October 1, 2007
To Whom It May Concern,
We are investors who take seriously our rights and our responsibility to be engaged and informed as shareowners of companies. We strongly oppose proposals at the Securities and Exchange Commission (SEC) that would either eliminate the shareholder resolution process or limit the rights of shareholders to sponsor proxy resolutions. We also oppose any step that would prevent investors from nominating members of corporate boards.
We believe it would be better for the SEC to take no action on their shareholder resolution initiatives than it would be for the Commission to destroy the rights of shareholders. The Barbara Smith Fund votes on proxies and actively participates in corporate ownership. We consider shareholder advocacy to be vitally important in communicating with corporate boards, management and other investors on key issues and problems such as poor corporate governance, pollution and inaction on climate change, employee diversity, executive compensation, and human rights in overseas factories. We need more shareholder involvement in American corporations, not less.
The SEC should be encouraging shareholder engagement in corporate governance and policy-setting, not discouraging such actions. We need the companies in question to be encouraged by shareholders to be well governed, responsible corporate citizens. These are not companies that the SEC should be protecting from shareholders who are understandably concerned about what are often very serious risks to our long-term investments. There is a long history of positive reforms and policies resulting from shareholder resolutions with companies.
Further, companies are not overburdened by shareholder resolutions. In 2007, there have been fewer than 1,400 resolutions, and fewer than 1,000 companies received resolutions of any kind. This is less than one out of five major publicly traded companies. The market is hardly burdened by the resolution process - in fact, it is strengthened by it. Finally, in any given year, one-quarter to one-third of the resolutions will be withdrawn in light of agreements arrived at between investors and the company.
The SEC has issued three specific proposals, which we believe would eliminate or cripple the resolution process. We cannot support the following proposals: (1) the "opt-out" option that would allow the most unresponsive companies -- those with the worst records when it comes to good corporate conduct and governance -- to drop out of the shareholder resolution process and isolate themselves further; (2) the unilateral substitution of the electronic petition model or "chat room" for the vibrant and public 14a-8 shareholder resolution process; and (3) the raising of shareholder resolution resubmission levels from the current 3%, 6% and 10% vote levels to 10%, 15% and 20% levels, thus effectively killing many important shareholder resolutions.
We also believe the shareholders of America's companies should be able to help nominate corporate board members. This is a process that could use more openness and accountability. Investors have a duty to take their ownership role seriously. At the same time, the companies have a responsibility to investors: They should be expected to listen to their shareowners -- rather than working to limit the rights of shareholders to raise important issues, including the selection of corporate directors.
We take pride in our shareholder advocacy. The SEC should focus on putting the interests of investors first. We urge Congress to monitor this situation and get involved to ensure that the SEC serves the American public and its best interests. Please do not allow the voice of investors to be silenced.
Thank you for your attention to our comments.
President of the Board of Directors
(on behalf of the Board of Directors)