This proposal seeks to allow a group of share- holders that together hold a majority of the Company’s outstanding shares to approve ac- tions by written consent without holding a meet- ing of the Company’s shareholders.
Shareholders rejected a similar shareholder proposal in each of the last three years. The primary objective of a written consent pro- posal is to allow shareholders to propose corpo- rate actions without having to wait for a
corporation to convene a special or annual meeting of shareholders. The Board believes that this proposal is no longer necessary be- cause the Company amended its Restated Certificate of Incorporation in 2011 to provide that special meetings of shareholders of the Company may be called at the request of hold- ers of 25% of the outstanding shares of the Company’s common stock. This provision allows such holders to propose actions for shareholder consideration between annual meetings of the Company’s shareholders.
The Board also believes that the written consent process, as compared to shareholders acting at an annual or special meeting, is not well suited to an orderly debate on the merits of a proposed shareholder action. Under the Company’s Re- stated Certificate of Incorporation and By-Laws, all of the Company’s shareholders have the opportunity to participate in annual and special shareholder meetings called to determine pro- posed actions. These shareholder meetings of- fer advantages not present in the written consent process. First, the meeting and the shareholder vote take place on a specified date that is publicly announced well in advance of the meeting and vote, giving all interested share- holders a chance to express their views and cast their votes. Second, shareholder meetings pro- vide a forum for discussion. Third, information concerning the proposed shareholder action is widely distributed in the proxy statement before the meeting, which promotes a well-informed discussion on the merits of the proposed action.
Implementation of this shareholder proposal, on the other hand, would make it possible for the holders of a bare majority of the shares out- standing to take significant corporate action without a meeting, potentially without prior notice to the other shareholders or the Company, and before all shareholders have an opportunity to participate and voice their opinions. Share- holders acting through the written consent proc- ess often solicit the fewest possible
shareholders necessary to take action, thus dis- enfranchising many shareholders (especially smaller shareholders). In contrast, the default provision of New York law, which currently gov- erns the Company, is that, unless otherwise provided in the Company’s Restated Certificate of Incorporation, shareholders can act without a meeting only by aunanimouswritten consent signed by every shareholder of record of the Company.
In addition, the written consent process lacks procedural protections that could prevent abuse of the process. Shareholders acting by written consent only have to own their shares on the day that the consent is delivered to the Com- pany. These members could borrow shares for that day or enter into other empty voting arrangements without making a longer-term economic investment in the Company. This po- tentially exposes the shareholders and the Company to the self-interested, short-term speculation of a few shareholders. There is no guarantee that shareholders using the written consent process will act in the best interests of the shareholders at large or the Company. Further, if this proposal were implemented, shareholders would have the ability to act by the written consent of a majority of the shares out- standing, however frequently and at any time. Even if a proposed shareholder action is not in the best interests of the Company and its share- holders because it reflects a narrow self-interest, the Company would have to waste valuable re- sources defending against it. In addition, multi- ple groups of shareholders would be able to solicit written consents, which could generate
duplicative or conflicting proposed shareholder actions and cause confusion for the Company and the shareholders. Thus, the written consent process would impose significant administrative and financial burdens on the Company and the shareholders. It is for this reason that the Board believes that the written consent procedure is more appropriate for a closely held corporation with few shareholders, as compared to the Company, which has over 50,000 beneficial and record shareholders. Indeed, as of January 21, 2014, 69.8% of Fortune 500 companies do not allow shareholders to act by less than unan- imous written consent.
Adoption of this proposal would not by itself give shareholders the right to take action by written consent. Under New York law, the Board would have to recommend further action by the share- holders to amend the Restated Certificate of Incorporation to allow a majority of the shares outstanding to act by written consent, and the amendments then would have to be approved by a majority of all outstanding shares entitled to vote on the amendments.
Finally, the Company’s strong corporate gover- nance practices make adoption of this proposal unnecessary. The Company’s corporate gover- nance practices provide transparency and ac- countability of the Board to the shareholders, including:
• Election of Board of Directors– All of the Company’s Directors are elected annually and by a majority vote in uncontested Director elections.
• Director Nominees– Shareholders can recommend to the Company’s Nominating and Corporate Governance Committee their own nominees for Directors, who will then be considered by the Committee under its stan- dards and procedures.
• No Shareholder Rights Plan– The Company does not have a shareholder rights plan, also known as a poison pill.
• Annual Advisory Say-on-Pay Vote– The Com- pany holds annual “say-on-pay” votes to ap- prove the compensation of the Company’s named executive officers. This allows share- holders to provide feedback on the Company’s executive compensation program each year. • Shareholder Outreach– Shareholders can communicate directly with the Board and/or individual Directors.
For the reasons set forth above and given that shareholders rejected a similar proposal at both the 2013 and 2012 meetings, as well as the 2011 meeting (when they also approved the right of 25% of the outstanding shares to request special shareholder meetings), the Board be- lieves that implementation of this proposal is not in the best interests of the Company and its shareholders.
The Board of Directors’
Recommendation
The Board of Directors recommends a vote AGAINST this shareholder proposal.Unless you specify otherwise, the Board intends the accompanying proxy to be voted against this item.
Item 5. Other Matters
The Board knows of no other matters which may properly be brought before the Annual Meeting. How- ever, if other matters should properly come before the Meeting, it is the intention of those named in the solicited proxy to vote such proxy in accordance with their best judgment.
By Order of the Board of Directors. SCOTT L. BENNETT
Senior Vice President, Associate General Counsel and Secretary
New York, New York March 19, 2014