Daryl V. Miller/Comment
          SHAREHOLDER ACTIVISM UNDER THE PROPOSED CHANGES TO RULE 14a-
                    8 OF THE SECURITIES EXCHANGE ACT OF 1934
          I.   Introduction
               In recent years, numerous and diverse individuals and
          organizations have "seized on the shareholder proposal rule,
          Rule 14a-8 of the federal securities laws, as their weapon
          of choice" to advance concerns and to push for changes in
          company policies relating to everything from equal
          employment issues to nuclear power operations and nearly
          every conceivable topic in between.<1> Rule 14a-8's
          popularity results from the rule's requirement that
          shareholder proposals, which comply with the numerous
          qualifications and requirements set out by the rule, be
          included on the company's proxy materials.<2>  In short,
          Rule 14a-8 provides shareholders with a company subsidized
          means of reaching other shareholders through the company's
          "proxy mechanism."<3>
               On September 18, 1997 The Securities and Exchange
          Commission voted unanimously to propose a "revamped"
          shareholder proposal rule which could potentially influence
          shareholder activism for years to come.<4>  Along with other
          less dramatic modifications, the proposed changes would make
          it more difficult to re-submit proposals that received an
          insignificant percentage of votes on earlier submissions,
          and would introduce an innovative "override" mechanism
          permitting 3% of the share ownership to override a company's
          decision to exclude a proposal from its proxy materials.<5>
          Additionally, of particular significance, under the proposed
          rule the SEC's controversial "Cracker Barrel" decision would
          effectively be reversed.<6>
               Since the proposed changes were introduced last
          September, they have generated a great deal of debate
          between proponents for the changes and those opposed to
          their adoption.  For example, in expressing his support of
          the changes, SEC Chairman Arthur Levitt said he feels the
          package of changes would allow for effective shareholder
          communications and would "eliminate the abusive gamesmanship
          that has obscured the true purpose" of Rule 14a-8.<7>
          Conversely, in sharp contrast to Chairman Levitt's view most
          of the comment letters received by the SEC have been highly
          critical of the proposals.<8>  Some individuals in fact have
          gone so far as to refer to the proposed new version of 14a-8
          as the "stockholder gag rule."<9>  Because as former SEC
          Commissioner Steven Wallman stated, while concurring on the
          issuance of the proposals with Chairman Levitt, "the
          practical impact of what can be accomplished through
          shareholders appropriately engaged in their corporations'
          affairs is enormous," it is important that the SEC correctly
          balance the often divergent interests of all concerned
          parties when reforming Rule 14a-8.<10>
               This Comment will first examine the SEC's current
          application of Rule 14a-8 and analyze how that application
          will differ upon the adoption of the proposed changes.
          Secondly, in order to more fully understand the merits and
          shortcomings of the proposed changes, the changes will be
          retroactively applied to a selected subset of shareholder
          proposals from the 1996 proxy season.  By examining how the
          1996 results would have differed from the actual results had
          the proposed changes been in effect, the true impact of the
          proposed changes will become clear.  Finally, after
          examining the true ramifications of the proposed changes, a
          position in favor of the proposals' adoption will be
          asserted.
          II.  The SEC's Current Application Of Rule 14a-8
          A.       General Provisions
               Each year between three hundred and four hundred
          companies receive a total of approximately nine hundred
          proposals which shareholders wish to see included on the
          companies' proxy materials.<11>  Rule 14a-8 states that "if
          any security holder of a registrant notifies the registrant
          of his intention to present a proposal for action at a
          forthcoming meeting of the registrant's security holders,
          the registrant shall set forth the proposal in its proxy
          statement."<12>  Although Rule 14a-8 through this provision
          provides shareholders with a relatively inexpensive way to
          communicate with other shareholders, the rule does not
          "create an open forum for shareholder communications."<13>
          In fact, a company can exclude a proposal from its proxy
          materials if the proposal or its proponent fails to meet any
          of the eligibility or content requirements set out by the
          rule.<14>
               If a company asserts that a proposal received from a
          shareholder proponent may be properly omitted because of an
          eligibility or content requirement flaw, the company must
          submit the reason(s) for its decision to the Commission for
          review.<15>  During this process, management bears the
          burden of proving to the SEC that its decision is
          correct.<16>  Upon reviewing the company's reasoning for its
          decision to omit the proposal under 14a-8, the SEC staff
          will issue a "no action" letter if the staff agrees with
          management's reasons for exclusion.  A "no action" letter,
          while not legally binding, will in all likelihood,
          effectively justify a company's decision to exclude a
          proposal from its proxy materials.<17>
               B.  Eligibility Requirements
               For a proposal to be included on a company's proxy
          materials, the proponent of the proposal must first meet
          several eligibility requirements.  Under the current
          application of the rule, any shareholder who has owned (and
          continues to own) either 1% or $1,000 in market value of the
          company's securities for at least one year is entitled to
          submit a proposal to the company's management.<18>  When a
          proponent submits a proposal to the registrant, the rule
          requires that the proponent provide the company a written
          statement containing his name, address, and the number of
          the registrant's voting securities that he holds.<19>  In
          addition to these ownership requirements, Rule 14a-8 also
          requires that in order to be included on the company's proxy
          materials the proposal be submitted in a timely fashion.<20>
          Although what is considered to be "timely" may vary from
          case to case it is generally 120 days in advance of the date
          that the company released its proxy statement to
          shareholders in the previous year.<21>
               C.  Content Requirements
               Despite meeting the basic eligibility requirements of
          Rule 14a-8, a proposal may still be omitted by a company if
          the proposal falls within any one of 13 circumstances set
          out by the rule.<22>  Each of these 13 circumstances, their
          application by companies, and their interpretation by the
          SEC are individually important.  It is mainly because of
          problems relating to the application and interpretation of
          these provisions that changes to 14a-8 were initially
          proposed.  Specifically, under the SEC's current application
          of 14a-8, management may omit a shareholder proposal from
          the company's proxy materials under any of the following
          circumstances:
               1.  Improper under state law:  if the proposal is,
          under the laws of the company's domicile, not a proper
          subject for action by security holders, management may
          exclude the proposal.<23>  Under most circumstances if a
          proposal is phrased in a mandatory form it is almost always
          excludable; however proposals which are advisory in nature
          are generally not excludable.<24>  Because of this
          requirement shareholder proposals will frequently request
          management to conduct a study or report on a particular
          matter instead of attempting to compel any specific action
          on management's behalf.<25>
               2.  Violation of state, federal or foreign law:  if
          when implemented the proposal would require the registrant
          to violate any state, federal or foreign law to which the
          registrant is subject, management may properly omit the
          proposal.<26>
               3.  Contrary to SEC's proxy rules:  if the proposal
          violates any of the Commission's other proxy regulations
          management may exclude the proposal.<27>  This provision
          encompasses the general anti-fraud prohibitions of Rule 14a-
          9 which prohibit false or misleading statements in proxy
          materials.<28>  In fact, the most common reason cited by
          management to justify exclusion under the current
          application of 14a-8 is that the proposal or its supporting
          statement is false and misleading and thus in violation of
          Rule 14a-9.<29>
               4.  Redress of personal claim or grievance:  if the
          proposal relates to the redress of a personal claim or
          grievance against the registrant, or if the proposal is
          designed to benefit a proponent's personal interest and not
          the other security holders at large, management may omit the
          proposal from the proxy materials.<30>  This exclusion is
          often applied to the "frequent phenomenon of proposals by
          disgruntled employees" who are seeking other avenues to
          pursue their disputes with management.<31>  However, what
          exactly should be considered a "personal claim" is often
          difficult to tell solely from examining a proposal and its
          accompanying supporting material.  This difficulty in
          classifying proposals has fueled a considerable amount of
          debate as to what should and what should not be considered a
          "personal claim."  As the rule is currently applied, it
          appears that the registrant may present for SEC examination
          extrinsic evidence as to the true intent of the proponent
          when deciding whether or not to exclude a proposal under
          this provision.<32>
               5.  Not significantly related to company's business:
          management may omit a proposal if it relates to operations
          which account for less than 5% of the company's total
          assets, less than 5% of the company's net earnings or less
          than 5% of its gross sales; provided the proposal is not
          otherwise significantly related to the company's
          business.<33>  During the 1970's and 80's, matters relating
          to ethical or social issues were often held by the SEC to be
          "otherwise significantly related" despite not being
          significant from an economic perspective.<34>  However, the
          current application of the provision seems to have gradually
          returned to a predominantly economic significance test.<35>
               6.  Matters beyond company power:  management may
          properly omit a proposal that deals with a matter which is
          beyond the company's power to effectuate.<36>
               7.  Ordinary business operations:  a proposal which
          relates to the ordinary business operations of the company
          may be properly excluded because such concerns should be
          under the exclusive control of management.<37>  Because of
          the difficulty in determining what exactly constitutes
          "ordinary business," this provision has been the center of
          a considerable amount of debate and controversy.  It has
          been arguably the application of this provision in
          particular, and the dissatisfaction which has resulted
          therefrom, that has led to the current effort to reform 14a-
          8.<38>
               Prior to 1992, the SEC staff considered nearly all
          "politically sensitive" proposals to be policy matters
          rather than ordinary business concerns, and thus nearly
          always appropriate for inclusion on proxy materials.<39>  In
          1992 however, in an effort to balance its approach to this
          provision, the SEC issued its most famous and perhaps most
          controversial no action letter.  That letter, issued to
          Cracker Barrel Old Country Store, Inc. on October 13, 1992
          effectively reversed the SEC's prior application of the
          "ordinary business" exclusion by announcing that "the fact
          that a shareholder proposal concerning a company's
          employment policies and practices for the general workforce
          is tied to a social issue will no longer be viewed as
          removing the proposal from the realm of ordinary business
          operations of the registrant."<40>
               The controversy in the Cracker Barrel case centered
          around a decision by Cracker Barrel's management in 1991 to
          issue a press release in which the restaurant chain
          announced that "it is inconsistent with our concept and
          values, . . . to continue to employ individuals . . . whose
          sexual preferences fail to demonstrate normal heterosexual
          values."<41>  After this announcement, because of the large
          amount of public protests and negative media coverage,
          Cracker Barrel "rescinded its anti-gay policy;" however, it
          did not rehire the former employees, nor did it expressly
          include "sexual orientation" among inappropriate hiring
          criteria in its employment manual.<42>  In late 1991, the
          New York City Employees' Retirement System (NYCERS), a
          Cracker Barrel shareholder, expressed its desire to include
          on the company proxy materials for the 1992 shareholders'
          meeting a proposal which would expressly prohibit
          discrimination on the basis of sexual orientation.<43>  When
          Cracker Barrel's management decided that it wanted no part
          of the proposal, it sought SEC approval to omit the proposal
          from its proxy materials.  The resulting no action letter
          issued by the SEC has since come to be known as the SEC's
          controversial "Cracker Barrel position."<44>
               In the time since the SEC's Cracker Barrel was upheld
          in court, the SEC has routinely issued no-action letters
          allowing companies to omit from company proxy materials
          proposals under Rule 14a-8(c)(7) involving employment
          related issues which also have social policy
          implications.<45>  The nearly automatic exclusion by
          companies of proposals concerning significant social policy
          issues from their proxy materials under the protection of
          14a-8(c)(7) has raised vehement calls for the immediate
          reversal of the Cracker Barrel decision.<46>
               8.  Election to office:  a company may properly omit
          any proposal which relates to the election of a particular
          person to the board of directors.<47>  This provision is
          included among the possible reasons for management to
          exclude a proposal in order to prevent minority and
          dissident shareholders from "clogging the company's proxy
          statement with their own slates of directors."<48>
               9.  Counter proposals:  if a proposal is counter to a
          proposal to be submitted by the registrant at the
          shareholder meeting, management may elect to exclude the
          proposal.<49>  Without this provision a company could
          conceivably be forced to include all shareholder opinions
          and positions in opposition to each management suggestion.
