«W. Crews Lott Baker & McKenzie LLP crews.lott Re: Pilgrim’s Pride Corporation Incoming letter dated January 15, 2016 Dear Mr. ...»
February 25, 2016
W. Crews Lott
Baker & McKenzie LLP
Re: Pilgrim’s Pride Corporation
Incoming letter dated January 15, 2016
Dear Mr. Lott:
This is in response to your letter dated January 15, 2016 concerning the
shareholder proposal submitted to Pilgrim’s by Oxfam America Inc. We also have
received a letter on the proponent’s behalf dated February 5, 2016. Copies of all of the
correspondence on which this response is based will be made available on our website at http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8.shtml. For your reference, a brief discussion of the Division’s informal procedures regarding shareholder proposals is also available at the same website address.
Sincerely, Matt S. McNair Senior Special Counsel Enclosure cc: David L. Coombs Goulston & Storrs PC email@example.com February 25, 2016 Response of the Office of Chief Counsel Division of Corporation Finance Re: Pilgrim’s Pride Corporation Incoming letter dated January 15, 2016 The proposal requests that the company publish a report describing the company’s policies, practices, performance and improvement targets related to occupational health and safety.
There appears to be some basis for your view that Pilgrim’s may exclude the proposal under rule 14a-8(i)(7), as relating to Pilgrim’s ordinary business operations. In this regard, we note that the proposal relates to workplace safety. Accordingly, we will not recommend enforcement action to the Commission if Pilgrim’s omits the proposal from its proxy materials in reliance on rule 14a-8(i)(7).
Sincerely, Christina M. Thomas Attorney-Adviser
DIVISION OF CORPORATION FINANCE
INFORMAL PROCEDURES REGARDING SHAREHOLDER PROPOSALSThe Division of Corporation Finance believes that its responsibility with respect to matters arising under Rule 14a-8 [17 CFR 240.14a-8], as with other matter under the proxy rules, is to aid those who must comply with the rule by offering informal advice and suggestions and to determine, initially, whether or not it may be appropriate in a particular matter to recommend enforcement action to the Commission. In connection with a shareholder proposal under Rule 14a-8, the Division’s staff considers the information furnished to it by the Company in support of its intention to exclude the proposals from the Company’s proxy materials, as well as any information furnished by the proponent or the proponent’s representative.
Although Rule 14a-8(k) does not require any communications from shareholders to the Commission’s staff, the staff will always consider information concerning alleged violations of the statutes administered by the Commission, including argument as to whether or not activities proposed to be taken would be violative of the statute or rule involved. The receipt by the staff of such information, however, should not be construed as changing the staff’s informal procedures and proxy review into a formal or adversary procedure.
February 5, 2016 VIA EMAIL (firstname.lastname@example.org) Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Re: Pilgrim’s Pride Corporation Shareholder Proposal of Oxfam America, Inc.
for Inclusion in the 2016 Proxy Statement of Pilgrim’s Pride Corporation
Ladies & Gentlemen:
We are counsel for Oxfam America, Inc. (the “Proponent”) in connection with the Proponent’s shareholder proposal (the “Proposal”) submitted to Pilgrim’s Pride Corporation (the “Company”), pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for inclusion in the Company’s proxy statement for its 2016 annual meeting of shareholders. This letter is in response to the letter of W. Crews Lott of Baker & McKenzie LLP, on behalf of the Company, dated January 15, 2016 (the “Company Request Letter”), delivered to your office, in which the Company requests confirmation that the staff (the “Staff”) of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the “Commission”) will not recommend enforcement action if the Company omits the Proposal in reliance on Rule 14a-8(i)(7). The full text of the Proposal is enclosed with the Company Request Letter.
In accordance with Staff Legal Bulletin No. 14D (Nov. 7, 2008) (“SLB No. 14D”), this letter is being delivered by e-mail to email@example.com. Pursuant to Rule 14a-8(k) and SLB No. 14D, a copy of this letter is being furnished concurrently to the Company by e-mail in accordance with the delivery instructions provided in the Company Request Letter.
Pursuant to the guidance provided in Staff Legal Bulletin No. 14F (Oct. 18, 2011), we ask that the Staff transmit its response and that the Company transmit any correspondence intended for the Proponent in connection with the Company Request Letter to the undersigned by email at firstname.lastname@example.org.
The Company contends that the Proposal relates to the Company’s ordinary business operations and may be excluded in reliance on Rule 14a-8(i)(7). In particular, the Company attempts to Goulston & Storrs PC · Boston · DC · New York · Beijing 400 Atlantic Avenue, Boston, Massachusetts 02110-3333 ·(617) 482-1776 Tel ·(617) 574-4112 Fax · www.goulstonstorrs.com gsdocs.8691780.1 Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission February 5, 2016 Page 2 characterize the Proposal as both (i) not being focused on a significant policy issue and (ii) seeking to micro-manage the Company’s ordinary business operations. For the reasons discussed below, we disagree with the Company’s analysis and its characterization of the Proposal, and we respectfully request that the Staff reject the Company’s request for a no-action letter concerning the Proposal.
The Commission has stated that proposals focusing on a significant policy issue with sufficient nexus to the registrant are not excludable under the Rule 14a-8(i)(7) ordinary business exception “because the proposals would transcend the day-to-day business matters and raise policy issues so significant that it would be appropriate for a shareholder vote.” Staff Legal Bulletin No. 14H (October 22, 2015) (“SLB No. 14H”) (citing Exchange Act Release No. 40018 (May 21, 1998) (the “1998 Release”)). In such cases, a proposal will not be excludable “as long as a sufficient nexus exists between the nature of the proposal and the company.” Staff Legal Bulletin No. 14E (October 27, 2009) (“SLB No. 14E”). SLB No. 14H confirmed the analytical framework for considering requests to exclude shareholder proposals under the ordinary business exception as originally announced in SLB No. 14E.
