December 23, 1997 Chevron Corporation 575 Market Street, 38th Floor P.O. Box 7643 San Francisco, CA 94120-7643 Lydia I. Beebe Corporate Secretary Telephone 415 894 3232 Facsimile 415 894 7774 Mr. Jonathan G. Katz Secretary U. S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 File No. S7-25-97 Dear Mr. Katz: Chevron Corporation respectfully submits the following in response to the Commission's request for comments concerning the proposed rule changes set forth in Release No. 34-39093; IC-22828: A. Plain-English, Question & Answer Format. Chevron commends the Commission on adopting this format for Rule 14a-8. The format will help to facilitate stockholder understanding of the rule. With respect to the clarification of definitions referred to in Part A of the release, we would suggest expanding that of "ordinary business" as used in (c)(7) to include the word "board". The phrase would then read: "if the proposal relates to specific business decisions normally left to the discretion of the board and management." Inclusion of the word board would more clearly reflect the notion common to corporation law that corporations shall be managed by or under the direction of a board of directors. B. Personal Claims of Grievance Exclusion: Rule 14a- 8(c)(4). Chevron has no objection to excluding from Staff review personal grievance proposals which do not on their face relate to personal grievances or interests. C. Rule 14a-8(c)(5) The "Relevance Exclusion". Chevron agrees with more narrowly focusing the operation of this rule by dropping the "otherwise significantly related" test and making it strictly an economic one. The significantly related test added great uncertainty to application of the rule even in cases in which the issue addressed by the proposal clearly had very little impact on a company's financial performance--the protection of that performance being the ultimate rational for justifying stockholder inpute. However, Chevron recommends retaining and increasing the level of the current percentage (total assets/net earnings/gross sales) test instead of adopting the $10 million or 3% thresholds. For large corporations such as Chevron, the proposed $10 million and 3% thresholds are insignificant. Their use would make it very unlikely that any proposal would be omittable under this rule. For large corporations we believe that a minimum ten percent threshold (total assets/net earning/gross sales) would represent a material and, therefore, appropriate amount. D. The Interpretation of Rule 14a-8(c)(7): The "Ordinary Business" Exclusion. Chevron agrees with the presentation of the proposed revisions as part of an overall package which includes a reinterpretation of Cracker Barrel. We can accept this reinterpretation which we understand will now require employment related matters to be reviewed on a case-by-case basis. Because this reinterpretation of Cracker Barrel will probably result in the inclusion of more stockholder proposal in the proxy statement and because the proposed creation of an "override mechanism" will also result in the inclusion of more proposals, we believe that it is appropriate to combine these changes with those which may serve to help exclude inappropriate proposals. The Commission's approach represents an appropriate compromise. E. Rule 14a-8(c)(12): The Resubmission Thresholds. The proxy statement is intended to be a forum for stockholders to present proposals which are sufficiently important and relevant to the company's financial performance to warrant the attention of the stockholders at large. The existing 3% threshold permits the resubmission of proposals for a second year. This 3% represents an insignificant level of support when viewed in the light of the 51% vote most often required for adoption. Under the current 3%/6%/10% resubmission thresholds the proxy statement can become burdened over successive years with proposals which attract the interest of very few stockholders. For example, during the South African sanctions period, related proposals never received a vote "for" over 17% at Chevron. Yet for over seven years Chevron was required to reprint essentially the same proposals which never came near the support required for adoption. Chevron believes that the appropriate level of support for the first resubmission should be at least ten percent, but can accept the six/fifteen/thirty percent thresholds proposed. F. Proposed Override Mechanism. Chevron is neutral concerning the addition of an override mechanism to rules 14a-8(5) and (c)(7) so long at it is adopted along with the proposed change of proposal resubmission thresholds and the revision to (c)(5) as set forth above. However, rules for using the override need to be further clarified as follows: 1.Stockholders should be allowed to sponsor or endorse only one proposal per company. This limitation is consistent with the current one proposal limitation in rule 14a- 8(a)(4). 