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March 12, 2018
Jonas Kron Trillium Asset Management, LLC [email protected]
Re: EOG Resources, Inc. Incoming letter dated March 7, 2018
Dear Mr. Kron:
This letter is in response to your correspondence dated March 7, 2018 concerning the shareholder proposal (the “Proposal”) submitted to EOG Resources, Inc. (the “Company”) by the Sierra Club Foundation et al. We also have received correspondence from the Company dated March 8, 2018. On February 26, 2018, we issued a no-action response expressing our informal view that the Company could exclude the Proposal from its proxy materials for its upcoming annual meeting. You have asked us to reconsider our position. After reviewing the information contained in your correspondence, we find no basis to reconsider our position.
Under Part 202.1(d) of Section 17 of the Code of the Federal Regulations, the Division may present a request for Commission review of a Division no-action response relating to Rule 14a-8 under the Exchange Act if it concludes that the request involves “matters of substantial importance and where the issues are novel or highly complex.” We have applied this standard to your request and determined not to present your request to the Commission.
Copies of all of the correspondence on which this response is based will be made available on our website at http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8.shtml. For your reference, a brief discussion of the Division’s informal procedures regarding shareholder proposals is also available at the same website address.
Sincerely,
Michele M. Anderson Associate Director
Enclosure
cc: Michael P. Donaldson EOG Resources, Inc. [email protected]
March7,2018
VIAe-mail:[email protected]
Mr.DavidFredricksonAssociateDirectorandChiefCounselDivisionofCorporationFinanceU.S.SecuritiesandExchangeCommission100FStreet,N.E.Washington,D.C.20549
Re: RequestforReconsiderationofFebruary26,2018No-ActionLetterissuedtoEOGResources,Inc.
DearAssociateDirectorandChiefCounselFredrickson,
ThisletterissubmittedonbehalfoftheProponentswhoarethebeneficialownersofsharesofcommonstockofEOGResources,Inc.(hereinafterreferredtoas“EOG”orthe“Company”),andwhohavesubmittedashareholderproposal(hereinafterreferredtoas“theProposal”)toEOGthefulltextofwhichisattachedasAttachmentA,whichrequests:
EOGResources,Inc.(EOG)adoptcompany-wide,quantitative,time-boundtargetsforreducinggreenhousegas(GHG)emissionsandissueareport,atreasonablecostandomittingproprietaryinformation,discussingitsplansandprogresstowardsachievingthesetargets.
OnFebruary26,2018,theOfficeofChiefCounselissuedano-actionletter(EOGno-actionletter)whichstated:
ThereappearstobesomebasisforyourviewthattheCompanymayexcludetheProposalunderrule14a-8(i)(7),asrelatingtotheCompany’sordinarybusinessoperations.Inourview,theProposalseekstomicromanagetheCompanybyprobingtoodeeplyintomattersofacomplexnatureuponwhichshareholders,asagroup,wouldnotbeinapositiontomakeaninformedjudgment.
WeherebyrequestreconsiderationoftheStaff'sgrantoftheno-actionletterandifreconsiderationisdeniedthat,pursuantto17CFR202.1(d),thematterbepresentedtotheCommissionforitsconsideration.AcopyofthisrequestisbeingprovidedtotheCompanyatMichael_Donaldson@eogresources.comandAmosOekling,SeniorCounselandDeputyCorporateSecretary([email protected]).
Inadramaticmove,theStaffhasstoppedaproponentfromfilingashareholderproposalaskingacompanytosetquantitative,time-boundtargetstoreducegreenhousegasemissionstocombatclimatechange.Thisisatime-testedproposalmodelthathasbeenfiledover150timesinthelast15years.