               10.  Moot:  management may exclude any proposal which
          has been rendered moot by events subsequent to its
          submission by a shareholder.<50>
               11.  Duplicate proposals:  if a proposal is
          substantially duplicative of a proposal previously submitted
          to the registrant, and the registrant will include the
          previous proposal, management can exclude the additional
          proposal.<51>
               12.  Insufficient support at prior meetings:  if a
          proposal is substantially the same as a proposal previously
          submitted to the registrant within the preceding five years
          management may omit the proposal if the proposal received an
          insufficient level of support in its prior submissions.<52>
          In most cases there are rarely arguments as to the level of
          support a given proposal received at a prior meeting;
          however, there are often conflicts as to whether a proposal
          is in fact "substantially the same."<53>
               13.  Relates to specific amounts of dividends:  when a
          proposal relates to the specific amount of cash or stock
          dividends to be issued by the company, management may
          properly exclude the proposal from the proxy materials.<54>
               D.  Recent Application
                         Since its introduction over sixty years ago, both Rule
          14a-8 and the SEC's administration over its provisions have
          faced criticism from many different sources.  The source of
          criticism often depends on what is perceived as the current
          level of stringency with which the SEC applies the rule or a
          particular provision of the rule.  For example, if the SEC
          is perceived as being too lenient with respect to the number
          of proposals it feels to be proper under the rule, criticism
          will likely come from company managers frustrated by the
          intrusion of shareholders into corporate operations.<55>  On
          the other hand, as has recently been the case, when the SEC
          is perceived as needlessly excluding proposals, criticism is
          likely to come from disgruntled shareholders.<56>  The
          nearly constant criticism of the rule, and the SEC's
          application thereof, has forced experts in area of security
          regulation to admit that "the rule today is in chaos."<57>
               In response to the seemingly growing number of
          complaints from disgruntled shareholders and frustrated
          managers alike, Congress in 1996 approved the National
          Securities Markets Improvement Act in which it called upon
          the Commission to study and improve the process by which
          shareholders gain access to proxy statements.<58>  The
          changes to 14a-8 which were unanimously proposed by the
          Commission in September, are a direct consequence of these
          efforts.
          III. Proposed Changes To Rule 14a-8
               A.  Possible Alternatives
                         When the SEC began its congressionally mandated study
          to improve the shareholder proposal process one of the first
          decisions to be made was whether to abandon the current
          system entirely or to maintain the current system but with
          modifications.  In making this decision, several alternative
          systems were proposed.<59>  One such system, which was
          viewed favorably by companies, would have restricted
          companies' ability to exclude proposals by requiring
          companies to include in their proxy materials all proposals
          that are allowed under state law and that do not concern the
          election of directors, but would have limited proposals to a
          numerical maximum.<60>  Another alternative presented was
          for the SEC to withdraw completely from the process, leaving
          regulation of shareholder proposals to each state.<61>  This
          alternative however was supported by only 8% of companies
          and 5% of individual shareholders who were surveyed.<62>
          Although shareholders and companies could not seem to agree
          on any of the alternatives proposed, a majority of both
          groups were in favor of maintaining the existing system,
          either with or without reforms.<63>  Given the results of
          its initial survey, the SEC decided that the best approach
          for it to follow in attempting to improve the shareholder
          proposal process would be to essentially maintain the
          current workings of the present system while making
          modifications to some of the circumstances in which
          companies can properly exclude a proposal under 14a-8.
                B.  Proposed Amendments
                         When the Commission presented its proposed
          modifications in September of 1997, it believed that it was
          presenting a balanced "package" of reforms that would
          establish a "clearer more predictable framework" for both
          shareholders and managers to operate within.<64>  Although
          the proposed rule essentially maintains the same basic
          operational framework as the current rule, the proposed
          version of 14a-8 recasts the rule into a question and answer
          format.<65>  This formatting, rather than substantive,
          change was implemented so that "the hundreds of shareholders
          and companies who refer to the rule each year can more
          easily understand its requirements."<66>  Although the
          question and answer format dramatically changes the rule's
          appearance, and affects the wording of most of the
          provisions where management can exclude shareholder
          proposals under 14a-8, it should have little effect on the
          rule's day to day operations.<67>  The major changes to 14a-
          8 which will affect the day to day operation of the rule
          essentially effect several of the major reasons for
          exclusion under 14a-8(c).<68>
               1.  Redress of personal claim or grievance
               Under current application of 14a-8(c)(4) as discussed
          above, the registrant may present evidence to the SEC staff
          as to the true intent of the proponent when seeking approval
          to exclude a proposal under this provision.<69>  In the past
          the Commission recognized that this exclusion is "perhaps
          the most subjective provision and definitely the most
          difficult for the staff to administer" because it "requires
          the staff to make determinations essentially involving the
          motivation of the proponent in submitting the proposal."<70>
               In recognition of the difficulty that the SEC staff
          faces in making a determination under the current
          application of 14a-8(c)(4), under the proposed version, the
          staff would concur with an exclusion by a company only if
          the proposal or its supporting material "on its face"
          related to a personal grievance or special interest.<71>  If
          a company were to submit a "neutral" proposal for exclusion
          under this provision, the staff would automatically issue a
          "no view" response rather than support or disapprove of the
          company's exclusion.<72>  In other words, this change would
          effectively relieve the SEC staff of the burden of making
          subjective decisions under this provision and would instead
          place that burden on the court system.
               2.  Not significantly related to company's business
               Since 14a-8(c)(5) was first adopted this provision has
          suffered because of the subjective nature of the "otherwise
          significantly related" clause.<73>  Because of the
          subjective nature of this clause, the "otherwise
          significantly related" portion of (c)(5) often dominates the
          rest of the provision.<74>
               Under the proposed revision, the "otherwise
          significantly related" clause would be eliminated and a
          purely economic standard would apply.  Specifically, a
          company would be permitted to exclude proposals which relate
          to matters concerning less than $10 million in revenue or
          total costs, depending on which is more applicable to a
          given proposal.<75>  The revision is designed to establish a
          clearer, more predictable criteria for excluding proposals
          as well as to make it easier for companies to exclude
          economically insignificant proposals.<76>
               3.  Ordinary business operations
                         Although its decisions involving 14a-8(c)(7) often
          generate considerable controversy, the SEC believes that it
          applies the ordinary business exclusion to proposals
          relating to social policy issues with "the most well-
          reasoned standards possible, given the complexity of the
          task."<77>  Despite its belief that its decisions reflect
          sound reasoning, and despite continued support from a
          majority of companies, under the proposed revision of 14a-
          8(c)(7), the SEC would explicitly reverse its controversial
          Cracker Barrel decision.<78>  Instead of automatically
          allowing companies to exclude employment related proposals
          focusing on significant social policy issues, the SEC staff
          would return to the case by case analysis that prevailed
          prior to the 1992 Cracker Barrel decision.<79>
               Although the reversal of the Cracker Barrel position is
          undoubtedly the most significant change from the current
          version of 14a-8, the effect of the reversal may not be as
          great as it may appear at first glance.  To begin, the
          effect of the proposed reversal will be limited because the
          Cracker Barrel decision only affects employment related
          proposals raising significant social policy issues. As such,
          other categories of proposals under the exclusion such as
          proposals on general business operations and straightforward
          employment proposals would continue to receive the same
          analysis from the SEC as is presently applied.<80>
          Additionally, a reversal of the Cracker Barrel decision is
          likely to have only limited impact given the fact that
          during the 1997 proxy season, the SEC received only 30
          submissions involving employment related proposals tied to
          social issues.<81>
               4.  Insufficient support at prior meeting
               Under the revised version of 14a-8(c)(12) the
          resubmission thresholds would be increased from their
          current levels to 6% on the first submission, 15% on the
          second submission, and 30% on the third.<82>  The SEC feels
          that these new levels are appropriate to "counter-balance
          other proposals that would expand the range of proposals
          companies must include in their proxy materials."<83>
               5.  Override mechanism
               The proposed version of 14a-8 would include as one of
          its more unusual changes, an "innovative override
          provision."<84>  Unlike the other major areas of reform, the
          proposed override mechanism is not a modification of one of
          the circumstances under which management can exclude a
          proposal under subsection (c) of 14a-8.  The override
          mechanism does however have the potential to substantially
          influence what proposals management must include under
          subsection (c) of 14a-8.  Specifically, under the revised
          rule, a shareholder proponent would be permitted to override
          management's decision to exclude a proposal under 14a-
          8(c)(5) [not significantly related] or (c)(7)[ordinary
          business operations] if the shareholder demonstrates that at
          least 3% of the company's outstanding voting shares support
          the submission of the proposal for a shareholder vote.<85>
          According to the SEC, the requirement that a proponent
          obtain the support of 3% of fellow shareholders would serve
          two purposes.  First, the level of required support should
          be high enough to ensure that the proposals receiving this
          level of support are sufficiently relevant to be deserving
          of inclusion on the proxy materials.<86>  Secondly, the
          percentage should not be so high as to effectively make the
          override mechanism unattainable.<87>
               A recent SEC review of filings required by the agency
          revealed that in 69% of listed equity issues, institutional
          holdings are sufficiently high that a proponent would need
          to elicit the support of only one holder to reach 3% of the
          corporation's outstanding shares.<88>  In order to help
          control the number of proposals that shareholders could
          potentially force onto company proxy statements, the
          proposed override mechanism would limit each shareholder to
          the endorsement of only one proposal sponsored by another
          shareholder.<89>  Of course, however, because the current
          application of 14a-8 does not include any type of override
          provision, there is no way to predict how often shareholders
          will take advantage of the override provision to force
          companies to include proposals which the companies would
          otherwise be permitted to exclude.<90>
                C.  Implications Of 14a-8 Revisions
                         Improvements in the shareholder proposal process could
          potentially benefit shareholders and management alike in
          numerous ways.  If the proposed revisions to 14a-8
          successfully expand the range of proposals that companies
          must include in their proxy materials, the proposed
          revisions would likely make a company's managers more
          responsible to shareholders.  A more responsible management
          team could lead to improvements in company operations and
          could ultimately bring about improvements in stock price.
          At the same time, management could potentially benefit from
          the revisions if the integrity and efficiency of the process
          is improved.  By increasing management's ability to
          confidently exclude economically insignificant proposals, or
          proposals which lack substantial shareholder support,  the
          revised rule could potentially reduce both time and economic
          compliance costs.<91>  Thus the goal of the revisions should
          be to devise a process which quickly and efficiently
          eliminates inappropriate proposals, while simultaneously
          insuring the inclusion of important and relevant proposals.
               Of course, while the goal of the proposed reforms is to
          address the concerns of both managers and shareholders
          simultaneously, successfully accomplishing this goal will be
          extremely difficult.  This task will be especially difficult
          to accomplish given the fact that, as Elyssa MacChold, the
          director of the Council of Institutional Investors has
          stated, "[t]here is a tense balance between the groups each
          wanting to make sure that they are not giving up more than
          the other."<92>
          IV.  The Effects Of The Prospective Reforms On 1996
               Shareholder Proposals
               A.  Retroactive Analysis
                         When Congress ordered the SEC to review the shareholder
          proposal process, it effectively placed the Commission in
          the extremely precarious position of attempting to please
          both shareholders and management simultaneously.  Despite
          the fact that, as noted above, the SEC believes it has
          presented a "balanced package" of reforms, tension and
          conflicts between shareholder and management groups have
          delayed the implementation of all 14a-8 reform efforts.<93>
               This comment, by retroactively applying the proposed
          changes in 14a-8 to prior shareholder proposals, attempts to
          examine whether the proposed reforms to 14a-8 will
          drastically alter the operation of 14a-8 to the extent that
          the level of controversy and conflict created by their
          proposal would suggest.  Because the reforms proposed by the
          SEC in September are by their very nature only suggestions
          which have not been field tested, no one can truly predict,
          as the SEC has repeatedly emphasized, what their exact
          impact on the shareholder proposal process will be.<94>
          However, this comment hopes that in retroactively applying
          the proposed changes in 14a-8 to a group of proposals
          submitted during a previous proxy season, the true effect
          which the proposed changes will have if implemented can be
          ascertained by comparing how proposals would have been
          handled in that prior proxy season, had the proposed
          provisions been in effect, with how the proposals were
          actually handled during that particular time period.
