December 31, 1997 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Attention: Jonathan G. Katz, Secretary Re: Amendments to Rules on Shareholder Proposals/File No. S7-25-97 Ladies and Gentlemen: Burlington Northern Santa Fe Corporation ("BNSF" or the "Company") is pleased to comment on the September 26, 1997, Release (No. 34-39093; No. IC-22828; File No. 57-25-97) (the "Release") of the proposed revisions by the Securities and Exchange Commission to the Rules 14a-8 and 14a-4 shareholder proposal process. BNSF is a $20 billion corporation with some 47,000 registered stockholders (or triple that many when beneficial owners are included). Its shares are listed on the New York, Chicago, and Pacific stock exchanges. BNSF's primary operating subsidiary is one of the nation's largest railroads and operates over some 35,000 route miles of track and in 28 U.S. states and two Canadian provinces. BNSF and its predecessor companies have often received shareholder proposals submitted in connection with their annual meetings. BNSF has particular concerns and suggestions with respect to the Commission's proposals in these areas: (1) Rule 14a-8(c)(4) "Personal Claim or Grievance" Exclusion; (2) Rule 14a-8(c)(5) "Relevance" Exclusion; (3) Rule 14a-8(c)(7) "Ordinary Business" Exclusion; (4) Rule 14a-8(a)(1) Minimal Share Ownership and the Rule 14a-8(c)(12) Resubmission Thresholds; (4) Proposed Override Mechanism; and (5) Rule 14a-4 Discretionary Voting Authority. Personal Claim or Grievance Exclusion: Rule 14a-8(c)(4) The Commission proposes to revise the Rule 14a-8(c)(4) exclusion for proposals relating to a "personal claim or grievance" or those designed to "result in a benefit to the proponent or to further a personal claim, which benefit or interest is not shared by the other security holders at large." The Commission would revise its application of the rule so that a proposal that on its face related to a personal grievance or special interest would be ruled upon by the Staff through a no-action letter; proposals that were "neutral" on their face would automatically receive a "no view" no-action letter response. An issuer would then decide whether or not to exclude the proposal based upon its factual evidence concerning the personal grievance or special interest. BNSF believes that the Commission's proposed revision has merit, but that the present administration of Rule 14a-8(c)(5) is preferable. Regardless of which approach is employed, the Company believes that application of the exclusion should recognize that the 14a-8 process may easily be used by some stockholders as a tool to advance their own agenda rather than the interests of the stockholders at large. Stockholders involved in a dispute or in litigation with an issuer or who believe they have been treated unfairly in employment or business matters may introduce stockholder proposals to increase their "leverage" against the company and to encourage favorable settlement of their claim or dispute. Even where the proposal is facially neutral, this subverts the process and is wasteful of resources. Stockholder proposals should be advanced by those with a genuine interest in their merits; if the proposals fail, other proponents face steeper hurdles because of the resubmission thresholds for similar matters. In many situations, stockholder proposals are submitted by a person who is not the real party in the interest. A proponent may be asked by another to advance the proposal, or may be an officer, employee or agent of an organization. We believe that the 14a-8(c)(4) process would be enhanced -- and resolution of claims be facilitated -- by requiring disclosure of the real party in interest and the arrangement or affiliation between the proponent and the genuine interested party. If the Commission's proposed revision is adopted, a Company's decision to exclude a stockholder proposal for which it received a "no view" letter would not be without risk. Either the proponent or the Commission could commence on action in federal court to compel inclusion of the proposal. This is no different than what may take place under the present rule. Companies are mindful of not only the time and expense of litigation, but also of the possibility that their stockholder meetings might have to be rescheduled and a costly remailing of the proxy statement undertaken because of the litigation. Companies would thus be unlikely to act unless they had good evidence that a stockholder proposal related to or was motivated by a personal grievance or special interest. While BNSF believes that companies would act responsibly in choosing whether to exclude proposals under the proposed revision, it also believes the Staff involvement in the process is beneficial. This involvement can lead to the earlier resolution of Rule 14a-8(c)(4) issues and more certainty as companies work to meet their proxy deadlines. BNSF therefore advocates the Staff's continued involvement in these matters, including where a facially-neutral proposal is submitted and a company asserts that the proposal is motivated by a personal claim or