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ItisimpossibletooverstateboththescopeoftheshareholderactivityandinterestinthisissuethatcouldbehaltediftheEOGno-actionletterexemplifiesanewinterpretationofmicromanagement.Forover15years,shareholdershavefiledshareholderproposalsatawidevarietyofcompaniesaskingthemtosetquantitative,time-boundgreenhousegasemissionsreductiongoals.Asaconsequence,theEOGno-actionlettercanbeseenbyshareholdersasapotentiallydramaticinterferencewiththemarketplace.AccordingtoInstitutionalShareholderServicesrecordsofshareholderproposalsfiledattheRussell3000since2004,shareholdershavefiledover150shareholderproposalsaskingcompaniestosetgreenhousegasemissionsgoals.From2004–2017theseproposalsreceivedamedianvoteof26%.Andinthe2016-2017timeperiodthemedianvotewas31.9%.AtEOG,asimilarproposal,whichfocusedonmethane1reductiongoals,wasvotedonin2014and2015receivingvotesof28%and31%respectively.Clearlytheseareproposalsthatinvestors,includingEOGshareholders,arequitefamiliarwithandcomfortableformingopinionsupon.Whiletheseproposalsarefiledatcompaniesinmanydifferentindustriesandsectors,theseGHGemissionreductiongoalproposalsareoftenfiledatoilandgascompanieslikeEOG:
• ChevronCorporation–2016,2015• MarathonPetroleumCorporation–2016,2015,2014• ExxonMobilCorporation–2015,2014,2013,2012,2011• Phillips66Co.–2015,2014• ValeroEnergyCorporation–2015,2014• ConocoPhillipsCo.–2014,2013,2012,2011• HollyFrontierCorporation–2014• WPXEnergy,Inc.–2014
TheseeffortshavecontributedtonumerouscompaniessettingGHGreductiontargets.Over350globalbusinesseshavecommittedtosettingGHGemissionsreductiontargetsconsistentwiththeglobal2-degreetemperaturerisegoalsetintheParisAccords.OverhalfofEOG’speersintheS&P500havesetGHGreductiongoals.TheoilandgassectorisnotexemptfromthisbroadmovementtosetGHGtargets.Hess,Apache,KinderMorgan,andSouthwesternEnergyareamongEOG’speersintheU.S.OilandGassectorthathavesetquantitative,time-boundGHGand/ormethanereductiongoals.The10majorinternationaloilandgascompaniesthatconstitutetheOilandGasClimateInitiative,includingShellandBP,recentlyannouncedtheirintentiontoworktowardsnear-zeromethaneemissions.Thisuptakeoftargetsettingbysomanycompaniesshouldbenosurprisegiventhecompellingargumentsinfavorofdoingso.SettingGHGreductiontargetsisfrequentlyfoundtobeasoundbusinessstrategy.A2013reportbyCDP,WWF,andMcKinsey&CompanyfoundthatcompanieswithGHGreductiontargetsachieved9%betterreturnoninvestedcapitalthancompanieswithouttargets.
1Methane,theprimarycomponentofnaturalgas,isanextremelypowerfulgreenhousegas.
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Wearealsoseeinglargeinstitutionalinvestorsdemonstratingdeepinterestinthisissue.Forexample,StateStreetGlobalAdvisorsrecentlypublisheddisclosurerecommendationsforoilandgascompanies,whereinitstates,“Weviewestablishingcompany-specificGHGemissionstargetsasoneofthemostimportantstepsinmanagingclimaterisk.”2OneoftherecommendationsofTheTaskForceonClimate-relatedFinancialDisclosures,whosemembersincludeJPMorganChase,UBSAssetManagement,GenerationInvestmentManagement,andBlackRock,is:“Describethetargetsusedbytheorganizationtomanageclimate-relatedrisksandopportunitiesandperformanceagainstthesetargets.”AccordingtoEY’s2018ProxyPreviewreport,“Thepercentageofinvestorsnotingclimatechangespecificallyisapriorityhasmorethantripledsince2016.”Thisinterestisnotlimitedtojustdisclosures,butisspecificallyfocusedonimprovingcorporatepoliciesandpractices.EYreportsthat79%ofinvestorshaveconcludedthatclimatechangeisa“significantriskfactor”andthat30%ofinvestorsbelieveimprovingcorporateclimatestrategyismoreimportantthanenhancingreporting.3InstitutionalShareholderServicesalsoissuedaforecastforthe2018seasonandbyitscountclimatechange:
proposalswilllikelyfeatureevenmoreprominentlyontheproxylandscape.ISSisawareof59filedproposalsrelatedtoclimatechangefor2018proxyseason,including15two-degreescenarioproposals(onealreadywithdrawn—atExxonMobil)andsevenproposalsonclimatechangeriskmanagement.Thetwo-degreescenarioproposalswerefiledbytendifferentmainfilers(notcountinganyco-filers),whichshowsthatthesefilingsarenottheresultofasinglecampaign—asisoftenthecasewithenvironmentalandsocialproposals—buttheoutcomeofawidespreadinitiative.4
Thiscomesontheheelsofmajorityvotesonclimatechangeproposalsin2017atExxonMobilandOccidentalPetroleumaskingthecompaniestoissuereportsprovidinga2degreescenarioanalysis.5TheimplicationsoftheEOGno-actionletterrundirectlycontrarytoallofthisinvestorandcorporateactivity,andappearsexceptionallyoutofstepwiththerealitiesofinvestor/companyengagementonclimatechange.Itisdirectgovernmentinterferenceinthemarketplacethatwillstopinvestors–fromMr.andMs.401Kallthewayup$100billionfunds–fromavailingthemselvesoftheirrightsasshareholders.GreenhousegasemissionshareholderproposalshavebeenfiledbyfirmsaslargeasCalSTRS,NewYorkCityPensionFund,thePresbyterianChurchUSA,theNewYorkStateCommonRetirementFundandassmallasprivateindividuals.Theyhavebeensupportedthroughtheproxyballot
2https://www.ssga.com/investment-topics/environmental-social-governance/2017/perspectives-on-effective-climate-change-disclosure.pdf3http://www.ey.com/us/en/issues/governance-and-reporting/ey-2018-proxy-season-preview#section34https://corpgov.law.harvard.edu/2018/01/23/doubling-down-on-two-degrees-the-rise-in-support-for-climate-risk-proposals/#more-1043945https://corpgov.law.harvard.edu/2017/06/21/are-shareholder-proposals-on-climate-change-becoming-a-thing/
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votesbyinvestorssuchasJPMorgan,MFS,MorganStanley,LeggMason,CharlesSchwab,EatonVance,HartfordFinancial,AllianceBernstein,OppenheimerandGoldmanSachs.Finally,theClimateAction100+,anorganizationsupportedby256investorswith$28trillioninassetsundermanagement,includingPIMCO,NorthernTrustAssetManagement,DeutscheAssetManagement,ManulifeAssetManagement,andHSBCGlobalAssetManagement,isactivelyengagedwiththeworld’s100largestGHGemitters.ThisgroupisrequestingthatthecompaniespubliclydisclosetheirGHGemissionsreductiontargetsanditsplanstoutilizeexistingtechnologysolutionstomeetsuchtargets.6IftheEOGno-actionletterispermittedtostand,itappearsthatinvestorsmaynolongerabletovoteinsupportoftheseproposals.Thisrepresentsadramaticshiftinthemarketplaceandlimitstheabilityofinvestorstospeaktomanagementandotherinvestorsonanimportantissueofwidespreadinterest.TheEOGno-actionlettercallsintoquestionalltargetandgoalsettingshareholderproposals.Inouropinion,thereisnothingintheCompany'sactivitiesorboardopinionthatjustifiesfindingmicromanagementatthiscompany,anditishardtounderstandhow,ifthisradicaldepartureonfindingmicromanagementisallowedtostand,thesamelogicwouldnotapplytomanyothercompaniesandproposals.Castingawiderviewthantheapproximately150GHGemissionreductiontargetproposals,itisclearthattheEOGno-actionletterputsintoquestionalltargetandgoalssettingshareholderproposals.Since2004,investorshavesuccessfullyfiledatleastanadditional70shareholderproposalsseekingcompanygoalsandtargets.Theseproposalsreceivedamedianvoteof25%.Subjectsoftheseproposalsinclude,namingafew:
• Waterusereductiongoals• Deforestationreductiongoals• Renewableenergygoals• Energyproductivitygoals• Animalsourcedmaterialreductiongoals