               B.  Limiting The Data
               In order to successfully illustrate by retroactive
          application how the proposed changes would have altered a
          prior proxy season, it was first necessary to select a
          particular proxy season and then attempt to reduce the data
          within that proxy season to a manageable and comprehendible
          level.  For this study, proposals made during the 1996 proxy
          season were selected.<95>  After deciding upon the 1996
          proxy season, a subset of the proposals made during that
          season was selected for analysis.<96>  Out of the numerous
          proposals submitted by shareholders, it was decided to focus
          on "social policy shareholder proposals," as defined by the
          Investor Responsibility Research Center ("IRRC"), which were
          submitted through the first five months of 1996.<97>  Social
          policy related proposals were chosen over other groups of
          proposals, such as corporate governance related proposals,
          because it is often the "social" proposals which generate
          the emotional and ideological conflicts between shareholders
          and management.<98>  Additionally, because of the important
          role that the Cracker Barrel controversy has played in
          spurring the current reform efforts, it was felt that
          analyzing the effects of the proposed changes on similar
          employment related proposals which raise significant social
          policy issues was of particular importance.
               C.  The 1996 Proxy Season
               Through May 1996, as reported by the IRRC, shareholders
          presented to 153 different corporations a total of 258
          social policy proposals.<99>  Of the 258 proposals received
          38% were eventually voted on by shareholders (of the 98
          proposals voted on, only 2 were approved); 32% were omitted
          from the proxy materials by the companies with SEC approval;
          and 30% were withdrawn by their proponents before voting
          occurred.<100>
               1.  Unaffected Proposals
               The proposed changes to 14a-8 will, of course, not
          affect all shareholder proposals differently than the
          current version of the rule.  Just as not all future
          shareholder proposals will be affected by the modifications
          to 14a-8; many of the 1996 proposals would not have met with
          different results had the proposed revisions been in place
          during the 1996 proxy season.  In analyzing the scope of the
          ramifications that will result from any changes to 14a-8, a
          logical first step to take is to eliminate from the data set
          those proposals which would not have been affected by the
          changes.
               Of the 258 social policy proposals, 109 or 42% of the
          proposals, would not have been significantly affected by the
          proposed changes.  The vast majority (69%) of the unaffected
          proposals consist of proposals that were withdrawn by their
          proponents either before management attempted to exclude
          them or before they were voted on by the shareholders.<101>
          In most cases, the proposals were likely withdrawn after the
          proponent and management reached a compromise on the
          subject.  Unfortunately, because these agreements were
          reached in private, the exact nature of the agreements is
          also in most cases, like that of an out of court settlement,
          private.  Thus, it is impossible to tell which side in most
          of the cases had a stronger bargaining position, and whether
          or not that position would have been affected had the
          proposed changes to 14a-8 applied.  Because it is impossible
          to individually track and quantify the results of the
          withdrawn proposals, it is also impossible to ascertain if
          the proposed changes to 14a-8 would have so drastically
          weakened or strengthened a party's bargaining position to
          the extent that a compromise would have been prevented, and
          a vote or attempted exclusion instead forced upon the
          parties.  However, although this possibility exists, it is
          safe to assume that, because management and the shareholder
          proponents in these cases were able to reach acceptable
          compromises, both groups considered the subject matter of
          the proposals to be both relevant and important to the
          company.  It would be an unusual case indeed in which
          management would attempt to exclude a proposal, which it
          feels has merit, from a shareholder vote simply because a
          change in the rules may give it the power to do so.
          Therefore, in most cases one can conclude that the proposed
          changes in 14a-8 would not have affected the social policy
          proposals which were withdrawn by their proponents during
          the 1996 proxy season.
               The remaining proposals which would not have been
          affected by the suggested changes to 14a-8, consist of 31
          proposals that were actually omitted by management under the
          current application of 14a-8.  However, because these
          proposals were omitted under parts of the rule that will not
          be modified by any of the proposed changes, these proposals
          would have also faced exclusion by management under the new
          version of the rule.<102>
               2.  Affected Proposals
               If the proposed revisions to 14a-8 were applicable to
          the 1996 proxy season approximately 58% of all the social
          policy related proposals examined could have been
          affected.<103>  The first group of the proposals in this
          category were those that were excluded in 1996 under 14a-
          8(a)(1), because of proponent eligibility problems.  Because
          the revised version of 14a-8(a)(1) increases the eligibility
          requirements, the five proposals that were excluded under
          (a)(1) would have also been excluded had the proposed
          amendments been in operation.<104>  However, what worries
          some opponents to the proposed amendments is that the new
          stricter eligibility requirements will cause some of the
          proposals which would normally be voted on, to be excluded.
          The new version of (a)(1) however was not designed to have a
          major impact on the shareholder proposal process.  Rather,
          the revisions were suggested mainly to insure that the
          qualification amounts in the provision remain current, given
          the appreciation in market values and inflation since the
          time when the original version of the provision was
          adopted.<105>  Since the eligibility requirements under the
          proposed rule in actuality do not depart substantially from
          the current requirements after adjustments for inflation and
          market appreciation are considered, the revisions to (a)(1)
          will likely have little effect on the shareholder proposal
          process.
               The remaining proposals that could have been affected
          by the proposed changes are those which were omitted by
          management under one of the five reformed provisions
          discussed in part III of this comment, or those that were
          actually voted upon by shareholders in 1996.  Because of the
          individual characteristics applicable to each of these
          provisions, and the potentially divergent impacts that each
          may have on future proxy seasons, it is necessary to examine
          each of these six areas individually.
               a.  Redress of personal claim or grievance
               Of the 258 social policy proposals tracked by the IRRC
          and examined here, 2 were omitted from company proxy
          materials in 1996 because of the 14a-8(c)(4) exclusion
          relating to personal grievances.<106>  If the amended
          version of (c)(4) had been in place during 1996 proxy
          season, the SEC likely would have concurred in the company's
          decision to omit in one of the cases, and would have likely
          issued a "no view" response in the other case.
               The first case involved a proposal submitted to Allied
          Signal, Inc. by David Adland and eight other former Allied
          Signal employees.<107>  The proposal advocated the rehiring
          of personnel and reimbursing the rehired personnel for all
          income, and benefits lost while not employed by Allied
          Signal.<108>  The SEC stated in its no-action letter that
          the "[p]roposal clearly relates to the redress of personal
          claims, . . . and is intended to provide a personal benefit
          to the Proponents."<109>  Because the proposal presented by
          Mr. Adland "on its face" related to a personal grievance, it
          would continue to receive the same response from the SEC
          under the proposed version of 14a-8(c)(4).<110>
               The other proposal omitted under (c)(4) involved a
          proposal submitted by A.L. Quintas to Phillips
          Petroleum.<111>  The proposal requested that the company
          strengthen its code of ethics by giving all employees equal
          opportunities.<112>  In his supporting statement however,
          Mr. Quintas repeatedly complained of his own improper
          discharge, harassment, and unfair treatment as evidence of
          why the company needed to strengthen its ethical code.<113>
          In issuing its no-action letter the SEC seized on this
          language to reason that Quintas was attempting to address a
          personal grievance and "his frustration", and thus agreed
          with the company's decision to omit the proposal.<114>
          However, had the proposed version of (c)(4) been in place at
          the time this proposal was submitted, the SEC probably would
          not have been able to justify issuing a no-action letter.
          Instead, under the proposed version of the rule, the
          Commission would have been forced to issue a "no view"
          letter, since the proposal does not address a personal
          grievance "on its face."  Phillips of course could have
          still omitted the proposal from its proxy materials,
          provided it believed that it could support its position in
          court, which in this case it probably could have done with
          little difficulty.
               Provided that the proposals examined here are
          indicative of the average proposal affected by (c)(4), the
          new version of the provision may present some interesting
          situations.  On the one hand, the SEC is removed from its
          role of making subjective decisions concerning the degree of
          personal grievance involved.  On the other hand however, if
          the proponents of these proposals are willing to take their
          case to court to see their proposal included, an additional
          layer of unnecessary bureaucracy may be added to the
          shareholder proposal process by this change.  How companies
          and shareholders will ultimately handle proposals under this
          provision will likely be decided by the market.  In short,
          if a company feels that it can successfully omit a proposal
          and possibly defend that decision in court for less money
          than it will cost it to include the proposal with the proxy
          materials, it will follow that course.  At the same time,
          shareholders will of course also be forced to make a similar
          decision, by weighing the costs and benefits of a possible
          court battle.  Although this same decision is essentially
          made under the current version of (c)(4) by companies
          considering exclusion vs. inclusion, the current version of
          (c)(4) places very little cost on the shareholder to make an
          initial proposal.<115>  Thus, the new version of (c)(4) may
          ultimately provide for a more equitable division of the
          total costs and benefits associated with a proposal, while
          still arriving at the same final conclusion with regard to
          most proposals.
               b.  Not significantly related to company's business
               Of the 258 social policy proposals examined here, only
          one was omitted from company proxy materials under      14a-
          8(c)(5) because it concerned a subject matter not
          significantly related to the company's business.<116>  The
          fact that only one proposal out of 258 was omitted under the
          current application of (c)(5) clearly demonstrates, as was
          discussed above, the dominate impact of the "otherwise
          significantly related" clause on the application of (c)(5).
               The revised version of (c)(5) would, of course,
          eliminate the use of the "otherwise significantly related"
          clause, and thus increase the ability of companies to omit
          proposals in many cases.  Not surprisingly, had the revised
          version of (c)(5) been in place in 1996 the omitted proposal
          would have also been excluded from the company's proxy
          materials.  However, what is surprising is that the specific
          proposal in question here may have eventually secured its
          place on the company's proxy materials faster under the
          revised application of (c)(5) than under the current
          application.<117>
               The proposal omitted under (c)(5) was presented by the
          Interfaith Center on Corporate Responsibility ("ICCR"), to
          PepsiCo, and requested that the company withdraw from
          Burma.<118>  In issuing its no-action letter the SEC noted
          that PepsiCo's involvement in Burma accounted for
          substantially less than five percent of the company's total
          revenue, earnings, and assets.<119>  The SEC was however
          able to issue a no-action letter in this case because,
          unlike the vast majority of cases submitted for exclusion
          under (c)(5), the SEC felt this case was not otherwise
          related to any policy issues significant to the company's
          business.  The SEC believed that PepsiCo's situation was
          somewhat unique because the company's operations in Burma
          consisted of only a joint venture with a private Burmese
          citizen, and were not affiliated with the Burmese
          government.<120>  In fact, PepsiCo owned merely a 40%
          minority ownership stake in a company wholly owned by a
          private entrepreneur that was in direct competition with the
          government owned soft drink operations.<121>  Therefore,
          since the SEC felt that policy issues significant to the
          company's operations were not negatively impacted, under the
          current rule the proposal's only chance for inclusion would
          be in the unlikely event that operations in Burma accounted
          for five percent of PepsiCo's revenues.<122>  However, under
          the revised version of (c)(5) if PepsiCo's operations in
          Burma accounted for more than $10 million of revenue, the
          proposal could make its way onto the proxy materials.  The
          possibility that PepsiCo's operations in Burma could
          generate $10 million in revenue is of course a much more
          likely scenario.  In fact, considering that PepsiCo's
          revenues attributable to Burma were estimated to be
          approximately $8 million at the time of the IRRC's proposal,
          it is quite possible that PepsiCo's current revenues from
          Burma are now substantially in excess of $10 million.<123>
               Although in the case examined here, it is more likely
          that PepsiCo would have to include the disputed proposal
          under the new version of (c)(5), many shareholder groups are
          likely to argue that this case represents an abnormality.