grievance. "Relevance" Exclusion: Rule 14a-8(c)(5) Rule 14a-8(c)(5) presently permits the exclusion of a proposal that meets neither an objective standard -- relating to operations accounting for less than five percent of total assets and of net earnings and gross sales -- nor a subjective standard -- is not otherwise significantly related to the registrant's business. The Company supports the Commission's proposal to eliminate the subjective "not otherwise significantly related" test, and favors a quantitative approach using an economic materiality test. Rather than the alternative lesser than either $10 million in gross revenues or total costs or 3% of gross revenues or total assets test as proposed, however, we suggest a single percentage test be employed to ensure consistency in application to all types of companies. We therefore recommend a 10% of gross revenues, total assets or sales standard, which standard is consistent with the materiality threshold employed by the Commission in similar contexts (e.g., the definition of a "significant subsidiary" in Regulation S-X, and the threshold for disclosure of material customers in Regulation S-K). We believe that a straightforward economic materiality test will be easier to apply, will lead to more consistent application, and will better serve the exclusion's purpose of screening out proposals of little or no economic relevance to a company's business. "Ordinary Business" Exclusion: Rule 14a-8(c)(7) The Release states that the general underlying purpose of the Rule 14a-8(c)(7) "ordinary business" exclusion is "to confine the resolution of ordinary business problems to management and the board of directors since it is impractical for shareholders to decide how to solve such problems." The Commission proposes to change the language of the exclusion from "deals with a matter relating to the ordinary business operations of the registrant" to "relates to specific business decisions normally left to the discretion of management." A note to the rule would provide several examples of such matters. BNSF believes that the existing language should be maintained. The proposed revision refers to decisions by "management" but not to the role of the Board of Directors; this could suggest that the exclusion does not apply to decisions by the Board. The suggested list of examples also appears to be too specific to be particularly helpful to a wide range of business activities by diverse types of businesses. For these reasons, the existing language of Rule 14a-8(c)(7) is preferable. Minimal Share Ownership: Rule 14a-8(a)(1) Resubmission Thresholds: Rule 14a-8(c)(12) BNSF endorses the proposed higher resubmission thresholds under Rule 14a-8(c)(12), particularly if the proposed "override mechanism" is adopted. A preferable approach, however, is to increase eligibility criteria. Rule 14a-8(a)(1) currently requires that a stockholder must hold for at least one year the lesser of $1,000 in market value or 1% of a company's shares at the time the proposal is submitted. The Release proposes an increase to $2,000, the first such increase since adoption in 1983, and maintains the continuous ownership requirement. BNSF advocates increasing the minimal ownership threshold to $10,000 or 1% in voting securities and maintaining the one year ownership requirement. The current $1,000 or proposed $2,000 thresholds are in effect de minimis requirements that ordinarily have little practical import. This is particularly true because the Commission currently permits one or more stockholders to aggregate their holdings to reach the minimum threshold. Given the time and expense that inclusion of stockholder proposals cause companies and their stockholders, and the lengthening of already lengthy proxy statements, a $10,000 threshold maintained for one year is not unreasonable and would serve the needs of responsible, long- term investors. BNSF strongly opposes any shortening or elimination of the continuous ownership requirement, regardless of the size of the investor. A continuous investment interest in a company is essential if the 14a-8(a) process is to be made available to stockholders. Elimination of the continuous ownership requirement could lead to abuse of the process by those with business or personal disputes with a company and in employee termination situations. It could radically increase the number of stockholder proposals and encourage "issue du jour" proposals from holders with no long-term interest in the company. BNSF also suggests that if the Commission continues to permit stockholders to aggregate their holdings to meet the ownership threshold, the Commission should clarify that all holders must continuously have held for at least one year by the date of submission of the proposal the minimum amount of securities entitled to vote at the meeting, and to continue to hold those securities through the date of the meeting. Proposed Override Mechanism The current and proposed rules provide exclusions for stockholder proposals that are of little economic relevance (Rule 14a-8(c)(5)) or that concern the "ordinary