Assuch,whenviewedinlightofAppleInc.(December21,2017),Deere&Company(December27,2017),andVerizonCommunicationsInc.(March6,2018)theconcernabouttheEOGno-actionletterbecomesevenmoreconcerning.InthiscontextwealsonotethatStaffLegalBulletin14I(November1,2017),whilementioningmicromanagementinpassing,focusedits14a-8(i)(7)discussionalmostexclusivelyonquestionsofwhetheraproposalfocusesonamatterofsufficientlysignificantpolicyimportance.RecognizingthatEOGdiddiscussBoardviewsonthemattersraisedintheshareholderproposal,neverthelessStaffLegalBulletin14Iappearsinappositetothisdiscussiongiventhat
6http://www.climateaction100.org
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micromanagementreceivedonlymeagerreferenceinStaffLegalBulletin14I.However,iftheStaffisextendingStaffLegalBulletin14Iinvitationtoboardsofdirectorstoassertmicromanagementthis(1)hasnotbeenmadecleartoshareholdersand(2)wouldbeadramaticdeviationfrompastpracticeandCommissionguidance.Asdiscussedelsewhereinthisletter,micromanagementhasheretoforebeenusedtoexcludeproposalsthatarefocusedontheminutiaofoperationsratherthanthepermissibleandpracticablepolicyandgoalsettinglevelwhichinvestorsareappropriatelyandwellsuitedtoaddress.TheEOGno-actionletterisasharpdeviationfromthewaytheStaffhastreatedmicromanagementanalysisinthepast.In1998,theCommissionarticulatedthemicromanagementcomponentoftheRule14a-8(i)(7)analysisthisway:
Thesecondconsiderationrelatestothedegreetowhichtheproposalseeksto"micro-manage"thecompanybyprobingtoodeeplyintomattersofacomplexnatureuponwhichshareholders,asagroup,wouldnotbeinapositiontomakeaninformedjudgment.Thisconsiderationmaycomeintoplayinanumberofcircumstances,suchaswheretheproposalinvolvesintricatedetail,orseekstoimposespecifictime-framesormethodsforimplementingcomplexpolicies.7
Seealso,Rooseveltv.E.I.DuPontdeNemours&Company,958F.2d416(D.C.Cir.1992).Inthatcase,theAppellateCourtnotedthedifferencebetweenamicromanagingtimelineandonethatdoesnotmicromanage.JudgeRuthBaderGinsburg,intheCircuitCourtappeal,statedintheRooseveltdecisionthat:
Timingquestionsnodoubtreflect“significantpolicy”whenlargedifferencesareatstake.Thatwouldbethecase,forexample,ifDuPontprojectedaphase-outperiodextendingintothenewcentury.Ontheotherhand,wereRooseveltseekingtomoveupDuPont’stargetdatebybarelyaseason,thematterwouldappearmuchmoreofan“ordinary”thananextraordinarybusinessjudgment.RooseveltvDupont,at37.
OvertimethisanalyticalstructurehasledtheStafftopermitshareholderproposalsatcompaniesthatseekGHGemissionreductiongoals.Thefollowingarefourexamplesofsuchproposals,includinganoilandgascompany,andStaffresponses.FirstEnergyCorp.(March4,2015)
Proposal:Resolved:ShareholdersrequestthatFirstEnergycreatespecific,quantitative,timeboundcarbondioxidereductiongoalstodecreasethecompany’scorporatecarbon
7SECReleaseNo.34-40018(May21,1998)citingExchangeActReleaseNo.12999(Nov.22,1976).
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emissions,andreportbySeptember1,2015onitsplanstoachievethecarbongoalsthecompanyadopts
Staffletter:
Inourview,theproposalfocusesonreducinggreenhousegasemissionsanddoesnotseektomicromanagethecompanytosuchadegreethatexclusionoftheproposalwouldbeappropriate.
GreatPlainsEnergy(February5,2015)
Proposal:
Resolved:ShareholdersrequestthatGreatPlainsEnergycreatespecific,quantitative,timeboundcarbondioxidereductiongoalstodecreasethecompany’scorporatecarbonemissions,andreportbySeptember1,2015onitsplanstoachievethecarbongoalsthecompanyadopts
Staffletter:
Inourview,theproposalfocusesonreducinggreenhousegasemissionsanddoesnotseektomicromanagethecompanytosuchadegreethatexclusionoftheproposalwouldbeappropriate.
CentexCorporation(March18,2008)
Proposal:ShareholdersrequestthattheBoardofDirectorsadoptquantitativegoalsbasedonavailabletechnologies,forreducingtotalgreenhousegasemissionsfromtheCompany’sproductsandoperations;andreporttoshareholdersbyDecember31,2008onitsplanstoachievethesegoals.Suchreportwillomitproprietaryinformationandbepreparedatreasonablecost.