          In short these groups will likely argue that by eliminating
          the otherwise significantly related clause, companies will
          find it much easier to eliminate proposals which while
          perhaps economically insignificant, nevertheless represent
          important subjects.  These groups have a valid point; the
          revised version of (c)(5) will certainly make it easier for
          companies to exclude some types of proposals.  However, this
          is a trade-off whose time has come.<124>  The company
          subsidized shareholder proposal process has simply become
          too expensive to justify continuing to allow minority groups
          the luxury of forcing the inclusion of economically
          insignificant proposals onto company proxy statements at the
          expense of, and to the detriment of shareholders in
          general.<125>
               c.  Ordinary business operations
               Thirty-four of the 258 social policy proposals examined
          here were omitted from company proxy materials in 1996
          because of the 14a-8(c)(7) exclusion relating to ordinary
          business operations.<126>  Because the reversal of the
          Cracker Barrel decision contemplated in the proposed
          revision of (c)(7) affects only employment related proposals
          which raise significant social policy issues, not all of the
          34 proposals omitted under the current application of (c)(7)
          would have been affected by the proposed revision.  In fact
          of the 34 proposals, only 8 of the proposals would have
          likely been affected had the revised version of (c)(7) been
          in operative in 1996.<127>
               Of the 8 affected proposals, 3 requested that their
          respective companies review international workplace
          standards.  Although these proposals can obviously be linked
          to significant social policy issues it is even debatable
          whether the SEC will determine that these proposals should
          have been affected by the reversal of Cracker Barrel, given
          the Commission's announced stance on maquiladora
          proposals.<128>  Therefore, had the proposed changes to
          (c)(7) been in place in 1996, there is a very real
          possibility that only 5 of the 34 proposals omitted under
          the current application of (c)(7) would have been included
          on company proxy materials.
               The 5 proposals that would have had their fortunes
          reversed by the proposed version of (c)(7) raise significant
          social policy issues that most persons would agree have the
          potential to greatly influence a company's operations.<129>
          Specifically, the 5 proposals centered around equal
          employment, affirmative action, and other similar
          discrimination related topics.<130>  Because the revision of
          (c)(7) would be successful in preventing companies from
          automatically excluding some very significant proposals,
          while not opening the proverbial  flood gates, the revision
          should be adopted regardless of the fate that the other
          proposed revisions eventually meet.<131>  In fact, were the
          SEC to adopt this particular provision, its decision would
          likely receive little criticism from shareholders given
          their overwhelming level of shareholder support for the
          provision.<132>  At the same time, while management groups
          are likely to criticize the provision's adoption this
          criticism will be tempered by the fact that the management
          will in most cases support the overall package of changes to
          14a-8.
               d.  Insufficient support at prior meeting
               Of the proposals examined for this comment, nine were
          omitted under 14a-8(c)(12) from their company's respective
          proxy materials in 1996 because they had received an
          insufficient level of support from shareholders at a
          previous meeting.<133>  Because the revised version of
          (c)(12) increases the resubmission thresholds from their
          current levels to 6%, 15%, and 30% on a proposal's first,
          second, and third submission respectively, these nine
          proposals would have obviously also been excluded in 1996
          had the revised version of (c)(12) been applicable.<134>
               Because it is self apparent that any proposal that
          would be omitted under the current version of (c)(12) will
          also be omitted under the revised version, the more
          interesting question to ask about the possible impact of the
          revised version of (c)(12) is how it will affect proposals
          in its second year of operation.  In other words, for our
          purposes here, how would the proposals that were voted on in
          1996 been affected differently upon resubmission had the
          revisions also been in operation in 1997.  Of the 258
          proposals examined here, ninety-eight were voted on in 1996.
          Of those ninety-eight, two were approved by the
          shareholders; therefore, ninety-six proposals were eligible
          for resubmission in 1997.  Under the current application of
          (c)(12), eighty-seven (91%) of those proposals would have
          been eligible for resubmission in 1997 based on the levels
          of support received in 1996.<135>  However, if the revised
          version of (c)(12) had been applicable, only fifty-three
          (55%) of the proposals would have been eligible for
          resubmission.<136>  Thus, had the proposed version of
          (c)(12) been adopted in 1996, 36% of the proposals which
          would have been eligible for resubmission under the current
          version of the provision would have been excluded.
               The fact that over a third fewer proposals would have
          been eligible for resubmission to shareholders is quite
          significant.  However, the fact that these proposals will be
          excluded under the revised version should be considered a
          positive change.  The SEC is correct in its belief that "a
          proposal that has not achieved these levels of support has
          been fairly tested and stands no significant chance of
          obtaining the level of voting support required for
          approval."<137>  Because in all likelihood, there is little
          realistic chance that a proposal which does not even capture
          6% of the vote will be approved by shareholders any time in
          the near future, it is appropriate that the other
          shareholders should not have to bear the cost of including
          this proposal on the company proxy materials year after
          year.  Additionally, given some of the other amendments such
          as the proposed reversal of Cracker Barrel and the proposed
          "override mechanism" which will increase the number of
          proposals that the company and other shareholders must
          subsidize, this provision is appropriate to help balance the
          reform package between the interests of shareholders and
          management.<138>
               e.  Override mechanism
               The revised version of 14a-8 will allow shareholders
          who can demonstrate that 3% of the company's outstanding
          shares support a proposal excluded under (c)(5) or (c)(7),
          to include that proposal on the proxy material by overriding
          management's decision.  Under this provision, thirty-five of
          the 258 proposals examined here would have been potentially
          affected by the provision, had it been applicable in
          1996.<139>
               However, if the override provision would have been
          applicable in 1996, it must be assumed that the revised
          versions of both (c)(5) and (c)(7) would have also been
          applicable.  Taking this into account, the number of
          proposals under consideration here that could have been
          affected had the override mechanism been operative in 1996
          changes slightly.  As was discussed above, the revised
          version of (c)(5) will in all likelihood allow management
          the freedom to omit a greater number of insignificant
          proposals, thus making the override provision potentially
          applicable to a greater number of proposals.  On the other
          hand, the revised version of (c)(7) will potentially force
          the inclusion of a greater number of proposals onto to
          company proxies, therefore making the proposed override
          provision applicable to fewer proposals.  The exact impact
          that the modified versions of (c)(5) and (c)(7) will have on
          the breadth of applicability of the new override provision
          will depend mainly on how broadly the SEC applies the
          reversal of Cracker Barrel within its enforcement of (c)(7).
          If the reversal of Cracker Barrel is seen as having wide
          ramifications, the impact of the override provision will be
          tempered somewhat.  However the more likely scenario, based
          on the SEC's comments thus far, is that the Cracker Barrel
          reversal will be strictly construed.<140>  If Cracker Barrel
          is strictly construed, the overall impact of the override
          provision will be relatively more substantial when
          considered as part of the entire reform package, and not
          merely as a single isolated reform.  Implicit in this
          conclusion is the belief that when the effects of (c)(5) and
          (c)(7) are considered together, the total number of
          proposals potentially subject to exclusion by management
          will likely increase in the aggregate under the revised
          version of 14a-8.
                Of all the revisions proposed for 14a-8, the override
          mechanism is perhaps the one that most clearly represents
          the interests of the shareholders.  By allowing shareholders
          to override management decisions, the revision reaffirms the
          basic underlying principle of the corporate form of business
          organization: the shareholders are the ultimate residual
          owners of the entity.  As the ultimate owners of the
          corporation, shareholders, who often are the group with the
          greatest investment at risk, should be able to direct the
          corporation as they see fit.  Because they often have the
          greatest investment at risk, this personal vested interest
          will direct them to make decisions that will benefit
          themselves, and will ultimately benefit the corporation.
               Based on this logic, one could argue that any
          shareholder should be able to force the inclusion of any
          proposal that he sees fit onto the company's proxy
          materials.  However, despite the fact that in most cases
          shareholders generally only support proposals which they
          feel help to maximize shareholder wealth in the long term,
          there is always the possibly that the "lunatic fringe" of
          shareholders will present proposals that do not have the
          ultimate good of the corporation in mind.<141>  The 3%
          support provision of the override mechanism is designed
          appropriately to prevent this "lunatic fringe" from forcing
          the inclusion of such proposals.  By setting the required
          support at 3%, it is likely that only proposals which have
          substantial merit (despite management beliefs to the
          contrary) will find their way onto the proxy materials
          through this procedure.
               A 3% interest in a publicly traded corporation today
          represents quite a substantial investment, as was
          demonstrated above with the no-action letter issued to
          PepsiCo.<142>  Because 3% of a public company represents
          such a large investment, only proponents which truly believe
          in the merits of their proposal will be able to successfully
          make use of the mechanism.  In other words, only proponents
          which are willing to "put their money where their mouths
          are" will find this provision helpful.  This is not to say
          however that the small investor will be shut out by this
          mechanism.  To the contrary, because of the ever increasing
          role of large institutional investors in today's markets,
          many if not most publicly traded companies have substantial
          portions of their outstanding shares controlled by several
          institutions.<143>  The small investor who has had his
          proposal rejected by management, yet feels that his proposal
          will benefit the company significantly, merely has to
          present and "sell" his proposal to one of these large
          institutional shareholders.  If the small investor is truly
          correct in believing that his proposal will benefit the
          company at large, it is a pretty safe bet that an
          institutional investor, with a substantially larger
          investment on the line, will support the proposal's
          inclusion.  Of course, the small investor will have to take
          some steps such as contacting other shareholders and
          presenting his proposal on his own; however, the extra
          effort required by such steps insures that only proposals
          with true merit will find their way onto the proxy
          materials.  In short, when only proposals with true merit
          are ultimately included on the proxy materials, everyone
          from the largest to the smallest shareholder will benefit in
          the long term.
               f.  Voted on proposals
               Ninety-eight of the social policy proposals examined
          for this comment were voted on by shareholders during the
          1996 proxy season.<144>  Not surprisingly, the ninety-eight
          proposals covered numerous subject areas.  Because of the
          often individualistic nature of proposals which eventually
          appear on company proxy materials after surviving attempts
          by management to exclude them, it is nearly impossible to
          directly make any general conclusions as to how the proposed
          14a-8 would have affected the ninety-eight proposals
          actually voted on, had the revisions been applicable.
               However, it is possible to indirectly make some
          predictions as to how the proposed rule will affect some of
          the categories of proposals that were voted on in 1996.  The
          majority of the ninety-eight proposals voted in 1996 fell
          into seven categories.<145>  By randomly examining one
          proposal from each of these seven categories, a prediction
          can be made as to how the rest of the proposals falling into
          that category would have been affected had the revised 14a-8
          been applicable.  Upon concluding how the major categories
          of voted on proposals in 1996 would have been effected by
          the revised rule, it is possible to predict some of the
          general effects which a revised 14a-8 will have on proposals
          that would currently be included on company proxy materials.
