, 2001) the Staff reiterated its position that "a company is not required to disclose the identity of a shareholder proponent in its proxy statement. Rather, a company can indicate that it will provide the information to shareholders promptly upon receiving an oral or written request."
For the foregoing reasons, we believe that the Proposal may be omitted from the 2002 Proxy Statement and respectfully request that the Staff confirm that it will not recommend any enforcement action if the Proposal or portions thereof are excluded.
Boeing anticipates that the 2002 Proxy Statement will be finalized for printing on or about March 5, 2002. Accordingly, your prompt review of this matter would be greatly appreciated. Should you have any questions regarding any aspect of this matter or require any additional information, please call the undersigned at xxxxxxx
Please acknowledge receipt of this letter and its enclosures by stamping the enclosed copy of this letter and returning it to me in the enclosed envelope.
Very truly yours
J Sue Morgan
JSM:rh
Enclosure
cc: Don Shuper
James C. Johnson, The Boeing Company
Resolved: Shareholders request the Board of Directors adopt the following policy:
(1) All employees vested at time of conversion be given a choice between their heritage plans or the Pension Value cash-balance plan at time of termination or retirement.
(2) The cash balance plan to provide a monthly annuity at least equal to that expected under the old pension plan, or an actuarially equivalent lump sum.
Supporting Statements
Boeing implemented the Pension Value Plan [PVP] in 1999 for over
100,000 non-represented employees Although the PVP is primarily
one of benefit formula change, Boeing improperly claimed it could
not comply with eligibility, vesting, benefit and funding requirements
by giving employees a choice at retirement or termination. Over
50 Congresspersons signed a letter to the IRS suggesting several
changes in regulations including " . . . a safe harbor should
be established allowing cash balance plans to meet existing legal
requirements only if all employees are allowed to choose which
pension plan works best for them . . ." [Representative B.
Sanders, February 24,2000]
Last year, this proposal received 52 million votes despite being incorrectly described on the proxy card as a retiree choice. The California Public Employees Retirement System supported it and stated 'CalPERS advocates non-discrimination in retirement " We believe a majority of employee shareholders supported our proposal. Boeing ignored and declined multiple requests for the summary voting record of State Street which held 69 million employee shares as a trustee.
We believe Boeing has periodically understated the vested benefits
due employees during the last decade, which could make the new
plan appear better as the rate at which employees earn future
benefits can be more or less than the rate under the old plan(s).
Boeing will not provide a copy of their analysis described last
year.
Boeing does not use excess plan investment gains to increase the
benefits otherwise due any participant, but uses them to reduce
or eliminate future Company contributions, and to pump up earnings
with non-spendable dollars. Last year, the amount used was 428
Million, about 20 percent of net earnings.
In 1994, over 1,000 McDonnell Douglas Corp. workers alleged that
the company closed their plant in Tulsa to avoid paying pension
and retiree medical benefits. On September 5 2001, Judge Holmes
found for the retirees, while noting the company had "engaged
in a course of obstruction, inconsistent representations and outright
falsehoods." From paragraph 232 "The record further
reflects a corporate culture of mendacity . . . and the disregard
for the truth evidenced by the testimony of [ the then ] CEO.
[James R Milsap, et.al v McDonnell Douglas Corp. Case No 94-C-633-H
, and the WSJ September 6 2001]
Communications and background on this and my previous proposal
are available at
http://home.att.net/~dprops/welcome.html
Please encourage the BOD to keep their previous pension promises
by giving an informed choice to loyal employees who made the company
famous and profitable.
THANK YOU
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