SEC Acceptance of Management's Asserted Control of ESOP Trust Assets as Basis for Blocking Vote on Shareholder Proposal for Protection of Employee Pension Rights

(October 4, 2004)

The Securities and Exchange Commission ("SEC") issued a staff opinion on October 4, 2004, stating that arguments presented on behalf of Farmer Bros. management provided "some basis" for excluding the Lime Capital shareholder proposal from the company's proxy statement for voting at the annual meeting.

In its brief explanation, the SEC staff stated its acceptance of management's argument that the proposal for employee election of the ESOP's governing committee involves "general compensation matters," which may be considered to be in the category of "ordinary business operations" that can be excluded from proxy statements as a "management function" under Rule 14a-8(i)(7).  This argument had been based on the Farmer Bros. representative's assertions of management's continuing control of assets which the company had reportedly transferred to a trust established by the ESOP for the benefit of employees, raising questions which were referred to the SEC official responsible for investigating related issues defined in a January 8, 2004 letter.

Copies of the SEC response and the letters to which it refers can be accessed through the links below.