Staffletter:
WeareunabletoconcurinyourviewthatCentexmayexcludetheproposalunderrule14a-8(i)(7).AccordinglywedonotbelievethatCentexmayomittheproposalfromitsproxymaterialsinrelianceonrule14a-8(i)(7).
ONEOK,Inc.(February25,2008)
Proposal:RESOLVED:ShareholdersrequestthattheBoardofDirectorspreparereportconcerningthefeasibilityofadoptingquantitativegoals,basedoncurrentandemergingtechnologies,forreducingtotalgreenhousegasemissionsfromthecompany’soperations;andthatthecompanyshouldsubmitthisreporttoshareholdersbyDecember31,2008.Suchreportwillomitproprietaryinformationandbepreparedatreasonablecost.
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Staffletter:
WeareunabletoconcurinyourviewthatONEOKmayexcludetheproposalunderrule14a-8(i)(7).AccordinglywedonotbelievethatONEOKmayomittheproposalfromitsproxymaterialsinrelianceonrule14a-8(i)(7).
Therearealsoexamplesofshareholderproposalsfiledatoilandgascompanieswhicharesignificantlymorecomplicated.IdenticalproposalsinChesapeakeEnergyCorp.(April13,2010),UltraPetroleumCorp.(March26,2010),EOGResources,Inc.(February3,2010)andCabotOil&GasCorp.(January28,2010),whichpassedmusterunderthemicromanagementstandard,requestedareporton:
1.theenvironmentalimpactoffracturingoperationsof[companyname];2.potentialpoliciesforthecompanytoadopt,aboveandbeyondregulatoryrequirements,toreduceoreliminatehazardstoair,water,andsoilqualityfromfracturing;3.otherinformationregardingthescale,likelihoodand/orimpactsofpotentialmaterialrisks,shortorlong-termtothecompany’sfinancesoroperations,duetoenvironmentalconcernsregardingfracturing.
ButevenbeyondtheexampleofGHGemissiongoalsatthesecompanies,itisevidentthattheStaffhasconsideredcomparableorevenmorecomplexproposalstobeappropriateunderRule14a-8(i)(7).TakeforexamplethefollowingproposalsthatwerechallengedonRule14a-8(i)(7)groundsandwerefoundtobepermissiblebytheStaff:VerizonCommunications(February13,2012)
Resolved,shareholdersrequestthecompanypubliclycommit(whilenotconcedingorforfeitinganyissueinlitigationrelatedtonetworkneutrality)tooperatevoluntarilyitswirelessbroadbandnetworkconsistentwithnetworkneutralityprinciples–i.e.,operateaneutralnetworkwithneutralroutingalongthecompany’swirelessinfrastructuresuchthatthecompanydoesnotprivilege,degradeorprioritizeanypackettransmittedoveritswirelessinfrastructurebasedonitssource,ownershipordestination.
HalliburtonCompany(March11,2009)
Resolved,thattheshareholdersofHalliburtonCompany(“Company”)herebyrequestthattheCompanyprovideareport,updatedsemi-annually,disclosingtheCompany’s:
1. Policiesandproceduresforpoliticalcontributionsandexpenditures(bothdirectandindirect)madewithcorporatefunds.2. Monetaryandnon-monetarypoliticalcontributionsandexpendituresnotdeductibleundersection162(e)(1)(B)oftheInternalRevenueCode,includingbutnotlimitedtocontributionstoorexpendituresonbehalfofpoliticalcandidates,politicalparties,politicalcommitteesandotherpoliticalentitiesorganizedandoperatingunder26USCSec.527oftheInternalRevenueCodeandanyportionofanyduesorsimilarpaymentsmadetoanytaxexemptorganizationthatisusedforanexpenditureor
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contributionifmadedirectlybythecorporationwouldnotbedeductibleundersection162(e)(1)(B)oftheInternalRevenueCode.Thereportshallincludethefollowing:
a) AnaccountingoftheCompany'sfundsthatareusedforpoliticalcontributionsorexpendituresasdescribedabove;
b) IdentificationofthepersonorpersonsintheCompanywhoparticipatedinmakingthedecisionstomakethepoliticalcontributionorexpenditure;and
c) Theinternalguidelinesorpolicies,ifany,governingtheCompany'spoliticalcontributionsandexpenditures
Thereportshallbepresentedtotheboardofdirectors’auditcommitteeorotherrelevantoversightcommitteeandpostedonthecompany’swebsitetoreducecoststoshareholders.
