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.
*
