Carl T. Hagberg
Carl T. Hagberg and Associates
6 South Lakeview Drive
Jackson, NJ 08527
Tel: 732-928-6133

June 11, 2003

The Securities and Exchange Commission
Washington, DC

Re: File No. 57-10-03

Ladies and gentlemen:

Thank you for soliciting public comments on the proxy-proposal process. I am pleased to submit the following, on behalf of my family - who are recipients of, and sometimes even "consumers" of numerous sets of proxy materials each year - and on my own behalf, as a long-time participant in the proxy distribution, voting, tabulating and reporting processes - and as a "consumer of proxy materials" myself:

REGARDING THE NOMINATION OF DIRECTORS: If the primary goal of "good corporate governance" is to assure there is "good stewardship" of investor-owned companies and that "the goals of management are properly aligned with those of the stockholders"...we can think of no governance mechanism that could possibly be more effective than the ability to "throw the bums out," should there be any - and replace them with folks whose agendas are indeed so aligned. And what better way could there possibly be to keep directors focused on their real job than to have a system where automatic job-renewal would no longer be guaranteed? But clearly, the current proxy rules make it extremely difficult - and inordinately, and unnecessarily expensive besides - for shareholders (the real owners of the company) to make directors "run for their money," much less to replace them, and thus, should be amended:

  • We say; if a meaningful number of shareholders feel, for example, that there should be a non-management chairman of the board, they should be able to nominate one - and to suggest that holders withhold votes from the incumbent chairman, who'd simply become a hired hand of the board (which he or she should be anyway) were he or she to lose. If holders think that members of the compensation committee have been over-generous with the shareholder funds doled out to the management, or to the directors themselves, they should be able to offer candidates of their own. It is especially worth noting in this context that simply throwing money and stock options at managers to foster "alignment" with shareholders - as so many board compensation committees did for so long - clearly hasn`t worked.

  • We also believe that while the Annual Report ought to be the management's document, the Proxy Statement ought to become the directors' document, wherein they give an accounting of their stewardship, as well as their recommendations (and not "management's recommendation") regarding the matters to be put to a vote.

  • Corporate directors should have to "run on their record" each year - and, far more importantly, they need to know that they can and will be replaced with stockholder-nominated candidates if they fail to firmly align themselves - and their board policies - with the interests of the share-owners.

REGARDING CONTESTS FOR CORPORATE CONTROL: Every student of economics, of markets, and of human behaviors will agree that if the goal of an investor-owned company is to maximize the value of the enterprise for the benefit of its owners (rather than to entrench and to feather the nests of managers first and foremost)...there must be "reasonably open markets" for corporate control. While there's been much debate, and quite a lot of shareholder activism on the subject of "staggered boards" and "poison pills" (and where, it also should be noted, most real-world "contests for corporate control" are governed primarily by state laws) seems self evident that the strongest and most effective mechanism available to shareholders who are dissatisfied with their return-on-investment is to replace some or all of the corporate "stewards." This, in our view, is yet another extremely compelling reason to be sure that SEC rules and regulations allow the nominating and proxy-voting systems to be "open" to share-owners if a meaningful number of them feel that a "change of control" is required to maximize shareholder value.

REGARDING SHAREHOLDER PROPOSALS: The key question to ask here is "What is the `meaningful amount' of share ownership and/or shareowner support that ought to be required in order to submit - and to resubmit - a proposal for consideration or to offer-up one or more nominees to the board?"

  • We believe that any proposal that has a `meaningful measure' of shareholder support - whether it is economic, 93social,94 93environmental,94 93regarding an election of directors94 or part of the 93ordinary business94 of the company - ought to be a proper matter to bring before the owners for a vote. Without this ability, the concept of 93ownership94 becomes meaningless.

  • At the same time, we also believe that the current thresholds for submissions and resubmissions of shareholder proposals - as well as the 933% test94 that has been suggested for board nominations - are far too low. Given today's unprecedented and low-cost ways for investors to communicate with one another and to air issues of common concern, we believe that a 10% level of 93preliminary support94 is the absolute minimum that should be considered as sufficiently 93meaningful94 to warrant consideration at a shareholder meeting.