JPMorganChase&Co.(March19,2010),BankofAmericaCorp.(February24,2010),andCitigroupInc.(February23,2010)
BeitresolvedthattheBoardofDirectorsreporttoshareholders(atreasonablecostandomittingproprietaryinformation)byDecember1,2010,thefirm’spolicyconcerningtheuseofinitialandvariancemargin(collateral)onalloverthecounterderivativestradesanditsprocedurestoensurethatthecollateralismaintainedinsegregatedaccountsandisnotrehypothecated.
Wal-MartStores,Inc.(March31,2010)
Resolved,thattoadvancethecompany’sfinancialinterestsandthewelfareofchickenandturkeyskilledforitsstores,shareholdersencouragetheboardtorequirethecompany’schickenandturkeysupplierstoswitchtoanimalwelfare-friendlycontrolled-atmospherekilling(CAK),alesscruelmethodofslaughter,withinfiveyears.
Theseexamplesofproposalsthatpassedmusterunder14a-8(i)(7)areconsistentwiththeCommission’s1998Release,whichcitedfavorablytoAmalgamatedClothingandTextileWorkersUnionv.Wal-MartStores,Inc.,821F.Supp.877,891(S.D.N.Y.1993)(“ACTWU”)inadiscussionofhowtodeterminewhetheraproposalprobedtoodeeplyintomattersofacomplexnature.InACTWU,thecourtwasaddressingtheordinarybusinessexclusioninthecontextofemploymentdiscriminationataretailer.Thecourtconcludedthatthefollowingrequestdidnotviolatethemicromanagementstandardbyprobingtoodeeplyintothecompany'sbusiness:
1.AchartidentifyingemployeesaccordingtotheirsexandraceineachoftheninemajorEEOCdefinedjobcategoriesfor1990,1991,and1992,listingeithernumbersorpercentagesineachcategory.2.AsummarydescriptionofanyAffirmativeActionpoliciesandprogramstoimproveperformances,includingjobcategorieswherewomenandminoritiesareunderutilized.
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3. Adescriptionofanypoliciesandprogramsorientedspecificallytowardincreasingthenumberofmanagerswhoarequalifiedfemalesand/orbelongtoethnicminorities.
4. AgeneraldescriptionofhowWal-Martpublicizesourcompany'sAffirmativeActionpoliciesandprogramstomerchandisesuppliersandserviceproviders.
5. Adescriptionofanypoliciesandprogramsfavoringthepurchaseofgoodsandservicesfromminority-and/orfemale-ownedbusinessenterprises.
WhiletheEOGno-actionletterdoesnotprovideinvestorswithanyguidanceastoStaff’scurrentapproachto“micro-management”under14a-8(i)(7),theletterdoesleaveuswithseriousconcerns.InadditiontothelongtrackrecordofallowingshareholderstoevaluatemattersmorecomplexthanGHGemissionsreductiontargets,asshownabove,theStaffhaspermittedshareholderstomakeproposalsforcorporateactionorrequestsforinformationthatwasnotlimitedtoahigh-levelsignificantpolicyissue.Forexample,aproposalregardingWal-Martanimalwelfarepolicies8wasnotlimitedtosimplyaskingthecompanytohaveapolicy,butwaspermittedtofocusonaparticularpolicy.Similarly,aproposalregardingpoliticalspendingdisclosuresatHalliburtonwasnotlimitedtosimplyaskingthecompanytohaveapolicy,butwaspermittedtofocusonaspecificpolicy,withveryspecificarticulatedelements.WeareconcernedthattheapparentapproachappliedintheEOGno-actionletter,ifallowedtostand,wouldrestrictshareholderproposalswithvastandfarreachingconsequencesformanyinvestorsandmanysignificantissues.