2.The sponsor and endorser of an override proposal should be eligible stockholders under current rule 14a-8(a)(1). 3.If the endorser ceases to remain an eligible stockholder by the date of the meeting for which the proposal is presented, the person should be under an affirmative obligation to so inform the issuer. If this lowers the endorsing support for the proposal below the requisite 3%, then the proposal shall not be present for consideration at the meeting. This will ensure that the endorsement is a bona fide one for the proposal. 4.The threshold 3% should not include the sponsor's shares. The purpose of this new procedure is to require the inclusion of proposals which would otherwise be excluded under rule 14a-8(c)(5) and (c)(7). Requiring the expression of commitment by the holders of 3% of the issuer's securities other than those held by the proponent would confirm that interest. Also the 3% ownership share and not the number of holders should be the basis for determining the interest necessary to initiate an override. 5.The override should not apply to permit the inclusion of proposals affecting the control of the issuer such as those excludable under 14a-8(c)(8) or which under (c)(9) would conflict with proposals to be submitted by the issuer. Allowing change of control proposals and or other proposals opposing those submitted by management could lead to unclear voting results and it may not be certain from a split vote what may be the clear desire of the stockholders. 6.The new rule should expressly state that the issuer is under no obligation to provide the sponsor or endorser of an override proposal with the list of stockholders. G. Safe Harbor Under Section 13(d); Qualified Exemption from Proxy Rules. Chevron is neutral on the need for a safe harbor related to the introduction of the overrride rule. However, if a safe harbor is created, it should not extend to change of control proposals. H. Rule 14a-4(c) Discretionary Voting Authority. We recommend the following clarifications to the rule: 1.To insure that the issuer does not unnecessarily make the effort to print a notice in the proxy statement of a proposal to be presented from the annual meeting floor, we believe that a penalty for failing to present the proposal should be added similar to that appearing in Rule 14a-8(a)(1). If the proponent does not appear at the meeting or through a proxy to move the proposal for consideration, then that proponent should be denied the right to present a proposal for publication in the proxy statement or through the non-14a process at any meeting occurring during the next two consecutive years. 2.The proposed new rule of paragraph 14a-4(c)(2) will permit the issuer's exercise of discretionary authority if the proxy material includes, among other things, a "discussion" of the nature of the matters proposed to be presented from the floor of the meeting. The Commission's Idaho Power no-action letter specified that it would be sufficient to "advise" the stockholders of the nature of any such matter. Unless the Commission intends to require a new disclosure standard yet unspecified in the release, we recommend replacing the word "discussion" with "advice". 3.We also see no reason why the non-14a proponent's notice to the issuer should require the issuer to file preliminary copies of its proxy materials with the Commission. Rule 14a-6(a) does not require a preliminary filing when the proxy statement contains stockholder proposals. In the non-14a case the statement contains less--only a notice of the intent of the proponent to present a proposal and a description of the general subject matter. I. Other Proposed Modifications. We believe that there should be an increase in the ownership eligibility requirement. The present $1,000 and the $2,000 proposed amounts allow too many proponents who are not long term investors to use the proxy statement to publicize social and political issues which are of no general interest to the issuer's stockholders. We also recognize the public policy limitation inherent in setting the threshold too high. As a balanced approach we recommend using as the eligibility threshold, instead of the proposed $2,000 threshold alone, a combination of that dollar amount and ownership of 100 shares of the issuer's stock, whichever is the higher value. This dual test would have absolutely no effect on the qualification of those stockholders who normally submit proposals to Chevron. As a rule they own well over $2,000 or the value of 100 shares which at today's price would be about $8,200. But this suggestion might help smaller companies insure that only long-term investors submit proposals. We believe that current one year holding period is appropriate. Chevron appreciates having the opportunity to comment on the proposed rule changes and hereby respectfully submits in triplicate copies of its comments. Sincerely yours,