  • We also think that a proposal ought to achieve at least 20% support in year two and 30% in year three in order to qualify for resubmission. Further, we believe that these percentages should be based on the number of shares outstanding, rather than on the number of votes cast on a proposal. The current rules serve to exaggerate the extent of shareholder support a proposal receives, by ignoring the percentage of shareowners who simply don't care enough about the issue to exercise their vote. We say this not to be 93hard94 on shareholder activists - and not because of the costs involved, which are modest - but because proposals that fail to attract 93meaningful94 levels of support serve, in our experience, to distract shareholder attention when truly meaningful issues are presented.

  • Another perfectly appropriate solution, in our view, would be to allow shareholders themselves to decide on the levels of support that would be appropriate to submit and/or resubmit proposals and board nominees at companies they own.

    REGARDING DISCLOSURE AND OTHER REQUIREMENTS THAT MIGHT BE IMPOSED ON WOULD-BE PROPONENTS AND 93SOLICITORS OF PROXIES94: We believe that investors need to know the identities, professional backgrounds and 93agendas94 of any individuals or groups that wish to submit nominees or proposals for consideration by shareholders at large. We also believe that 93registration94 with the SEC of such information when there is an intent to solicit proxies serves a very valuable public purpose. But because we believe that freedom of speech and the right to associate freely and act in concert with like-minded citizens are among our most basic and precious rights, we don't see the need for an elaborate regulatory scheme, as long as proponents act peaceably, make no fraudulent representations or omissions of material facts and show 93reasonable94 levels of support for the submission of their proposals, so as not to waste corporate assets and the time and patience of their fellow investors.

    REGARDING THE 93TEN-DAY RULE94: We believe it is very important to note that a very large number of publicly-traded companies (somewhere between 28% and 40% of all companies that hold shareholder meetings in any given year) would not have a quorum for the transaction of business at the meeting without the ten-day vote; clear evidence, we would say, that a majority of shareholders of those companies were either totally content with incumbent management or, at the least, totally apathetic with respect to the 93governance issues94 up for a vote85and thus, hardly a matter for concern. But clearly, if and when a shareholder or shareholder group properly proposes one or more board nominees or shareholder proposals, the ten-day-rule should not apply85nor should the shares of absentees be counted for quorum purposes in our view.

    REGARDING THE COSTS ASSOCIATED WITH SHAREHOLDER PROPOSALS AND NOMINATIONS TO THE BOARD: In past reviews of the shareholder-proposal process, much ado was made about the costs to issuers of printing, distributing, rebutting85 and tabulating votes on shareholder proposals. We would simply note that issuers would likely spend far less on printing and rebutting than they do now, if reasonable submission thresholds are established. And, thanks to modern technologies, it costs no more to 93scan94 and tabulate votes on 15 proposals (or to let shareholders themselves do the 93data-entry work94 as they do when they vote by phone or internet) than it does to tabulate one proposal (at least at ADP, where most of the tabulating is done these days).

    • On a related note, I would be remiss if I failed to once again remind the Commission - and other readers of these comments - that a review of the systems, procedures and costs to issuers and their investors for disseminating corporate materials, issuing proxies and 93voting instruction cards94 and tabulating votes is long overdue: It has been 18 years since the now mega-million-dollar 93contract94 for distributing materials and tabulating votes for 93street-name94 holders was last bid-out under SEC supervision. This is an unconscionably long time, in my view, for such an important contract to remain in place without a formal review and re-bidding process.

    • Since 1985, when the current contract was awarded, technologies and unit-volumes have changed dramatically, while cost structures have hardly budged. Meanwhile, virtually all of the robust competition for providing these services that existed in 1985 has disappeared, because of the effective monopoly the current arrangements have created.

    • Last year, we would remind, three widely-held and tech-savvy U.S. companies (Agilent, Intel and Microsoft) wrote the SEC staff to say that 93the current distribution system, reflected in Exchange Act rules 14b-1 and 14b-2, maintains an economically inefficient system that has become obsolete over time94 and also to note kickbacks of up to 37% of issuer-paid `mail-elimination fees' to bank and broker participants in the 93system94. Accordingly, we would once again urge the Commission to mandate, and to oversee, a competitive re-bidding of the current proxy distribution, tabulation and reporting "system"... a process which we believe is quite a simple and straightforward one.

    Thank you again for the opportunity to comment on these issues and, as always, I will be happy to discuss any of these points in more detail with members of the SEC staff.


    Carl T. Hagberg