-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, tPayfLKAyauzzqSeS9O0neCNMj6HjZvcT0aNUJTnlDwOyXM8cWc9lap+ujVjilXz sB+3Sc1f3AJ50zeMq1/KXg== 0000919788-94-000009.txt : 19940309 0000919788-94-000009.hdr.sgml : 19940309 ACCESSION NUMBER: 0000919788-94-000009 CONFORMED SUBMISSION TYPE: PREC14A CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940308 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED FREIGHTWAYS INC CENTRAL INDEX KEY: 0000023675 STANDARD INDUSTRIAL CLASSIFICATION: 4213 IRS NUMBER: 941444798 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PREC14A SEC ACT: 34 SEC FILE NUMBER: 001-05046 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 3240 HILLVIEW AVE CITY: PALO A LTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154942900 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL BROTHERHOOD OF TEAMSTERS CENTRAL INDEX KEY: 0000919788 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 530215427 STATE OF INCORPORATION: DC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PREC14A BUSINESS ADDRESS: STREET 1: 25 LOUISIANA AVENUE, NW CITY: WASHINGTON STATE: DC ZIP: 20010 BUSINESS PHONE: 2026246800 PREC14A 1 ELECTRONIC COPY OF 14A FILED IN PAPER ON 2/14 THIS IS A CONFIRMING ELECTRONIC COPY OF THE PRELIMINARY PROXY FILED IN PAPER ON FEBRUARY 14, 1994. February 14, 1993 Division of Corporation Finance Securities and Exchange Commission 450 5th St. N.W. Washington, D.C. 20549 Dear Officers, Attached, please find materials for an independent proxy solicitation at Consolidated Freightways. We ask for expedited consideration: We depend on hand-delivery of proxy materials since the identity of many shareholders is not knowable to us. Many shareholders are truck drivers who hold stock through a plan that doesn't release names and addresses. It is our intention to distribute the proxy statement twice. Once as soon as it receives your approval and before the company's proxy statement has been mailed, and once after the company has mailed its proxy, at which time we will solicit proxy cards. Note that two separate cover letters are attached, one to be used in the first distribution, and one to be used in the second. We plan to make the first distribution on Feb. 25. Attached are supporting documents. We note that two of these resolutions were submitted under 14-a-8 and include discussion of subjects that the company asked SEC to review for "false and misleading statements." Special Counsel William H. Carter signed the "no action" letter. Sincerely, William Patterson Director IBT Office of Corporate Affairs cc: William H. Carter PRELIMINARY PROXY STATEMENT INDEPENDENT SHAREHOLDER SOLICITATION Re: CONSOLIDATED FREIGHTWAYS ANNUAL MEETING: APRIL 25, 1994 Dear Consolidated Freightways Shareholder, We are writing to alert you to three corporate governance reforms proposed for our Company for which we intend to solicit proxies at the upcoming Annual Meeting on April 25. 1) Eliminate the 80% vote requirement to alter board structure; 2) De-Classify the Board; 3) Institute confidential voting. The first resolution complements the second, making board declassification the subject of a simple majority vote. Many shareholders may be unaware of the unusual voting standard required to change board structure. All three proposals are widely accepted governance reforms, supported by many institutional investors with published policies. We think these reforms are especially important for our Company to encorage the Board of Directors to improve shareholder value. Despite a strong rally last fall, CF's stock still trails its peers among the so-called Big Three: $100 invested in CF five years ago was worth $76 at the end of 1993. The same $100 invested in CF peers Roadway Services and Yellow Corp. was worth $145 by the end of 1993. In addition, CF suspended its dividend during this period. A vote for these resolutions is a vote to build on a governance reform effort begun in 1988 by the California Public Employee Retirement System (CalPERS). Last year, one of us -- Jim Weaver -- achieved the first success in the effort, garnering enough support to compel the company to negotiate a reform of its "poison pill." The "pill" is a device where the company's value is destroyed if an unfriendly investor acquires a certain level of CF stock./MAKE THE TRANSACTION PROHIBITIVELY EXPENSIVE. But more work needs to be done. CF's contest against the Weaver "poison