July 23, 2007
Chairman Christopher Cox
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-1090
Via fax 202-772-9200 and email email@example.com
Re: File Number 4-537
Dear Chairman Cox,
I am writing in response to the Commission's May “Spotlight on the Proxy Process” roundtable meetings. As an attorney who has worked, for almost a decade, with investors as they file shareholder proposals I am greatly concerned about changes to Rule 14a-8 that would restrict or effectively eliminate shareholders' ability to file shareholder proposals. I respectfully urge the Commission to not proceed with any such changes.
For decades, shareholder proposals have been a force for positive change in corporations. These proposals, often filed by fiduciaries who have deep responsibilities to their beneficiaries and work diligently to enhance the value of their investments, have improved corporate environmental, social and governance practices to the benefit of the companies, their shareholders, their stakeholders and society. I believe many of these changes could not have been achieved without shareholder proposals. The materiality of the issues raised by these proposals has never been more clear. This is demonstrated by the growing percentage of votes received by the proposals and the fact that proxy voting advisory firms are increasingly recommending “yes” votes for the proposals.
I would like to take this opportunity to echo many of the compelling statements made by my colleagues in earlier comment letters and endorse them whole heartedly. In addition, please consider these brief additional points.
The approximately 50 year old shareholder proposal process is ultimately serving shareholders and companies well. It is an important pillar in the Commission's historic and congressionally mandated role to ensure that all investors have a level playing field. The result is a balanced and tested system – it is a process we know and understand. If Rule 14a-8 is changed as some have suggested, the Commission runs the risk of creating significant unintended negative consequences as shareholders and companies take action to address their interests within the new structure.
The current filing and re-filing thresholds have been effective at culling the field of shareholder proposals. While not perfect, they do create a contest of ideas in which the success of the proposal finally rests on its relevance to the company's prosperity and the strength of the arguments that support it.
The initial decision whether a proposal will appear in the proxy is best left with the Commission. Investors will not benefit by replacing the current uniform and formalized process with a balkanized system where the rules vary from state-to-state or company-to-company. A decentralized system would simply waste precious investor and company resources as well as distract all parties from the business at hand. No legitimate interest is served by creating a “wild west” shareholder proposal process.
Thank you for considering my comments as you contemplate this weighty issue. In sum, the current system has been a net positive for companies, investors and the public. Because of that, I respectfully caution the Commission against restricting or effectively eliminating shareholders' ability to file shareholder proposals.