               The seven significant categories of voted on proposals,
          and how those categories would have been affected had the
          revised rule been applicable are as follows:
                    1.  Tobacco related proposals:
               The proposal examined for this category was submitted
          by Catholic Healthcare West, to H.B. Fuller a maker of
          cigarette packaging and adhesives which glue the filter to
          the cigarette and which glue cigarette papers together.<146>
          The proposal, like most of the shareholder proposals related
          to tobacco in general, requests that the company withdraw
          from the tobacco industry altogether.<147>
               Assuming that the proposal meets all of the eligibility
          and content requirements not affected by the revised version
          of 14a-8 set out in part II of this comment, there is
          nothing in the revised version of 14a-8 that will act
          specifically to keep proposals such as this out of a
          company's proxy materials.<148>  Of course, with the
          elimination of the "otherwise significantly related"
          language of (c)(5) proposals in this category which do not
          concern significant economic issues could be omitted.
          However, with the qualification amount set at the relatively
          low level of $10 million, most proposals which would be
          voted on under the current rule, including the one examined
          here would not be impacted by the modification to (c)(5).
                    2.  Reports on political contributions
               Seven of the nine proposals voted on in 1996 which
          requested political contribution reports were submitted by
          Evelyn Davis from the Watergate Office Building in
          Washington D.C..<149>  The specific proposal examined for
          our purposes here was submitted by Ms. Davis to Exxon, and
          requested the company to publish a detailed statement in
          various national newspapers of each contribution made by the
          company to any political party, campaign or candidate within
          the preceding fiscal year.<150>  With the elimination of the
          "otherwise significantly related" language in the revised
          version of (c)(5) it appears that management could
          potentially omit proposals such as this, if the company
          contributes less than $10 million per year to political
          groups.  Exxon in this particular case admitted to making
          "limited contributions" but did not release the exact dollar
          amount of its annual contributions, and it is therefore
          impossible to tell how this specific proposal would be
          handled under the revised rule.<151>
               In short, whether proposals that fall into this
          category will continue to be voted on by shareholders under
          a revised 14a-8 depends on the level of contributions made
          by the company.  Appropriately, this conclusion means that
          under the revised rule, for proposals that fall into this
          category only those that are economically significant will
          be able to utilize company resources, for their inclusion on
          the proxy materials.
                    3.  Reports on equal employment
               The proposal examined here that represents this
          category was submitted by Immaculate Heart Missions, Inc.,
          to American Brands and requested that the company prepare
          and distribute a report listing among other things the
          number of discrimination complaints and lawsuits concerning
          race and gender filed against the company.<152>  Within the
          revised version of 14a-8, there is nothing that would result
          in a greater likelihood of exclusion for proposals such as
          the one examined here.<153>  In fact, given the proposed
          reversal of Cracker Barrel; for proposals within this
          category which concern employment related matters tied to
          social policies, it is likely that the new rule will
          actually result in a greater probability of inclusion.
                    4.  Endorse CERE'S environmental principles
               Eight of the proposals voted on in 1996 which were
          examined for this comment requested their respective
          companies to implement The Coalition for Environmentally
          Responsible Economies' ("CERE'S) principles.<154>  The
          proposal examined here as a representative of this category
          was submitted by the Missionary Oblates of Mary Immaculate
          to GTE Corp., and called for the company to endorse the
          CERE'S environmental principles and annually publish a
          report showing efforts to comply with those principles.<155>
          Based on the revision to (c)(5) it appears as if proposals
          in this category will be subject to omission by management
          from company proxy materials under the proposed version of
          14a-8.  This position is however subject to change depending
          on how broadly or narrowly the SEC staff decides to consider
          the elimination of the "otherwise significantly related"
          clause from (c)(5).  The SEC has already stated that the
          removal of the "otherwise significant" language from (c)(5)
          will only apply to quantifiable matters.<156>  The question
          remains however whether the SEC staff will consider
          compliance with these demands to be a quantifiable matter.
          In other words, a company will likely be able to omit the
          proposal if it is classified as a quantifiable matter by the
          SEC, provided that the cost of producing such a requested
          report does not exceed the economic threshold of $10 million
          established by (c)(5).  However, if the SEC considers the
          matter non-quantifiable it will likely continue to require
          inclusion of the proposal as a matter "otherwise
          significantly related" to the company's business.
                    5.  Endorse the MacBride principles
               All seven of the proposals voted on in 1996 which
          requested the endorsement of the MacBride principles were
          submitted by the New York City Employees Retirement System,
          and are thus nearly identical.<157>  The MacBride principles
          are a set of recommendations originally formulated by Dr.
          Sean MacBride which serve as guidelines for corporations to
          follow for assistance in reaching equal employment goals in
          Northern Ireland.<158>  The treatment and analysis of
          proposals within this category under the revised version of
          14a-8 will be nearly identical to the treatment of proposals
          in the previous category advocating the endorsement of the
          CERE'S principles.  In other words, because of the proposed
          revision of (c)(5) it appears as if proposals in this
          category could be properly omitted from proxy statements by
          management under the new rule.<159>
               Like the proposals relating to the CERE'S principles,
          the proposals within this category will be drastically
          affected by the SEC's decision of whether or not such
          matters are quantifiable under (c)(5).  However, unlike the
          CERE'S proposals, even if the SEC decides to prohibit
          omission for these proposals under (c)(5), it is likely that
          most of these proposals will be omitted by management under
          the higher resubmission threshold requirements of (c)(12).
          For example, the proposal examined here as a representative
          of this category, had been submitted to Dun & Bradstreet and
          voted on by company shareholders every year since 1989.<160>
          Despite the fact that the proposal received the approval of
          14.7% of company shareholders in its final year of
          submission, such a level of support while sufficient under
          the current version of (c)(12) would be inadequate, and
          therefore justify omission, under the revised version.<161>
                    6.  Nuclear Power Operations
               The proposal examined as a representative of this
          category was submitted by the Sisters, Servants of the
          Immaculate Heart of Mary to DTE Energy.<162>  Like all of
          the proposals which were voted on within this category in
          1996, the proposal requested that the company discontinue
          its nuclear power generating operations.<163>  Assuming that
          this proposal specifically, and proposals within this
          category in general, meet all of the eligibility and content
          requirements unaffected by the revisions to 14a-8, there is
          nothing in the revised version of 14a-8 that will cause
          proposals in this category to be treated differently than
          they are under the current application of the rule.
               Although under (c)(5) the "otherwise significantly
          related" language is omitted in the revised version, this
          provision is in nearly all cases inapplicable to proposals
          within this category because of the large investments
          necessary to facilitate nuclear power generation.  For
          example, in the case of DTE Energy, the proposal advocates
          the closing of the Fermi nuclear plant.<164>  DTE's
          management points out that the shareholders of DTE have
          invested $3.9 billion in the particular plant mentioned in
          the proposal.<165>  Obviously, proposals concerning such
          large amounts of money, more than adequately satisfy
          (c)(5)'s $10 million threshold requirement for economic
          significance.
                    7.  Human rights guidelines
               The proposals applicable to this category request that
          management establish specific human rights guidelines and
          requirements to be used in determining which countries of
          the world the company should operate within.  In most cases,
          the proposals further request that after these guidelines
          are established, the company terminate current operations
          within any country that does not qualify under established
          guidelines.<166>  Under the revised application of 14a-8,
          and specifically under (c)(5), management will continue to
          be obligated to include these proposals on company proxy
          materials.  This obligation of course being contingent on
          the operations within the applicable countries accounting
          for more than $10 million in revenue or expenses annually.
          Unlike some of the other categories examined here however,
          there is little question that the SEC will consider
          proposals within this category to be quantifiable matters
          and therefore subject exclusively to pure economic
          evaluations.  Therefore, given the scope and size of most
          public corporations today, it is probable that most
          proposals related to such human rights concerns will indeed
          continue to be included on company proxy materials under the
          revised version of 14a-8.
          After examining how each of the major categories of social
          policy proposals voted on in 1996 would have been affected
          differently had the revised provisions of 14a-8 been
          applicable, some conclusions can be drawn.  To begin, all of
          the proposals examined here which were voted on in 1996 will
          continue to make their way onto company proxy statements
          provided they concern an economically significant amount of
          resources.  Secondly, although in most cases, proposals are
          likely to concern economically significant matters, those
          that do not, can be quickly and confidently excluded by
          management under the revised rule.  Finally, despite the
          fact that the revised rule on its face will exclude
          economically insignificant proposals and allow management to
          confidently and quickly dispose of other insignificant
          proposals, it is clear that initial determinations by the
          SEC staff as to initial which categories of proposals
          concern quantifiable matters and which do not will greatly
          shape the degree to which the proposed rule is both
          effective and beneficial.
          V.   Conclusion:  Why The SEC Should Adopt The Proposed
               Version Of 14a-8
               Just as the SEC voted last September to unanimously
          propose a revised version of 14a-8, it should unanimously
          vote to adopt the "revamped" version when it is finally
          submitted for a full Commission vote sometime in the next
          few months.  The revised version of 14a-8 offers many
          benefits over the current rule for both shareholders and
          managers.  In general, shareholders will benefit from an
          easier to understand format, the reversal of the Cracker
          Barrel decision, and the ability to control a proposal's
          final destiny with the advent of the override mechanism.
          Managers on the other hand will be able to quickly and
          efficiently exclude the economically insignificant proposals
          that seem to clog the proxy process year after year.
               As this comment has demonstrated, in keeping with the
          demands of both shareholders and managers, the revised rule
          will not make earth shattering changes to the overall
          application of the current rule.  Nor will the SEC
          dramatically alter its position as unofficial arbitrator
          between shareholders and management.  However, the changes
          that the revisions do bring about will be quite significant
          in their own right.
               Specifically, the revision of (c)(4) to allow for
          exclusion of proposals only when a proposal "on its face"
          relates to a personal grievance, eliminates the need for the
          SEC staff to make subjective, and at times erroneous
          decisions, and instead allows the market to ultimately
          determine whether or not a proposal is excluded.  By
          eliminating the "otherwise significantly related" language
          in (c)(5) the revised rule insures that only economically
          significant matters will usurp the company resources that
          ultimately belong to all shareholders, and not merely those
          with personal agendas.  In modifying (c)(7) to reverse the
          Cracker Barrel decision, the revision finally corrects a
          decision that perhaps should have never been made in the
          first place.  By increasing the resubmission thresholds, the
          revised version of (c)(12) eliminates the constant pestering
          and wasting of corporate resources caused by certain
          perpetually unpopular proposals.  Finally, in providing
          shareholders with a workable yet fair override provision the
          revised rule insures that shareholders can by their own
          choice control a meritorious proposal's destiny.
               Chairman Levitt was certainly correct in believing that
          the package of proposed changes will "eliminate the abusive
          gamesmanship that has obscured the true purpose" of 14a-8,
          and ultimately allow for effective and efficient shareholder
          communication with management.<167>  In short, the  revised
          14a-8 is simply:  A rule everyone can live with.
          **ENDNOTES**
                  <1>:  See Randall S. Thomas & Kenneth J. Martin, Should Labor Be
            Allowed To Use Rule 14a-8?, 4 (July 7, 1997) (unpublished manuscript on
            file with Randall S. Thomas, Professor of Law at the University of Iowa
            College of Law, Iowa City, IA 52242, and Kenneth J. Martin, Associate
            Professor of Finance at the College of Business and Economics at New
            Mexico State University, Las Cruces, NM 88003).
                  <2>:  Proposals of Security Holders, 17 C.F.R.  240.14a-8 (1997).
                  <3>: See Alan R. Palmiter, The Shareholder Proposal Rule:  A
            Failed Experiment In Merit Regulation, 45 Ala. L. Rev. 879 (1994).