Furthermore,therearemanyshareholderproposalsthatarecurrentlybeingconsideredbyinvestorsandaregettingveryhighvotes,butarenotbeingchallengedbycompanies,presumablybecausetheStaffapproachhasbeenconsistentlypermissiveofthesetypesofrequests,atleastuntilnow.Take,forexample,thefollowing:
CFIndustriesHoldings,Inc.–votedonatthecompany2013AGMandreceiveda50.7%vote
Resolved,ShareholdersrequestthattheBoardofDirectorsofCFIndustriesHoldings,Inc.("CF")adoptapolicyonBoarddiversitythatrequirestheCorporateGovernanceandNominatingCommitteeoftheBoard(the"Committee"),consistentwithitsfiduciaryduties,to:1. includewomenandminoritycandidatesinthepoolfromwhichBoardnomineesarechosen;2. expanddirectorsearchestoincludenomineesfrombothnon-executivecorporatepositionsandnon-traditionalenvironmentssuchgovernment,academia,andnon-profitorganizations;3. reviewperiodicallythecompositionoftheBoardtoensureitreflectstheknowledge,experience,skills,anddiversityrequiredtofulfillitsduties;and4. reporttoshareholders,atreasonableexpenseandomittingproprietaryinformation,itseffortstoencouragediversifiedrepresentationontheBoard.
876percentofUScompanieshavenowpublishedfarmanimalwelfarepolicies.http://www.meatpoultry.com/articles/news_home/Business/2017/01/Benchmark_report_examines_corp.aspx?ID=%7B1007BECF-2BD4-4ACB-8C34-8EFD10E1BD23%7D&cck=1
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J.B.Hunt–votedonatthecompany2016AGMandreceiveda54.7%vote
RESOLVEDShareholdersrequestthatJBHuntamenditswrittenequalemploymentopportunitypolicytoexplicitlyprohibitdiscriminationbasedonsexualorientation,genderidentityorexpressionandtotakeconcreteactiontoimplementthepolicy.
KBRInc.–votedonatthecompany2010AGMandreceiveda41%vote
RESOLVED,ShareholdersrequestmanagementtoreviewpoliciesrelatedtohumanrightstoassessareaswherethecompanyneedstoadoptandimplementadditionalpoliciesandtoreportitsfindingsbyDecember2010,omittingproprietaryinformationandpreparedatreasonableexpense.SupportingStatement:Werecommendthereviewinclude:
1.Riskassessmenttodeterminepotentialforhumanrightsabusesinlocations,suchastheMiddleEast,Nigeria,formerU.S.S.R.republics,Chinaandothercivil-strife/war-tornareas,wherethecompanyoperates.2.AreportoncurrentsystemsinplacetoensurethatKBRcontractorsandsuppliersareimplementinghumanrightspoliciesintheiroperations,includingmonitoring,training,addressingissuesofnon-complianceandassurancethattrafficking-relatedconcernshavebeenaddressed.3.KBR’sstrategyofengagementwithinternalandexternalstakeholders.
ThesetypesofproposalshavenotbeenchallengedunderRule14a-8(i)(7)formanyyears,presumablybecauseinvestorsandcompaniesalikehaveassumedthattheproponentshavestrucktheappropriatelevelofdetailonthesignificantpolicyissuestheyseektoaddress.Disruptingthisequilibriumcouldresultindramaticincreasesinno-actionletterrequestsandadditionalcoststoallpartiesastheyseektounderstandthecontoursoftheStaff’sRule14a-8(i)(7)analysis.Further,weareconcernedthattheapproachtakenintheEOGno-actionletterthreatenstounderminetheefficacyofRule14a-8,byreducingproponentstorequeststhatlackthespecificsneededtoaddresstheunderlyingissues.ConclusionForthereasonsprovidedabove,werespectfullyrequestthattheDivisionconcludeEOG’srequestforano-actionlettershouldhavebeendenied.Iftheno-actionletterisallowedtostanditwillbeinstarkcontrasttonumerousno-actionlettersonthispreciseproposalmodel,overmanyyears,andwillcallintoquestionnumerousproposalsonawiderangeofissues.Thefar-reachingconsequencesoftheEOGno-actionletter,coupledwiththeradicaldepartureitrepresentsfromthe1998ReleaseandStaff’sconsistentlyappliedanalyticalframeworkfordeciding
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“micromanagement”claims,withoutthebenefitofarulemakingorStaffLegalBulletin,illustratesthatthisisamatterofsubstantialimportance,therebycallingforreconsiderationpursuantto17CFR202.1(d).IntheeventthatuponreconsiderationoftheFebruary26,2018decisiontheStaffmaintainsitsposition,weherebyrequestthematterbereferredtotheCommissionforitsreview.Pleasecontactmeat503-894-7551orjkron@trilliuminvest.comwithanyquestionsinconnectionwiththismatter,orifyouwishanyfurtherinformation.Sincerely,
JonasKronCcMichaelP.DonaldsonEOGResources,Inc.michael_donaldson@eogresources.comInvestorAdvisoryCommitteeAnneSheehan,ChairmanDirectorofCorporateGovernanceCaliforniaStateTeachers'RetirementSystemASheehan@[email protected]
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AttachmentA
Resolved:ShareholdersrequestEOGResources,Inc.(EOG)adoptcompany-wide,quantitative,time-boundtargetsforreducinggreenhousegas(GHG)emissionsandissueareport,atreasonablecostandomittingproprietaryinformation,discussingitsplansandprogresstowardsachievingthesetargets.
