Stephanie B. Mudick
153 East 53 Street
New York, NY 10043
February 22, 2000
Securities and Exchange Commission
Office of the Chief Counsel
Division of Corporate Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Stockholder Proposal to Citigroup Inc. ("Citigroup") of Mark Latham, Ph.D.
Dear Sir or Madam:
Mr. Latham submitted a proposal relating to the hiring of an advisory firm for stockholders to Citigroup on November 2, 1999 for inclusion in its proxy statement. Citigroup filed a no action request with the Securities and Exchange Commission on December 22, 1999. Mr. Latham filed a response on January 10, 2000 and Citigroup responded on January 18, 2000. Mr. Latham filed a response on January 31, 2000. This is in response to Mr. Latham’s January 31, 2000 letter.
In addition to the items raised in Citigroup’s submissions dated December 22, 1999 and January 18, 2000, Citigroup submits that Mr. Latham’s proposal may be omitted from Citigroup’s proxy materials because it relates to election for membership on Citigroup’s board of directors in violation of Rule 14a-8(i)(8). Rule 14a-8(i)(8) allows the exclusion of proposal if it "relates to an election for membership on the company’s board of directors." The SEC has stated that the "principal purpose of [paragraph (c)(8) (renumbered (i)(8)] is to make clear, with respect to corporate elections, that Rule 14a-8 is not the proper means for conducting campaigns or effecting reforms in elections of that nature, since the proxy rules, including Rule 14a-11, are applicable." Release No. 34-12598 (July7, 1976).
Mr. Latham’s proposal would allow a proxy advisory firm to render advice to stockholders on the election of directors. Undoubtedly, from time to time the advice will include a recommendation to vote against one or more of management’s candidates. Solicitations to vote against management candidates fall within the parameters of Rule 14a-11 which contains certain procedural and disclosure obligations designed to protect stockholders in election contests and are not proper subject matter for stockholder proposals. In both his original proposal and his January 31, 2000 letter, Mr. Latham anticipates that once stockholders have the advice of a proxy advisor, they might no longer follow management’s recommendations. Mr. Latham’s letter of January 31, 2000 states as follows: "While it [information proxy statements typically provide about director candidates] may be accurate, it is not sufficient for discerning a candidate’s effectiveness and degree of loyalty to shareowner interests. That is why shareowner voting on directors remains a mere formality in all but a few cases." Mr. Latham concludes that advisory firms will be able to give advice on proxy matters that "will have the independence that management’s advice lacks." The supporting statement to his original proposal reads as follows: "This proposal can be expected to improve the return on Citigroup stock by:...-effectively enfranchising individual investors for the first time, ensuring that a majority of shares can be voted independently of management’s recommendations."
The Staff has stated on more than one occasion that the presence of Rule 14a-11 in the proxy rules indicates that " the shareholder proposal process is not the proper means for conducting election contests." See Computer Network Corporation (June 16, 1983) and Bank of Montana Systems (April 8, 1982). The Staff has consistently found that proposal which attempt to circumvent the requirements of Rule 14a-11 by using the shreholder proposal process may be omitted. See BellSouth Corp. ( February 4,1998) (by-law amendment to include shareholder nominees in proxy statement and proxy card even if management recommends a vote against nominee excludable because proposal, rather than establishing procedures for nomination or qualification generally, would establish a procedure that may result in contested elections of directors, which is a matter more appropriately addressed under Rule 14a-11); Unocal Corporation (February 6, 1990) (proposal requiring the registrant to include information about shareholder nominee in its proxy material excludable because proposal, rather than establishing procedures for nomination or qualification generally, would establish a procedure that may result in contested elections of directors, which is a matter more appropriately addressed under Rule 14a-11); and Amoco Corporation (February 14, 1990) (proposal to allow shareholder nominations of directors through a "common ballot" excludable because proposal, rather than establishing procedures for nomination or qualification generally, would establish a procedure that may result in contested elections of directors, which is a matter more appropriately addressed under Rule 14a-11).
Accordingly, Citigroup believes that the proposal may be omitted under Rule 14a-8(i)(8).
If you have any comments or questions concerning this matter, please contact me at 212 793 7855 or Shelley J. Dropkin at 212 793 7396.
Very truly yours,
[Stephanie B. Mudick]
cc: Mark Latham, Ph.D.