pill" reform effort last year led to an episode worth careful consideration: CF officials lobbied institutional investors in person last spring. They assured investors that CF's Directors were attuned to shareholder interests. They emphasized that the long-troubled Emery division had turned the corner to profitability. Yet CF elected not to disclose an Emery employee bonus plan diverting what amounted to $20.5 million in Emery profits, or 40% of total 1993 CF profits. When CF finally disclosed the profit diversion three weeks after the annual meeting, CF's stock price fell nearly 20% in a matter of days. The drop equalled $3.22 a share. We think that a company more fully attuned to shareholder interests would have disclosed such information in a more timely fashion. To make personal visits to institutional investors and inform them that Emery had turned the corner, but elect not to tell them that most Emery profits would be diverted in 1993 to a bonus pool, suggests a lack of attention to shareholder interests. Unlike optimistic projections issued in previous years, the company's recent financial reports may signal a genuine turnaround. We think that additional corporate governance reforms can help keep a turnaround on track, and can make sure that these profits find their way to shareholders. When we forward the proxy solicitation material, we ask your support for the reforms. The first proposal was not submitted for inclusion in the company's proxy. BEFORE YOU USE THE COMPANY'S PROXY CARD, MAKE SURE THAT IT INCLUDES THE RIGHT TO VOTE ON ALL THREE PROPOSALS DESCRIBED HERE. Sincerely, James Weaver Jack Boyle William Patterson Employee- Employee- Director, shareholder shareholder IBT Corporate Affairs Dear Shareholder, We're pleased to present you with this independent proxy solicitation on behalf of three corporate governance reforms at Consolidated Freightways. 1) Eliminate the 80% vote requirement on board structure; 2) De-Classify the Board; 3) Institute confidential voting. We call special attention to the first item. Some institutional investors that otherwise support classified boards oppose them when accompanied with such an unusual voting standard. The company's recent encouraging financial reports may signal a real recovery. We think that additional corporate governance reforms can help keep the turnaround on track. Last year, for example, the company publicly emphasized the turnaround at its troubled Emery division, but elected not to disclose that most 1993 Emery profits would be diverted to an incentive compensation plan. A vote for these resolutions is a vote to build on a governance reform effort begun in 1988 by the California Public Employee Retirement System. Last year, one of us -- Jim Weaver - -- achieved the first success in the effort. We like to think that it is more than chance that this success coincided with the financial recovery of the company. We ask your support for the reforms, and remain, sincerely, James Weaver Jack Boyle William Patterson Employee- Employee- Director, shareholder shareholder IBT Corporate Affairs Dear Shareholder, We're pleased to present you with this independent proxy solicitation on behalf of three corporate governance reforms at Consolidated Freightways. 1) Eliminate the 80% vote requirement on board structure; 2) De-Classify the Board; 3) Institute confidential voting. To vote all three issues, you must use the enclosed independent proxy card. The company proxy will not include all three of these shareholder issues. We call special attention to the first item. Some institutional investors that otherwise support classified boards oppose them when accompanied BY SUPERMAJORITY VOTING REQUIREMENTS. The company's recent encouraging financial reports may signal a real recovery. We think that additional corporate governance reforms can help keep the turnaround on track. Last year, for example, the company publicly emphasized the turnaround at its troubled Emery division, but elected not to disclose that most 1993 Emery profits would be diverted to an incentive compensation plan. A vote for these resolutions is a vote to build on a governance reform effort begun in 1988 by the California Public Employee Retirement System. Last year, one of us -- Jim Weaver -- achieved the first success in the effort. We like to think that it is more than chance that this success coincided with the financial recovery of the company. We