                  <4>:  SEC Proposes Reversal of `Cracker Barrel' In Revamped
            Shareholder Proposal System, 29 Sec. Reg. & L.Rep. (BNA) 1285 (Sept. 19,
            1997).
                  <5>:  Amendments to Rules on Shareholder Proposals, 62 Fed. Reg.
            50,682 (1997) (to be codified at 17 C.F.R. pt. 240).
                  <6>:  Id. at 50,682.  Under the proposed changes, shareholder
            proposals relating to "ordinary business" would once again be treated
            subjectively as they were prior to the 1992 SEC no-action letter that
            allowed Cracker Barrel Old Country Store Inc. to exclude an employment-
            related shareholder proposal even though social policy concerns were
            raised by the proposal.  SEC Proposes Reversal of `Cracker Barrel',
            supra note 4, at 1285.
                  <7>:  See SEC Proposes Reversal of `Cracker Barrel', supra  note
            4, at 1286.
                  <8>:  Between September 19, 1997 and January 2, 1998 the SEC
            received several hundred comment letters from investment groups,
            individual shareholders, students, and others expressing various
            thoughts on the proposed changes.  These comment letters were posted by
            the SEC at <http://www.sec.gov/rules/proposed/s72597.  To access the
            general level of public opinion expressed in these letters, for the
            purposes of this comment, thirty of the submitted comment letters were
            randomly selected for review.  Of the thirty letters analyzed only two
            supported the package of reforms proposed by the SEC.  Eleven of the
            letters, including the two in favor of the complete package, supported
            reversing the SEC's Cracker Barrel position.  The remaining nineteen
            letters of those surveyed were either directly opposed to all of the
            proposed reforms, or at least did not separately support the reversal of
            Cracker Barrel.
                  <9>:  See Letter from Margaret Groarke, to Arthur Levitt, Chairman
            of the Securities and Exchange Commission (Jan. 5, 1998)
            <http://www.sec.gov/rules/proposed/s72597/groarke1.
                  <10>:  Concurrence of Commissioner Steven M.H. Wallman (S7-25-97)
            (Sept. 18, 1997). <http://www.sec.gov/rules/proposed/s72597cn.htm
                  <11>: See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,683.  The Investor Responsibility Research Center ("IRRC")
            monitors proposals at approximately 1,500 companies each year and the
            American Society of Corporate Secretaries ("ASCS") tracks proposals at
            approximately 1,950 companies.
                  <12>: Proposals of Security Holders, 17 C.F.R.
            240.14a-8.  The SEC feels that the rule enhances investor confidence in
            the securities markets by providing a means for shareholders to
            communicate with management and with other shareholders.  See Amendments
            to Rules on Shareholder Proposals, 62 Fed. Reg. at 50,698.
                  <13>:  Palmiter, The Shareholder Proposal Rule, supra note 3, at
            886.
                  <14>:  See Proposals of Security Holders, 17 C.F.R.
           240.14a-8.
                  <15>: See Proposals of Security Holders, 17 C.F.R.
           240.14a-8(d).  Under the current application of 14a-8, a
          company that receives a proposal has no obligation to make a
          submission to the SEC unless it intends to exclude the
          proposal.  From September 30, 1996 to September 26, 1997 the
          SEC received submissions under 14a-8 from 245 different
          companies.  See Amendments to Rules on Shareholder
          Proposals, supra note 5 at 50,697.
                  <16>:  See Thomas & Martin, supra note 1, at 22.
                  <17>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,683.  The staff response is not legally binding, and does not
            necessarily reflect the view of the Commission.  For this reason, either
            party is free to institute a private action to obtain a legally binding
            decision from a federal court on the excludability of a challenged
            proposal.  See id.  In the past, when a company received a "no action"
            letter from the SEC stating that the Commission would not pursue
            enforcement action if the company omitted a proposal, the company
            generally was safe in assuming that it would not be exposed to legal
            action if it omitted the proposal from its proxy material.  See Michael
            J. Connell, Preparation of Annual Disclosure Documents 1997:
            Shareholder Proposals, 970 PLI/Corp 397, 400 (1997).  This assumption
            however may not be as safe as it once was, given the recent decision in
            New York City Employees' Retirement System v. SEC, in which the court
            concluded that no action letters from the SEC are merely opinions of the
            SEC staff, and deserve little deference from the courts.  New York City
            Employees' Retirement System v. SEC, 45 F.3d 7, 12 (2d Cir. 1995).
                  <18>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(a)(1).  Although any shareholder which owns the
          required amount of securities is eligible to submit a
          resolution to management, each shareholder is only permitted
          to submit one proposal. See Proposals of Security Holders,
          17 C.F.R.  240.14a-8(4).  Additionally, any supporting
          statements in connection with the proposal may not exceed
          500 words in length.  See Proposals of Security Holders, 17
          C.F.R.  240.14a-8(4)(b)(1) (1997).
                  <19>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(a)(2).
                  <20>: Proposals of Security Holders, 17 C.F.R.
          240.14a-
            8(a)(3).
                  <22>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c).
                  <23>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(1).
                  <24>:  See Connell, Shareholder Proposals, supra note 17, at 405.
                  <25>:  See Lewis D. Solomon & Alan R. Palmiter, Corporations:
            Examples and Explanations  19.5.2 (2d ed. 1994).
                  <26>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(2).
                  <27>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(3).
                  <28>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(3).
                  <29>:  See Connell, supra note 17, at 406.
                  <30>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(4).
                  <31>: See Solomon & Palmiter, Corporations:  Examples and
            Explanations, supra note 25, at 292.
                  <32>: See Michael J. Connell, supra note 24, at 407.
                  <33>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(5).
                  <34>:  See Solomon & Palmiter, Corporations:  Examples and
            Explanations, supra note 25, at 290.  A particularly famous case that
            supported the "not significantly related" language of this provision was
            Lovenheim v. Iroquois Brands, 618 F.Supp. 554 (D.D.C. 1985).  In
            Lovenheim, the court held that a shareholder proposal concerning the
            cruelty involved in force feeding geese in order to produce pate could
            not be omitted from the company's proxy materials despite the fact that
            significantly less than 5% of the company's sales and profits were
            derived from this activity.  Id. at 562.
                  <35>: See Connell, supra note 17, at 407.
                  <36>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(6).  In the past the Commission has construed
          this provision in a very narrow manner. See Connell, supra
          note 24, at 408.
                  <37>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(7).
                  <38>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,683.
                  <39>:  See Connell, supra note 17, at 409.
                  <40>:  Cracker Barrel Old Country Store, Inc., SEC No-Action
            Letter, 1992 SEC No-Act. Lexis 984.  The opinion set forth in the no-
            action letter was appealed to federal court where it was reversed.  See
            New York City Employees' Retirement System (NYCERS) v. SEC, 843 F. Supp.
            858, 880 (S.D.N.Y. 1994).  However, on appeal the Circuit Court again
            reversed the decision and upheld the SEC no-action letter.  See NYCERS
            v. SEC, 45 F.3d 7 (2d Cir. 1995).
                  <41>: NYCERS v. SEC, 45 F.3d at 9.
                  <42>:  See id.
                  <43>:  See id. at 10.
                  <44>:  See SEC Proposes Reversal of `Cracker Barrel', supra note
            4, at 1286.
                  <45>:  See id.
                  <46>:  See id. at 1285.
                  <47>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(8).  However, this provision cannot be used
          by management to exclude proposals that suggest procedures
          under which to hold elections or suggest requirements for
          nominees (for example a proposal which suggests requiring
          future directors to own company shares), provided that the
          proposal is constructed such that it does not affect the
          election to take place at the immediately upcoming
          shareholders' meeting.  See Connell, supra note 17, at 410.
                  <48>: See Solomon & Palmiter, Corporations:  Examples and
            Explanations, supra note 25, at 291.
                  <49>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(9).
                  <50>:  Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(10).  This exclusion applies when management
          feels that the company is already doing what the shareholder
          suggests or where the company feels that the proposal has
          been "substantially implemented."  Whether or not a proposal
          is "moot" is a factual determination that can only be made
          on a case by case basis.  See Connell, supra note 17, at
          411.
                  <51>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(11).  Like many of the other reasons for
          exclusion, what exactly qualifies under this provision must
          be determined on a case by case basis by members of the SEC
          staff.
                  <52>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(12).  The level of support required to
          prevent management from excluding a proposal varies
          depending on the number of times a proposal has been
          submitted to the shareholders for a vote.  A proposal can be
          omitted if during the preceding five years it has been
          submitted: (i) at only one meeting and received less than
          three percent of the total votes cast, (ii) at only two
          meetings and received less than six percent of the total
          votes, (iii) at three or more meetings and received less
          than ten percent of the total votes on its latest
          submission.  See id.
                  <53>:  See Connell, supra note 17, at 412.
                  <54>: Proposals of Security Holders, 17 C.F.R.
           240.14a-8(c)(13).
                  <55>:  The SEC recently completed a survey of some of America's
            largest corporations in order to ascertain how corporate America feels
            about the current shareholder proposal process and the SEC staff's role
            within the process.  Eight companies with over half a million
            shareholders responded.  G.E. and AT&T reported that they are
            "satisfied" with the process.  Hewlett Packard said it is "very
            satisfied." IBM, GTE, Procter & Gamble, and Exxon said they are
            "unsatisfied," and Bell Atlantic said it is "very unsatisfied."  However
            with respect to the Cracker Barrel decision, all of the large firms
            agreed with the decision that employment proposals that raise broader
            policy issues should not be included in proxy statements.  See Proxies:
            Some of Surveyed Firms Show Consensus On `Cracker Barrel,' Other Issues,
            29 Sec. Reg. & L.Rep. (BNA) 567 (Apr. 25, 1997).  Among all companies
            responding to the SEC questionnaire, 40% ranked as their top reform goal
            the reduction of the types of proposals that they must include on their
            proxy statements.  See Amendments to Rules on Shareholder Proposals, 62
            Fed. Reg. at 50,683.
                  <56>:  A perception that the SEC is responding to shareholder
            proposals with general feelings of hostility or tolerance likely results
            from the recognition of trends in SEC no action letters.  One such
            documented trend is the fact that the SEC "is now thirty percent more
            likely to permit the exclusion of proposals urging greater corporate
            social responsibility than was the case ten years ago."  Palmiter, The
            Shareholder Proposal Rule, supra note 3, at 883.  What may be surprising
            to some is that this trend was discovered before the Cracker Barrel
            decision was upheld in court and may now therefore be even more
            pronounced.  In response to a questionnaire distributed in February 1997
            to shareholders, 63% of those responding ranked as the top goal of
            reform the expansion of the categories of proposals that companies must
            include on their proxy materials.  See Amendments to Rules on
            Shareholder Proposals, 62 Fed. Reg. at 50,683.
                  <57>:  See Palmiter, The Shareholder Proposal Rule, supra note 3,
            at 883.
                  <58>:  Proposed Shareholder Proposal Rule Would `Cripple'
            Dialogue, Coalition Warns, 29 Sec. Reg. & L.Rep. (BNA) 1723 (Dec. 12,
            1997).  See also National Securities Markets Improvement Act of 1996,
            Pub. L. No. 104-290,  510(b), 110 Stat. 3416 (1996).  Specifically, the
            Commission was required to study (1) whether shareholder access to proxy
            statements pursuant to 14a-8 was impaired by recent statutory, judicial,
            or regulatory changes and (2) the ability of shareholders to have
            proposals relating to corporate practices and social issues included as
            part of a company's proxy materials.  Id.
                  <59>:  Former SEC Commissioner Steven Wallman has been an
            outspoken proponent for changes to 14a-8 for several years.  Wallman's
            personal proposal, although containing drastic modifications from the
            current law, essentially maintains the current structure and functioning
            of the rule, and is therefore not discussed here.  See Wallman Proposes
            Broad Changes To SEC's Shareholder Proposal Rule, 29 Sec. Reg. & L.Rep.