Whereas:TheParisClimateAgreementof2015,agreedtoby195countries,establishedatargettolimitglobaltemperatureincreasesto2-degreesCelsiusabovepre-industriallevels.Tomeetthe2-degreegoalandmitigatethemostsevereimpactsofclimatechange,climatescientistsestimateitisnecessarytoreduceglobalemissions55percentby2050(relativeto2010levels),entailingaUSreductiontargetof80percent.
Accordingtoa2015reportbyCitigroupthecostsoffailingtoaddressclimatechangecouldleadtoa$72trillionlosstoglobalGDP.
EOGstates:“Oursafetyandenvironmentalmanagementprocessesarebasedonagoalsettingphilosophy.Thecompanysetssafetyandenvironmentalexpectationsandprovidesaframeworkwithinwhichmanagementcanachievesafetyandenvironmentalgoalsinasystematicway.”Despitethisphilosophy,EOGhasnotestablishedtime-boundorquantitativeemissionsreductionsgoals.Motivatedbytheimperativetoreduceemissions,cutcosts,and/orachievethegoalsoftheParisAgreement,manycompaniesaresettinggoals:
• Over300globalbusinesseshavecommittedtosettingGHGemissionsreductiontargetsconsistentwiththe2-degreegoal.
• Hess,Apache,KinderMorgan,andSouthwestern,areamongEOG’speersintheU.S.OilandGassectorthathavesetquantitative,time-boundGHGand/ormethanereductiontargets.
• The10majorinternationaloilandgascompaniesthatconstitutetheOilandGasClimateInitiativerecentlyannouncedtheirintentiontoworktowardsnear-zeromethaneemissions.
• OverhalfofEOG’speersintheS&P500havesetGHGreductiontargets.
SettingGHGreductiontargetsisfrequentlyfoundtobeasoundbusinessstrategy.A2013reportbyCDP,WWF,andMcKinsey&CompanyfoundthatcompanieswithGHGreductiontargetsachieved9%betterreturnoninvestedcapitalthancompanieswithouttargets.
Settingtargetswouldaddressacommonconcernofinvestorsthatareincreasinglyattunetotherisksofclimatechange.StateStreetGlobalAdvisorsrecentlypublisheddisclosurerecommendationsforoilandgascompanies,whereinitstates,“Weviewestablishingcompany-specificGHGemissionstargetsasoneofthemostimportantstepsinmanagingclimaterisk.”
OneoftherecommendationsofTheTaskForceonClimate-relatedFinancialDisclosures,whosemembersincludeJPMorganChase,UBSAssetManagement,GenerationInvestmentManagement,andBlackRock,is:“Describethetargetsusedbytheorganizationtomanageclimate-relatedrisksandopportunitiesandperformanceagainstthesetargets.”
WhileEOGhasimplementedvariousemissionsreductionstrategies,proponentsbelieveestablishingtime-bound,quantitativeemissionsreductiontargetswouldservetoalignnewandexistinginitiatives,spurinnovationtodrivefurtheremissionsreductions,lowercoststhroughenhancedefficiency,mitigaterisk,andenhanceshareholdervalue.