ask your support for the reforms, and remain, sincerely, James Weaver Jack Boyle William Patterson Employee- Employee- Director, shareholder shareholder IBT Corporate Affairs PRELIMINARY PROXY STATEMENT INDEPENDENT SHAREHOLDER SOLICITATION Re: CONSOLIDATED FREIGHTWAYS ANNUAL MEETING: APRIL 25, 1994 YOU CAN USE THIS CARD TO VOTE ALL THE ISSUES THAT WILL BE VOTED ON IN THE COMPANY'S ANNUAL MEETING. ON BOARD ELECTIONS AND OTHER MANAGEMENT-PROPOSED ISSUES, WE PLAN TO VOTE FOR MANAGEMENT, UNLESS YOU DIRECT US OTHERWISE. The enclosed proxy material relating to CONSOLIDATED FREIGHTWAYS from the CF Shareholders Committee is sent to you as the direct or/beneficial owner of shares in this corporation. Shareholders Jack Boyle and James Weaver who collectively own 4,284 shares, each propose resolutions that are joined here for purposes of explanation and solicitation. This proxy statement is being distributed to shareholders on or after Feb. 25. WE ARE NOT ASKING YOU TO SEND US A PROXY CARD NOW. WE WILL BE ASKING FOR YOUR PROXY ONCE THE COMPANY IDENTIFIES THE NAMES OF BOARD NOMINEES. BEFORE YOU SIGN THE COMPANY'S PROXY, MAKE SURE IT GIVES YOU THE RIGHT TO VOTE ON ALL THREE GOVERNANCE ISSUE DESCRIBED HERE. CF Shareholders Committee c/o International Brotherhood of Teamsters 25 Louisiana Ave NW Washington, D.C. 20001 Fax: 202-624-6833 COVER FOR SECOND SOLICITATION The enclosed proxy material relating to CONSOLIDATED FREIGHTWAYS from the CF Shareholders Committee is sent to you as the direct or/beneficial owner of shares in this corporation. Shareholders Jack Boyle, and James Weaver who collectively own 4,284 shares, each propose resolutions that are joined here for purposes of explanation and solicitation. This proxy statement is being distributed to shareholders on or after Feb. 25. To be ensured to vote all three issues, you need to use this proxy card. The company proxy may not include all three of these shareholder issues. By returning the enclosed proxy, stockholders will be able to vote on all matters described in management's proxy statement, in addition to all three issues. CF Shareholders Committee c/o International Brotherhood of Teamsters 25 Louisiana Ave NW Washington, D.C. 20001 Fax: 202-624-6833 Summary of Problems and Shareholder Reforms For five years, shareholders of Consolidated Freightways have confronted serious problems: * Declining stock price; and * Dividend suspension; and * Undisclosed profit diversion for bonuses; and * Two alleged insider trading episodes by key officers. A Board more fully attuned to shareholder interests would have overseen more timely repairs to CF's financial posture, and would have more diligently policed insider trading and disclosure irregularities. Instead, the company has repeatedly contested shareholders who did seek reforms. These problems indicate that the CF Board may be insulated from shareholder concerns. To address this insulation, shareholders are proposing three reforms: 1) Eliminate the supermajority requirement of 80% shareholder approval to declassify the Board, or to mandate shareholder elections for open seats; 2) De-Classify the Board, to require annual elections of all Board Directors; 3) Institute confidential voting to eliminate the chance for coercion. The first resolution complements the second, making board declassification the subject of a simple majority vote. These are widely accepted governance reforms. These resolutions build on a successful effort last year when an employee-shareholder negotiated a reform of the company's "poison pill." Employees are the largest block of CF shareholders. WHY GOVERNANCE REFORM IS NEEDED For nearly five years following the takeover of Emery, CF management has faltered. The company's once unbroken string of profitable quarters dissolved into consistent losses. The company suspended the dividend. The company overpaid for Emery (according to some Wall Street analysts), lost its high credit rating, and changed the CEO three times. CF's stock price has collapsed, from a high in 1989 of $36.75 before it acquired Emery, to below $10. In 1993, the stock climbed initially to $20 before falling again to $13. Along with the economy and transportation stocks generally, CF's stock staged a come-back last fall. While 1993 company revenues were 48% greater than in 1989, CF's market valuation at year-end 1993 was 32% less. The company's expected earnings of 77 cents a share in 