The opinion of the court was delivered by: KIMBA M. WOOD
1. The Importance of Proxies
4. SEC Review of Intent to Omit Proposals
B. Standard for Court's Determination Whether a Proposal May Be Excluded as Pertaining to "Ordinary Business Operations"
1. The SEC's Interpretive Release Standard
2. Development of SEC Interpretation Through No-Action Letter Review Process
a. Deference Owed to No-Action Position
b. SEC's No-Action Letter Position on Ordinary Business Operations
C. Whether Wal-Mart May Exclude Plaintiffs' Proposal.
1. Whether the Court Should Defer to the SEC's Cracker Barrel Position
2. Whether Application of the 1976 Interpretive Release Standard Independently Permits Wal-Mart to Exclude the Proposal
On April 19, 1993, the court issued an Order enjoining defendant Wal-Mart Stores, Inc. ("Wal-Mart") from mailing out proxy material omitting plaintiffs' proposed resolution (the "Proposal") as amended by the court. The court's factual and legal findings are set forth below.
Plaintiffs, Wal-Mart shareholders, sought to enjoin the company from omitting their Proposal from proxy solicitation material the company plans to distribute in advance of Wal-Mart's June 4, 1993 annual meeting. Plaintiffs seek to submit to a shareholder vote a request for Wal-Mart's directors to prepare and distribute reports about Wal-Mart's equal employment opportunity ("EEO") and affirmative action policies, programs and data, along with a description of Wal-Mart's efforts to 1) publicize its EEO policies to suppliers, and 2) purchase goods and services from minority- and female-owned suppliers. Plaintiffs allege that Wal-Mart's omission of their proposal violates Securities and Exchange Commission ("SEC" or "Commission") Rule 14a-8.
Plaintiff Amalgamated Clothing and Textile Workers Union ("ACTWU") is a labor union representing approximately 250,000 workers internationally. (Amended Complaint at P 3). Plaintiffs National Council of Churches of Christ in the U.S.A., Unitarian Universalist Association and Literary Society of Saint Catherine of Sienna are religious organizations, which invest in socially responsible corporations as part of their religious missions. Each plaintiff believes that "issues concerning equal employment opportunity and affirmative action are important to shareholder value." (Id. at PP 4-6). Plaintiffs' stated ultimate goal is to improve Wal-Mart's EEO record and that of the discount retail store industry; to that end, they submit proposals, such as this one, to foster dialogue between plaintiffs and Wal-Mart and between plaintiffs and other shareholders. (Pls. Ex. 5, 6). Under SEC Rule 14a-8(a)(1), plaintiffs, as owners of at least $ 1,000 worth of Wal-Mart stock, are eligible to submit proposals for inclusion in Wal-Mart's proxy material. See 17 C.F.R. § 240.14a8(a)(1).
Wal-Mart operates a chain of retail stores throughout the United States. (Amended Complaint at P 7). Wal-Mart is a Delaware corporation with its principal place of business in Bentonville, Arkansas. As a Delaware corporation, Wal-Mart is subject to Delaware corporate law pertaining to the use of shareholder proxies at annual meetings and is concurrently subject to the rules adopted by the SEC, which regulate the content and solicitation of proxies.
Plaintiff ACTWU submitted a proposal to Wal-Mart in 1991 that is substantially similar to the 1993 proposal at issue here. In 1992, plaintiffs collectively submitted a revised proposal to Wal-Mart that is identical to the 1993 Proposal. Plaintiffs' resubmitted their 1992 proposal for inclusion in Wal-Mart's 1993 proxy material. Wal-Mart refused to include any of the proposals submitted by plaintiffs. The 1993 Proposal requests Wal-Mart's board of directors to prepare the following reports by September 1993:
1. A chart identifying employees according to their sex and race in each of the nine major EEOC defined job categories for 1990, 1991, 1992 listing either numbers or percentages in each category.
2. A summary description of Affirmative Action Programs to improve performance especially in job categories where women and minorities are under utilized and a description of major problems in meeting the company's goals and objectives in this area.
3. A description of steps taken to increase the number of managers who are qualified females and ethnic minorities.
4. A description of ways in which Wal-Mart publicizes our company's policies to merchandise suppliers and service providers to encourage forward action on their part as well.
5. A description of Wal-Mart's efforts to purchase goods and services from minority and female owned business enterprises.