/etc/X11/xsm/system.xsm is in x11-session-utils 7.7+2build1.
This file is owned by root:root, with mode 0o644.
The actual contents of the file can be viewed below.
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! $Xorg: system.xsm,v 1.3 2000/08/17 19:55:06 cpqbld Exp $ twm smproxy xterm