1993 are a pale reminder of 1988 earnings of $3 a share. Rather than take decisive, affirmative action to correct problems, management has engaged in a campaign to thwart the efforts of shareholders who suggest reforms. The California Public Employee Retirement System repeatedly sought to terminate and eventually won a majority vote to eliminate the management-entrenching "poison pill." But CF exploited a technicality that required a majority of outstanding shares, and rejected the CalPERS initiative. CF has not kept stockholders well informed. In fact, during 1991, which CF officers described as its bleakest period, the CEO formally commended the company's shareholder and public relations staff not for keeping these corporate constituents well informed, but for "keeping the world at bay." Diversion of Profits: In the beginning of 1993, CF again chose to keep shareholders in the dark about important decisions. The company's publicity machinery churned out continuous optimistic reports about an Emery turnaround. Meanwhile the company's board approved the diversion of virtually all potential profits from that same Emery division to a bonus pool. Not only did CF fail to disclose this extraordinary move immediately after Board action, it failed to report it in the annual reports where it traditionally includes incentive plans, and where such plans could be addressed at the subsequent annual shareholder meeting. When CF did reveal the diversion, three weeks after the annual meeting, CF's stock dropped by nearly 20% in a matter of days. Insider Trading: Two episodes of insider trading provide further evidence of a Board not fully overseeing issues of shareholder interests. Key CF officers have apparently engaged in questionable insider trading. The board not only failed to police fully instances where key CF officers apparently engaged in irregular activities, but has rejected shareholder requests to do so. * The board learned of possible insider trading involving the chief executive officer, other CF employees and a securities firm. In Consolidated Freightways Inc., vs. Lary R. Scott, "CF alleges that defendant ... and others have conspired and are continuing to conspire to obtain and trade on inside information from CF." The alleged trading took place both before and after Scott's separation from the company in July 1990. In 1992 the court ruled that the board brought the suit to the wrong forum. Rather than bringing it to the proper forum, the company did nothing. Shareholder Jack Boyle, proponent of a resolution in this proxy, asked the board to explain its inaction. CF's board responded that it "rejected" his demand. * CF Chairman Raymond O'Brien sold $1 million of his company stock on Feb. 3, 6, 7, 1989, days before the company sealed the Emery deal on Feb. 12, 1989. DATE EVENT DAILY CLOSING STOCK PRICE Fall 1988 CF negotiates acquisition of Emery 34-3/4 Jan 1989 CF-Emery negotiations intensify; news reports cite CF and others as potential buyers of Emery Wed Feb. 1 CF nears end of preparation for announced takeover of Emery. Stock trading at post-crash high. 36-3/4 Fri Feb. 3 CF Chairman sells 10,000 shares of CF stock @ $36.75, or $367,500 36-5/8 Mon Feb. 6 CF Chairman sells 10,000 shares of CF stock at $36.75, or $367,500 36-1/2 Tues Feb. 7 CF Chairman sells 12,000 shares of CF stock at $36,75, or $441,000; CF Chairman also sells 500 shares at $36.75, or $18,375. 36-1/2 Thurs Feb. 9 Employee shareholders buy CF stock through payroll deduction plan. CF Senior V.P. sells 2,615 shares at $35.63, or $93,172.45. 35-1/2 Fri Feb. 10 34-3/4 Sun Feb. 12 CF President outlines plans following announcement of acquisition: Date on memo to Board outlining final details of tender offer for Emery, which declares: "We expect CF's stock to take a hit in the short term." Mon Feb. 13 Tender offer for Emery; stock drops 32-7/8 March 13 One month following tender offer 30 Feb. 13 One year anniversary of Emery tender offer 19-1/8 CF Counsel claimed there was no illegal insider trading because negotiations to acquire Emery were not active at the time of the chairman's sales, but began "about Feb. 11." CF's own merger documents contradict this, detailing negotiations in January and February. If this were true, however, negotiating a significant merger in roughly one day raises the issue of whether the Board fulfilled its legal duty of care. Employee shareholder efforts: For two