business" of an issuer (Rule 14a-8(c)(7)). The Release proposes a completely new "override mechanism" that would empower a 3% stockholder -- or a group with that voting power -- to require the inclusion in the proxy statement of proposals that could otherwise be excluded on "relevance" or "ordinary business" grounds. BNSF opposes what would be an unprecedented preference granted stockholders of a sufficient size. If the (c)(5) and (c)(7) exclusions make sense--and experience suggests they do--then they should apply across the board. The Company sees no logical or policy reasons for changing both the substance and administration of Rule 14a-8. BNSF is also concerned that any override mechanism would be exploited by certain stockholders to further their special interests. Insurgents or one or more institutional holders might use the process to conduct what would amount to be an unregulated solicitation. Thus, the override could be used to exert influence and control and not merely as a means to express views on matters which would ordinarily be excludable. Discretionary Voting Authority: Rule 14a-4 The Commission proposes to amend Rule 14a-4 to clarify the exercise by companies of the discretionary voting authority normally granted as part of the proxy process. The Company is concerned that the proposed revision would foist new burdens on companies while at the same time encourage proposals which circumvent the 14a-8 process. Current Rule 14a-4(c)(4) allows a company to vote proxies it solicited in its discretion (unless otherwise instructed) against stockholder proposals that have been properly excluded from its proxy materials under the 14a-8 process. Where stockholder proposals are submitted outside of the 14a-8 timeframe and the proponents notify the issuer of their intention to nevertheless present the proposal from the floor of the meeting, current Rule 14a-4(c)(1) permits a company's exercise of discretionary voting authority if it was not notified of the proposals a "reasonable time" before the meeting. If the company has been notified within a reasonable time--such as within an advance notice by-law provision--the Commission's informal practice has been to permit a company to retain discretionary authority if it discloses in its proxy statement the nature of the proposal and how it intends to exercise its discretion. Submission of last minute proposals can be especially vexing as a company finalizes its proxy materials. In recent years, there appears to have been a proliferation of non-14a-8 proposals submitted for tactical or harassment purposes. These efforts to avoid the procedural and substantive requirements of Rule 14a-8 abuse the process. BNSF believes that, on balance, the proposed revisions to Rule 14a-4 would actually facilitate and encourage 14a-4 proposals. Indeed, the proposed revisions, if adopted, might encourage proponents whose 14a-8 proposals have been excluded to resubmit them under 14a-4. While the Company supports the establishment of a 45-day notice period requirement (or the dates specified in a company's advance notice by-law), it disagrees with the following aspects of the proposed revision: ú A company would be required to "discuss" the nature of any such proposal in its proxy statement. Idaho Power's disclosure standard of "advising" stockholders of the general nature of such a proposal is preferable so that there is no inference that the proposal's merits be evaluated. ú A company would be required to add a box to its form of proxy to enable stockholders to withhold the granting of discretionary voting authority. This is not currently required unless the proposal is the subject of an opposing proxy solicitation. The present standard is preferable. Companies may otherwise feel compelled to provide greater discussion of the non-14a-8 proposal and, as a result, encourage erosion of the entire 14a-8 process. ú Similarly, the Company does not believe that stockholders should also be able to "grant" or "abstain" from granting voting discretion; this would be tantamount to including the proposal in the proxy statement-- the very purpose of the 14a-8 process. Nor should a company be required to put a proposal on its proxy card if a proponent commences a proxy solicitation of a majority of holders. The 14a-8 mechanism is intended to be the means for determining which proposals are to be included in proxy materials. ú BNSF strongly urges the Commission not to require the filing of proxy materials in preliminary form because of a stockholder proposal submitted outside of the 14a-8 framework. A disclosure of the nature of such a proposal and how the company intends to employ its discretionary voting authority should not trigger the time and expense of Staff review of preliminary proxy materials, with the attendant possibility of delays in proxy mailing schedules. BNSF appreciates this opportunity to comment and is available to discuss our comments and alternative proposals with the Commission's Staff. Very truly yours, Jeffrey R. Moreland Senior Vice President-Law and General Counsel ======END OF PAGE 6======