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February 7, 2013

Whirlpool May Not Omit Shareholder Proposal Seeking Vote on Golden Coffin Agreements

By Jacquelyn Lumb

Whirlpool Corporation may not omit from its proxy materials a shareholder proposal that asks the board to adopt a policy of obtaining shareholder approval for future agreements and policies in which the company would make payments, grants, or awards after the death of a senior executive. The AFL-CIO, in submitting the proposal, said that such “golden coffin” agreements award pay without performance and that executives have ample opportunities to provide for their estates (Whirlpool Corporation, January 22, 2013).

As of December 31, 2011, the AFL-CIO said that Whirlpool had five named executive officers who were entitled to receive posthumous benefits valued at more than $34.5 million, including accelerated equity awards. The AFL-CIO questioned the need for those payments when the company would receive no services in return. Allowing shareholders to approve death benefits may serve as a moderating influence, in the union’s view.

Michigan law. Whirlpool sought to omit the proposal on the basis that it would cause the company to violate Michigan law and because it was vague and misleading. Among the benefits under the law of Michigan, which is the location of the company’s worldwide headquarters and where many of its senior executives reside, is that wage continuation payments can be made to dependents of a deceased employee who otherwise qualified for the benefits.

The proposal is vague, Whirlpool maintained, because it failed to define terms such as senior executives, unearned salary or bonuses, or payments of benefits in lieu of compensation. These terms may be subject to numerous interpretations, in Whirlpool’s view.

The AFL-CIO responded that the proposal would not violate Michigan law because, if implemented, it would apply only to future agreements and corporate policies, not those in effect at the time the proposal is adopted. The proposal has nothing to do with the statutory death benefits required under Michigan’s workers’ compensation law, according to the AFL-CIO. The union noted that the staff rejected a virtually identical request to exclude the same proposal submitted to the Charles Schwab Corporation (March 6, 2009). The AFL-CIO added that the proposal clearly states the terms and is not false or misleading.

Whirlpool countered that the proposal would not apply only to future agreements and policies since it included modifications, amendments, and extensions of existing agreements. The company also said its argument was distinguishable from that in Charles Schwab because of different state laws and types of provisions in those laws.

Staff view. The staff said it was unable to concur with Whirlpool’s view that the proposal could be excluded under Rule 14a-8(i)(2) relating to the violation of state law, and it was unable to concur that the proposal could be omitted under Rule 14a-8(i)(3) as vague or indefinite. The staff said the proposal was not so inherently vague or indefinite that shareholders voting on the proposal, or the staff in implementing it, would not be able to determine with reasonable certainty the actions or measures that would be required.

Attorneys: (Dickinson Wright PLLC)

Companies: Whirlpool Corporation; AFL-CIO; Charles Schwab Corporation

RegulatoryActivity: CorporateGovernance DirectorsOfficers MichiganNews Proxies

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