years, CF has sought to block employee shareholders from exercising certain rights to bring shareholder proposals to a vote. Last year, employee shareholders James Weaver and Robert L. Eddy submitted resolutions to end the poison pill and declassify the board. CF first sought to disqualify the employees as suitable governance advocates: CF argued, "The company has verified that [the proponents] have both been truck drivers ... It is highly unlikely -- given Eddy's and Weaver's experience -- that they would have had the resources to author the resolutions or supporting statements contained in their proposals." When the Securities and Exchange Commission rejected this effort, CF then deployed agents to major institutional investors to combat the resolution. But the employee- shareholders won sufficient support to compel the company to negotiate a reform of the "poison pill," and garnered nearly 40% of the vote to declassify the board. Again this year, the company sought to exclude two employee shareholders on similar grounds, filing a lengthy argument and attaching voluminous exhibits. Again, the SEC rejected the company's argument. Pattern of Insulation: A Board more fully attuned to shareholder interests would have more aggressively overseen timely repairs to CF's financial posture. While CF struggled during the last five years, peer companies such as Roadway and Yellow posted consistent profits. A Board more fully attuned to shareholder interests would have more diligently policed insider trading and disclosure irregularities. Instead, the company has repeatedly contested shareholders who did seek reform. These events suggest a pattern of disregard for and insulation from shareholder interests. Rather than respond affirmatively, the Board has sought to minimize or even impugn the motives of shareholders. To address this insulation, the following governance reforms are proposed. CORPORATE GOVERNANCE PROPOSALS 1. Eliminate the Supermajority Requirement RESOLVED: That the Board of Directors take the necessary steps to remove the by-law requirement that 80% of the outstanding shares must be voted to change the structure of the board. CF's board structure includes staggered terms, and board power to increase the number of board seats and appoint directors to these seats, or to a vacant seat, without stockholder votes. That means a director could serve nearly three years without being approved by shareholders. A shareholder proponent again asks CF to de-classify the board as part of this proxy. But as a practical matter, this proposal can't be passed until the principle of majority rule is restored. * Supermajority requirements of any kind are widely opposed. The bi-partisan National Conference of State Legislatures urged states to ban them. Major pension funds, including those holding CF stock, believe that supermajority provisions are not in the best interests of the shareholders. * CF offered no specific justification for the 80% requirement when the board packaged it with its staggered board proposal in 1985. A small majority of 52.85 approved the package. * The Investor Responsibility Research Center (IRRC) shows consistently growing support for proposals eliminating supermajority requirements, from 21.9% in 1986, to 41.4% in 1990 to 50% in 1992. 2. Require Annual Election of All Board Directors BE IT RESOLVED: That the stockholders of Consolidated Freightways Inc., (CF) urge that the Board of Directors take the necessary steps to declassify the Board of Directors for the purpose of director elections, which shall be done in a manner that does not affect the unexpired terms of directors previously elected. The Board of CF is divided into three classes serving staggered three-years terms. This means it would take three annual meetings for shareholders to replace the whole board. CF's stated purpose is to provide continuity and prevent manipulative takeovers. But a staggered board is unnecessary since as a Delaware company, state law provides CF with what we consider to be ample protection from hostile bidders. "Providing continuity" really means shareholders can't hold all directors accountable in annual elections. * Only 52.85% of the shareholders supported management's classified board proposal in 1985, a slim margin reflecting shareholder concern about management entrenchment. Events itemized above have borne this out. * -----END PRIVACY-ENHANCED MESSAGE-----