            (BNA) 1244 (Oct. 11, 1996).
                  <60>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,684.  This proposal was supported by 63% of the companies
            surveyed; however, its support among shareholders was only 9%.  Id.  A
            similar alternative under which (without "merit-based" regulation)
            proposals submitted under 14a-8 would be limited to seven per company,
            with priority given to those shareholders with the largest holdings in
            cases where more than seven proposals were presented was originally
            proposed by Alan R. Palmiter in 1994.  See Palmiter, The Shareholder
            Proposal Rule, supra note 3, at 885.
                  <61>: See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,684.  At first glance this alternative appears to be a
            plausible alternative given the fact that the current rule defers to
            state law on the central question of whether a proposal is a proper
            matter for shareholder action.  See Proposals of Security Holders, 17
            C.F.R.  240.14a-8(c)(1).
                  <62>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,683.
                  <63>:  See id. at  50,684.  Among those surveyed by the SEC 73% of
            company respondents and 75% of shareholder respondents favored this
            approach over the other alternatives.  Id.
                  <64>:  See SEC Proposes Reversal of `Cracker Barrel', supra note
            4, at 1286.
                  <65>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,684.
                  <66>:  Id.  In a survey conducted by the SEC, 65% of individual
            shareholder respondents indicated that they believe shareholders
            generally do not understand the current version of 14a-8.  See id.
                  <67>:  For example, currently 14a-8(c)(7) allows exclusion of
            proposals relating to a company's "ordinary business." Proposals of
            Security Holders, 17 C.F.R.  240.14a-8(c)(7).  Under the proposed
            version, the "ordinary business" language would be changed to permit
            exclusion where "the proposal relates to specific business decisions
            normally left to the discretion of management."  This modification is
            intended to make the "ordinary business" exclusion easier to understand,
            and is not intended to modify how the exclusion is applied. See
            Amendments to Rules on Shareholder Proposals, 62 Fed. Reg. at 50,685.
                  <68>:  In addition to the major changes included in the
            modifications to the specific exclusions of 14a-8(c), the proposed
            version of 14a-8 would also increase the ownership requirement to $2,000
            from its current level of $1,000. See Amendments to Rules on Shareholder
            Proposals, 62 Fed. Reg. at 50,694.
                  <69>:  See Connell, supra note 17, at 407.
                  <70>:  Proposed Amendments to Rule 14a-8 Under The Securities and
            Exchange Act of 1934; Relating to Proposals By Security Holders, 47 Fed.
            Reg. 47,420, 47,427 (1982).
                  <71>: See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,686.
                  <72>:  See id.  If a company were to receive a "no view" response
            from the SEC, it could still omit the proposal from its proxy materials
            if it believed that it had the necessary proof to defend its position in
            court.
                  <73>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,686.
                  <74>:  Because of the "otherwise significant" language of the
            provision, even if a proposal represents less than 5% of a company's
            assets or sales, it is still often included on the proxy materials.  In
            fact, between September 1996 and September 1997 only two proposals were
            successfully excluded using 14a-8(c)(5).  See Amendments to Rules on
            Shareholder Proposals, 62 Fed. Reg. at 50,686.
                  <75>: See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,686.  The proposed revision would use 3% of the company's
            revenue or assets as the applicable threshold for smaller companies
            where 3% of either assets or revenues represents a figure smaller than
            $10 million.  Id.
                  <76>:  To prevent the revised version of (c)(5) from excluding
            proposals which may be important despite having a low economic impact,
            the SEC has proposed four safeguards: (1) the exclusion would apply only
            to quantifiable matters (2) the economic threshold would be
            significantly reduced from the current level of 5% to help counter the
            elimination of the "otherwise significant" language (3)the exclusion
            would apply only to proposals related to the purchase or sale of
            products and services and not matters involving the company's internal
            governance (4) any inflexibility that would result from a purely
            economic standard would be offset by the adoption of the override
            provision.  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,687.
                  <77>: See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,688.
                  <78>:  See id. Although the Cracker Barrel decision is supported
            by an estimated 91% of companies, the SEC feels its reversal is
            justified given the "package of reforms" proposed under the revised
            version of 14a-8.  Former Commissioner Steven Wallman, in calling for
            the immediate reversal of Cracker Barrel, however, has suggested that
            "the notion of holding the reversal of Cracker Barrel hostage to the
            success or failure of an overall reform effort" would be a drastic
            mistake.  See SEC Proposes Reversal of `Cracker Barrel', supra note 4,
            at 1285.
                  <79>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,688.  Many people familiar with the shareholder proposal
            process, including Commissioner Isaac Hunt have questioned the wisdom of
            placing the SEC staff in the position of line drawing on what social
            policy concerns deserve inclusion in company proxy materials.  See SEC
            Proposes Reversal of `Cracker Barrel', supra note 4, at 1286.
                  <80>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,688.  In fact, the SEC has already stated for example that
            reversal of the Cracker Barrel decision would not automatically result
            in the inclusion of proposals focusing on wage and other issues for
            companies with Mexican maquiladora operations.  Additionally, the SEC
            has hinted that proposals which attempt to micro manage company
            operations by seeking intricate detail or the imposition of specific
            time frames to implement complex policies will continue to be excluded
            under the revised rule.
                  <81>:  See id. at 50,696.  Admittedly there is no way to tell how
            many additional proposals will be submitted involving employment related
            social issues, if proponents feel more confident about the chances of
            seeing their proposals included on the proxy materials.
                  <82>:  See id. at 50,689.
                  <83>:  See id.  The SEC also justifies these higher thresholds by
            pointing out that proposals which do not generate at least these levels
            of support over the course of three submissions will have been "fairly
            tested" and stand little chance of obtaining a level of support needed
            for their adoption.  Former Commissioner Wallman however has urged that
            shareholders will be adversely impacted by the increased resubmission
            thresholds, and in particularly by the "very high level of 30 percent in
            the third year." See SEC Proposes Reversal of `Cracker Barrel', supra
            note 4, at 1286.
                  <84>: See SEC Proposes Reversal of `Cracker Barrel', supra note 4,
            at 1286.
                  <85>: See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,690.  Proponents utilizing the override would be required to
            demonstrate to the company, more than 120 days before the date on which
            the company's proxy statement was released in connection with the prior
            year's shareholder meeting, that their proposal has received the support
            of holders of 3% of the company's shares entitled to vote on the
            proposal at the upcoming meeting.  To accommodate these requirements,
            14a-8's current timing requirements would be amended to provide a
            proponent with a chance to learn from the SEC whether a proposal is
            properly excludable before attempting to invoke the override procedure.
            As it is currently written, 14a-8 does not include any mechanism for
            overriding a management decision to exclude a proposal for any reason
            listed in 14a-8.  See Proposals of Security Holders, 17 C.F.R. 
            240.14a-8.
                  <86>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,690.
                  <87>:  See id.
                  <88>:  See id.
                  <89>:  See id.
                  <90>:  See id. at 50,696.  During the most recent proxy season,
            the SEC staff concurred in the exclusion of approximately 100 proposals
            under 14a-8(c)(7) and (c)(5) which would have been potentially subject
            to the proposed override mechanism.  Id. at 50,698.
                  <91>:  Although the SEC does not have data which demonstrates the
            marginal cost of including an additional shareholder proposal on a
            company proxy statement, the average cost reported to the SEC by
            companies to include shareholder proposals on their proxy materials was
            $49,563. See id. at 50,699.  Additionally, the SEC has reported that
            companies on average spend $36,603 per year determining whether to
            include or exclude shareholder proposals and in following SEC procedures
            related to proposals that the company wishes to exclude.  See id.
                  <92>:  See Philip Scipio, Companies, Investors May Agree on Proxy
            Reform, Investor Relations Business, Jan. 27, 1997, available in 1997 WL
            8783793.
                  <93>:  Although the reform proposals were originally presented by
            the SEC in September of 1997 for possible inclusion in the 1998 proxy
            season, tension and conflict have eliminated the possibility of the
            rules affecting the 1998 proxy season.  In fact, as of the writing of
            this comment, the proposals had still not been submitted for the full
            Commission vote which was originally scheduled to take place in October
            1997.  See Michael Schroeder, SEC Considers New Proposal On Resolutions,
            Wall St. J., Jan. 16, 1998, at A1.
                  <94>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,702 (emphasizing that the SEC currently lacks reliable
            empirical data on the magnitude and frequency of any such effects).
                  <95>:  The 1996 proxy season was selected because of two main
            factors:  (1) the current version of 14a-8 was also in effect in 1996,
            thus any effects which are observed can also be expected to occur when
            and if the proposed changes are actually adopted by the SEC, and (2) the
            data available at the time of this writing for the 1996 proxy season is
            relatively complete in comparison to the data presently available for
            the recently completed 1997 proxy season.
                  <96>:  To make the analysis manageable, it was important to reduce
            the number of proposals included in the study given the fact that
            companies receive approximately 900 proposals each year which
            shareholders wish to see included on the companies' proxy materials.
            See Amendments to Rules on Shareholder Proposals, 62 Fed. Reg. at
            50,683.
                  <97>:  See Checklist of 1996 Shareholder Resolutions, Corp. Soc.
            Issues Rep., Apr./May 1996, at 15, 15-19 (listing the social policy
            shareholder proposals that IRRC tracked during the 1996 proxy season).
                  <98>:  By their very nature, social policy proposals often are
            related to propositions, which while perhaps an important aspect of
            company policy, are also personally related to some other aspect of a
            shareholder's life.  For example, proposals by church affiliated groups
            often seek to influence companies to operate in a manner that is
            consistent with deeply rooted beliefs.
                  <99>:  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.  Typically, proxy seasons run from approximately July 1st to
            the following June 30th of each year, with the majority of shareholder
            proposals being presented in the fall of each year in hopes of
            eventually being voted on at the annual shareholder's meeting which is
            typically held in the spring.  Thus, the 1996 proxy season last from
            July 1, 1995 to June 30, 1996.
                  <100>:  See id.  Specifically, the 258 social policy shareholder
            submissions resulted in the following:
               75   withdrawn by proponent
               3    not voted upon because of company mergers
               98   voted on by shareholders
               5    omitted [a-1]  eligibility of proponent
               5    omitted [a-3]  timeliness
               3    omitted [a-4]  number of proposals / word limit
               1    omitted [b-1]  supporting statement word limit
               14   omitted [c-3]  false or misleading statement
               2    omitted [c-4]  personal claim or grievance
               1    omitted [c-5]  not significantly related
               34   omitted [c-7]  ordinary business
               7    omitted [c-10] moot proposal
               1    omitted [c-11] duplicate proposal
               9    omitted [c-12] insufficient votes prior meeting.
          <101>:
                    The 75 proposals withdrawn by their proponents before a vote or
            exclusion were presented to 63 different companies.  The proposals
            related to many of the same topics which were either voted upon or
            excluded at other companies such as:  environmental concerns (6),
            Northern Ireland operations (6), foreign labor standards (5), equal
            employment (10), tobacco (12), and foreign military sales (4).  In
            addition to the 75 proposals withdrawn by their proponents, 3 proposals
            in the 1996 proxy season were not voted on because the applicable
            companies involved entered mergers before voting could occur.  Because
            these mergers would have occurred regardless of the status of the
            shareholder proposal process, it is safe to assume that these proposals
            would also not have been affected by the changes in 14a-8.
                  <102>:  The 31 social policy proposals that would continue to be
            excluded under the new rule fall under the following provisions which
            will remain applicable: 5 (a-3); 3 (a-4); 1 (b-1); 14 (c-3); 7 (c-10); 1
            (c-11).