SLB No. 14E signaled an expansion in the Staff’s interpretation of significant social policy issues, in which the Staff remarked that its previously applied analytical framework “may have resulted in the unwarranted exclusion of proposals that relate to the evaluation of risk but that focus on significant policy issues” and advised that “as most corporate decisions involve some evaluation of risk, the evaluation of risk should not be viewed as an end in itself, but rather, as a means to an end.” While not dispositive of the issues presented here, we find it instructive that the Company Request Letter does not mention either SLB No. 14H or SLB No. 14E, and the majority of the no-action letters cited for support in the Company Request Letter pre-date the publication of SLB No. 14E.
The Company does not dispute that worker occupational health and safety is a significant policy issue, nor does the Company dispute that the Proposal raises this issue. Rather, the Company seeks to characterize the Proposal as not being “socially driven” and as being focused instead on “financial risk” and “potential costs to the Company of occupational health and safety risks existing in its operations.” See Company Request Letter, pp. 5-6. The Company appears to reach this conclusion through the exercise of selective quotation from the Proposal, conveniently omitting from its analysis the majority of the text of the Proposal and ignoring the Proposal’s import and primary focus on worker occupational health and safety. For example, the Company neglects to recite the Proposal’s stated goal to “strengthen [the Company’s] ability to improve its gsdocs.8691780.1 Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission February 5, 2016 Page 3 employees’ working conditions.” The Company also seems to ignore the Proposal’s lead
paragraph, which we reproduce below (emphasis added):
“Despite technology advances, the American poultry industry relies on roughly 250,000 workers to process 8.5 billion chickens annually. Yet, research demonstrates that poultry workers suffer elevated rates of injury and illness and face obstacles to reporting workplace safety violations.
The Department of Labor reports that poultry workers suffer injuries and illnesses rates at five times, and carpal tunnel syndrome at seven times, the national average. Occupational health and safety (OHS), and the need for sustainable improvements, are significant social policy issues.” The Proposal highlights the Company’s poor track record in the area of worker occupational health and safety, noting that the Company was “recently named to OHSA’s [sic] Severe Violator Enforcement Program for repeated or willful OHS violations, and has been fined more than $300,000 in the last four years for OHS violations.” The Proposal goes on to suggest that, due to the Company’s significant U.S. market share, the Company has the potential to “lead the industry” in making improvements in worker occupational health and safety. Through these and other statements, the Proposal establishes a clear nexus between the Proposal, with its significant policy issue focus, and the Company.
The Company contends that, because the Proposal also discusses the derivative consequences of failing to address and to make sustainable improvements in worker occupational health and safety (including “worker absenteeism, turnover and performance” and “substantial regulatory, legal, reputational and financial risks”), the Proposal’s significant policy issue focus is negated and the Proposal is to be viewed as involving an evaluation of risk that pertains to the Company’s legal compliance programs and other ordinary business operations. To the contrary, the Staff has indicated that a shareholder proposal focused on a significant policy issue need not refrain from also discussing related financial risks and other consequences. In American Eagle Outfitters (Mar. 20, 2001), the shareholder proposal at issue argued, among other things, that the registrant should adopt a code of conduct embodying the International Labor Organization’s core principles because human rights violations “can lead to negative publicity, public protests and a loss of consumer confidence, which can have a negative impact on shareholder value.” Notwithstanding the proposal’s inclusion of secondary consequences, the Staff determined that the proposal was focused on a significant policy issue and not excludable.
The Company contends that the Proposal seeks to “micro-manage” the Company to such a degree as to conclude that it relates to the ordinary business of the Company. In support of its gsdocs.8691780.1 Office of Chief Counsel Division of Corporation Finance U.S. Securities and Exchange Commission February 5, 2016 Page 4 argument, the Company points to the language of the Proposal, which requests a report “describing the company’s present policies, practices, performance, and improvement targets related to OHS” and including “employee injury causes and rates, incidents of non-compliance with safety and labor laws, remedial actions taken and measures contributing to long-term mitigation and improvements.” The Company contends that the list of topics to be included in the report is so detailed as to leave “no room for the Company’s board of directors to exercise its discretion” and cites Ford Motor Co. (Mar. 2, 2004) and General Electric Co. (Jan. 25, 2012, recon. Denied Apr. 16, 2012) for support. The proposals in Ford Motor Co. and General Electric Co. can be easily distinguished from the present Proposal based on the highly specific elements of the former proposals. The present Proposal’s enumeration of topic areas leaves ample room for the Company’s board of directors to use its judgment and discretion to determine the precise scope of disclosure to be included in those topic areas, as well as to include other topic areas relevant to the policy issue. In addition, the Proposal makes clear, as the Company neglects to include in its analysis, that the shareholders do not seek to dictate details over the construction of the report and the conduct of the related review, stating that the report should be “released at reasonable cost, omitting proprietary information and other information protected by privacy and other laws, and using a phased, tiered or other reasonable approach.” The Proposal does not seek to impose any specific conditions on how the Company chooses to operate its business, manage its workforce or conduct its legal compliance programs. In this respect, it can be distinguished from the more burdensome or probing shareholder proposals that were the subject of a number of the no-action letters cited in the Company Request Letter, including JPMorgan Chase & Co. (Mar. 13, 2014), Raytheon Co. (Mar. 25, 2013), Mattel Inc.
(Feb. 10, 2012), and PetSmart, Inc. (Mar. 24, 2011).
In accordance with Rule 14a-8(g) and Staff Legal Bulletin No. 14 (July 13, 2001), the Company has the burden of demonstrating that it is entitled to exclude the Proposal. The Company has not met its burden.