                  <103>:  During the 1996 proxy season, of the 258 social policy
            proposals made, 149 were either voted on by the shareholders, and
            therefore could potentially be excluded under a modified provision, or
            were originally omitted under one of the provisions of 14a-8 which is to
            be modified.
                  <104>: For a discussion of the proposed version of 14a-8(a)(1),
            the minimum ownership requirement increases from $1,000 to $2,000, see
            supra note 68.
                  <105>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,694.  An actual inflation adjustment from the time of the
            rule's adoption in 1983 would cause the minimum ownership requirement to
            increase to $1,600.  The SEC proposed $2,000 in order to account for
            future inflation as well as the great market appreciation that has
            occurred since 1983.
                  <106>:  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.
                  <107>:  See Allied Signal, Inc., SEC No-Action Letter, 1995 SEC
            No-Act. Lexis 920.
          <108>:   See id.
                  <109>:  See id.
                  <110>:  Although the proposal would probably continue to receive
            the same no-action response from the SEC under (c)(4), under the
            proposed version of 14a-8, the SEC would not also support the omission
            of this proposal with a reference to 14a-8(c)(7) as it did in the
            original letter because of the proposed reversal of the Cracker Barrel
            decision.
                  <111>:  See Phillips Petroleum Company, SEC No-Action Letter, 1996
            SEC No-Act. Lexis 222.
                  <112>:  See id.
                  <113>:  See id.
                  <114>:  See id.
                  <115>:  Of course, although the current version of the rule places
            little cost on shareholders initially, it also provides shareholders
            with little chance other than in the proposal itself in which to defend
            their position.
                  <116>:  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.
                  <117>:  This proposition is "surprising" given the fact that the
            revised version of (c)(5) has been widely criticized by shareholders who
            feel that in its revised format (c)(5) gives companies too much latitude
            under which to exclude proposals.  For a discussion of shareholder
            criticism, see supra note 8.
                  <118>:  See PepsiCo, Inc., SEC No-Action Letter, 1995 SEC No-Act.
            Lexis 162.  The IRRC did not believe in the policies of the government
            which was controlling Burma, and requested the PepsiCo terminate
            operations in Burma until political prisoners were released and
            political power transferred to a democratically-elected government.
                  <119>:  See id.
                  <120>:  See id.
                  <121>:  See id.
                  <122>:  Given that PepsiCo's operations in Burma accounted for
            approximately .02% of PepsiCo's total annual revenue of approximately
            $24 billion in 1994 (the last year in which complete data was available
            at the time of the IRRC's proposal), it is highly unlikely that
            operations in Burma will ever account for more than 5% of PepsiCo's
            total operations.  See id.
                  <123>:  In publicly available reports, PepsiCo does not disclose
            revenue per country on a regular basis unless it must do so for a
            specific purpose, such as supporting its reasoning for omitting
            shareholder proposals.  Because per country revenue numbers are not
            consistently reported, it is impossible to say exactly what PepsiCo's
            current revenues are with respect to Burma.
                  <124>:  As explained previously in note 76, the SEC has proposed
            several safeguards in order to limit the revised provision's effect on
            proposals which may be important despite having a low economic impact.
            Of these safeguards, it is debatable, as critics of the revision point
            out, as to how effective the 3% override provision will be in situations
            such as the present case where acquiring a 3% stake in a company the
            size of PepsiCo would require an investment in the neighborhood of
            nearly $4 billion. (As of February 5, 1998, PepsiCo was trading at 35
            7/16 on the NYSE and had 3,600,000,000 shares outstanding. See Wall St.
            J., Feb. 5, 1998, at C5.)  However, as was previously explained, a
            shareholder only needs the support of 3% of the company's shares and
            does not necessarily have to purchase a 3% interest.  Thus, if a
            shareholder truly believes that their proposal will provide merits and
            benefits to the company, they will acquire support from others on their
            own.  Under this procedure management will only have to include
            proposals which have merit significant to the point that their
            respective proponents are willing to support them with resources other
            than words.
                  <125>:  For an explanation of the average cost of the shareholder
            proposal process to companies see supra note 91.
                  <126>:  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.
                  <127>:  See id.  Of the twenty-six proposals omitted under the
            current application of (c)(7) that would remain unaffected by the
            proposed modifications, four involved proposals related to maquiladora
            operations.  Although, with proposals relating to maquiladora
            operations, one of the main concerns is employment conditions, the SEC
            has already stated that the reversal of the Cracker Barrel decision
            would not automatically result in the inclusion of such proposals.  See
            Amendments to Rules on Shareholder Proposals, 62 Fed. Reg. 50,688.  The
            remaining twenty-two proposals unaffected by the revisions to (c)(7)
            concerned various dissimilar matters related to ordinary business
            concerns of their respective companies.  For example, Mattel was able to
            omit under (c)(7) a proposal calling for the company to redesign its
            Barbie doll.  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 18.  Additionally, Alliant Techsystems was able to omit a
            proposal calling for it to end work on land mines.  See id. at 15.
                  <128>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. 50,688.  Although technically the proposals requesting companies to
            review international workplace standards in general are different on the
            surface from those requesting a review of maquiladora operations in
            Mexico specifically, the subject matter is for all practical purposes
            the same.  Thus, how much weight the SEC staff decides to give to this
            technical difference will determine how proposals requesting reviews of
            international operations will be handled under the revised version of
            (c)(7).  The weight given by the staff to the difference may in all
            likelihood be directly related to the public's perception of the (c)(7)
            revision.  For example, if the application of the revised (c)(7) is
            perceived by the public as not having enough of an impact, (which is a
            very real possibility given the limited impact shown by this study of
            the revised version) it is possible that proposals requesting reviews of
            international workplace employment conditions may find their way onto
            company proxy materials.
               Of course, it is also likely that the SEC could elect
          not to follow its pre-announced maquiladora position when
          the revisions are actually adopted.  However, given the
          strong opposition of corporate America to the revision of
          (c)(7) to begin with, this possibility seems to be more
          remote in light of the need to balance the effects of the
          proposed rules on management and shareholders.
                  <129>:  "Most people" of course does not include the specific
            management insiders that decided to omit the proposal from the company
            proxy materials to begin with.
                  <130>:  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15. The five affected proposals concerned the following: (1)
            rescind affirmative action programs; (2) no contractor/employment
            discrimination; (3) create high performance workplace; (4) report on
            equal employment; (5) report on standards at suppliers.
                  <131>:  Former Commission Steven Wallman has also urged the SEC to
            modify its application of (c)(7) regardless of how the Commission
            decides to handle the other provisions. See SEC Proposes Reversal of
            `Cracker Barrel', supra note 4, at 1285.
                  <132>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,683.
                  <133>:  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.
                  <134>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,689.
                  <135>:  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.  This result was arrived at by making the assumption that
            1996 was the first year in which any of the voted on proposals were
            submitted.  Thus, if a proposal received more than 3% of the vote it was
            considered to be eligible for submission to the company in the following
            year.
                  <136>:  The same assumptions were made for the revised version of
            (c)(12) as were made for the current version of the provision except
            that, in order to be considered eligible for resubmission a proposal was
            required to receive 6% approval.
                  <137>:  Amendments to Rules on Shareholder Proposals, 62 Fed. Reg.
            at 50,689.  It becomes even more apparent that proposals receiving this
            level of support have little realistic chance of being approved when one
            considers that only 2.04% (2 of 98) of all voted on proposals examined
            here were approved by the shareholders.
                  <138>:  See id.
                  <139>:  The thirty-five proposals potentially affected consisted
            of the one proposal omitted under (c)(5) and the thirty-four proposals
            omitted under (c)(7).
                  <140>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. 50,688.
                  <141>:  I use the term "lunatic fringe" to refer to the small
            percentage of shareholders who invest in companies not with the goal of
            achieving a fair return on their investment, but rather to find a stage
            from which "to vent their spleen about irrelevant matters."  Palmiter,
            The Shareholder Proposal Rule, supra note 3, at 888.
                  <142>:  For a discussion of the market value of PepsiCo, see supra
            note 124.
                  <143>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,690.
                  <144>:  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.
                  <145>:  Sixty-four percent (63 out 98) of the proposals voted on
            in 1996 fell into the following categories or requested the following
            action:  (17) tobacco related, (9) report on political contributions,
            (8) report on equal employment, (8) endorse the Ceres environmental
            principles, (7) implement the MacBride principles in Northern Ireland,
            (7) nuclear power related, and (7) human rights related.
                  <146>:  See H.B. Fuller, DEF14A, WL EDGAR Database, Filing
            96531972 (Apr. 18, 1996).
                  <147>:  See id. at 88.
                  <148>:  In order to be affected by the revised version of 14a-8 in
            a manner differently than the proposal would be affected under the
            current version of 14a-8, a proposal must be subject to one of the five
            modifications explained in part III of this comment.  The specific
            proposal examined here would not have been affected by the revised
            resubmission threshold set out by (c)(12) assuming that this was the
            first year in which this proposal was submitted because the proposal was
            approved by 10.8% of the votes cast, and thus qualifies for
            resubmission.  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 17.
                  <149>:  See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.
                  <150>:  See Exxon Corp., DEF14A, WL EDGAR Database, Filing
            96533720 (Apr. 24, 1996) at 21.
                  <151>:  Id.  Under the current version of 14a-8 the proposal was
            eligible for resubmission; however, under the revised version of 14a-8
            the proposal would not have been eligible for resubmission since it
            received the approval of only 5.2% of votes cast.  See Checklist of 1996
            Shareholder Resolutions, supra note 97, at 16.
                  <152>:  See American Brands Inc., DEF14A, WL EDGAR Database,
            Filing 96533820 (May 1, 1996).
                  <153>:  This statement does not consider the higher resubmission
            requirements contemplated by the revised rule.  In the specific case of
            the proposal examined here, the new resubmission thresholds would not
            used to exclude the proposal upon resubmission since the proposal was
            approved by 10.6% of shareholders in 1996.  See Checklist of 1996
            Shareholder Resolutions, supra note 97, at 15.
                  <154>: See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.
                  <155>:  See GTE Corp., DEF14A, WL EDGAR Database, Filing 96532456
            (Apr. 17, 1996).  The CERE'S principles suggest that a company should
            work toward: (1) protection of the biosphere, (2) sustainable use of
            natural resources, (3) waste reduction and disposal, (4) energy
            conservation, (5) risk reduction, (6) safe products and services, (7)
            environmental restoration, (8) informing the public, (9) management
            commitment, and (10) audits and reports.
                  <156>:  See Amendments to Rules on Shareholder Proposals, 62 Fed.
            Reg. at 50,688.
                  <157>: See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.  Note, this is the same shareholder group that first gained
            notoriety in the early 1990's for its involvement in the Cracker Barrel
            case.
                  <158>:  See Dun & Bradstreet Ltd., DEF 14A, WL EDGAR Database,
            Filing 96533326 (Apr. 16, 1996) at 35.
                  <159>:  Proper omission is of course based on the assumption that
            the proposal in question is considered by the SEC staff to be a
            quantifiable matter, which is related to less than $10 million annually.
                  <160>: See supra note 158, at 38.
                  <161>: See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 16.
                  <162>: See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.
                  <163>: See DTE Energy, DEF 14A, WL EDGAR Database, Filing 96537494
            (Apr. 22, 1996) at 70.
                  <164>:  See id.
                  <165>:  See id. at 72.
                  <166>: See Checklist of 1996 Shareholder Resolutions, supra note
            97, at 15.
                  <167>:  See SEC Proposes Reversal of `Cracker Barrel', supra note
            4, at 1286.