June 12, 2003

Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Re: File No. S7-10-03 and SEC Release #34-47778

Dear Mr. Katz:

I am writing on behalf of CERES, a coalition of investors and public interest groups representing over $300 billion in assets, in response to the Commission's solicitation of views (SEC Release #34-47778) regarding File Number S7-10-03 concerning shareholder proxy access and the election of corporate directors. 

CERES commends the SEC for considering reforms that would ensure that truly independent directors will be elected to corporate boards, and that incumbent directors will be responsive to shareholder concerns. CERES believes shareholder access to the director nomination process is needed to ensure that boards of directors are accountable to the shareholders they represent.

Since our founding in 1989, CERES members have filed shareholder proposals and engaged in dialogue on corporate environmental performance and disclosure with hundreds of companies. Too often, corporate boards approved management's pursuit of short-term profit at the expense of long-term value and hampered our efforts to improve corporate behavior on environmental issues.

In this era of reform, CERES is heartened that the SEC is addressing all issues and risks that have the potential to affect shareholders' returns. In 2002, CERES released a report citing the overwhelming scientific evidence that climate change presents multi-billion dollar financial risks to a wide range of industry sectors. Prudence and common sense mandate that corporate boards, those responsible for preserving the value of our businesses for the long-term, analyze this risk and take steps to mitigate it.

In a recent survey of corporate responses to climate change risks, however, CERES has found a troubling lack of disclosure in securities filings, inadequate corporate board reviews of the issue, and undeveloped strategies by boards to address the risks. CERES requests that the SEC enforce existing regulations that require companies to disclose material financial risks related to climate change and other social and environmental issues.

In addition, our pension fund members and other shareholder members of CERES have a fiduciary duty to nominate directors who will address climate change, and other social and environmental risks, to ensure the viability of corporate assets and the world economy over the long term.

We believe that the following specific reforms would advance the goals of director accountability to shareholders:

  • Foremost, that the SEC eliminate section (i)(8) of Rule 240.14a-8, concerning criteria for proposal exclusions on the proxy: "If the proposal relates to an election for membership on the company's board of directors or analogous governing body."

  • That a shareholder or group of shareholders nominating a candidate own shares for a minimum of one year before proposing a nominee. This would decrease, but not entirely eliminate, the possibility of investors using equal proxy access as a takeover device.

  • An investor or group of investors own at least 1% of shares (in aggregate) in the company in order to nominate a candidate or candidates, with a standard no higher than 3% of shares. While some proponents have argued for a 5% or higher minimum, CERES feels that smaller investors would be disenfranchised by this share threshold. CERES also supports a combination of a percentage threshold plus a minimum number of shareholders to meet the nominations criteria.

  • Investors, singly or cumulatively, can nominate up to half of available positions for the Board, regardless of how many investor groups organize to nominate them. If more than half of the nominees are put forward by shareholders, those candidates with the largest aggregate share support behind them should make it to the ballot.

  • A complete ban on broker votes or uninstructed share voting, that indicates an extreme conflict of interest, and shows that brokers are not fulfilling their fiduciary duty to clients. However, we support broker votes counting for a quorum, so that the business of the meeting may commence.

  • Directors should be elected annually. Though staggered or classified board elections do serve an anti-takeover function, shareholder votes on board performance should occur on an annual basis.

  • Cumulative voting should be used in the election of directors.

  • All nominees should disclose material familial, professional, and financial relationships to the company and its executives in the nominee statement on the proxy.

  • The "for" and "withhold" options on the proxy card should be eliminated, and replaced with standard proxy voting options like those for proxy resolutions: "for," "against," and "abstain."

  • All nominees should be provided equal space, within a reasonable number of words, to provide background information, a supporting statement, relevant experience, and material relationships to the company. A picture should also be included with each candidate's statement.

  • The company in its proxy statement must present candidates --management's and shareholders' -- in the same consistent manner, length, font, style, etc. Management should not segregate its list of nominees from that of investor nominees, but should note clearly that they are Board-nominated candidates.

  • Management or incumbent boards should be prohibited from colluding with shareholders or shareholder associations in order to nominate directors that are in essence management nominees. Penalties should be imposed on executives or directors involved in such schemes.

  • All corporate directors should attend the annual shareholders' meeting. Failure to do so should be reported in the proxy, along with attendance at Board and committee meetings.

  • Shareholders should receive full disclosure in the proxy of shareholder assets spent on proxy printing and related costs for the elections process and solicitation of votes, to ensure that management is not excessively using shareholder monies to support its own slate of candidates. This would enable investors to keep a closer watch on assets spent for the elections process, and deem whether such funds are being used properly.

  • Communication among shareholders holding more than 5% of shares should be exempt from current requirements under Regulation 13-D if it pertains to director nominations, solicitation of votes for directors, organizing aggregate votes for nominations, and the elections process.

Thank you for the opportunity to present these comments. I would be happy to discuss them with you further.


Mindy S. Lubber, Esq.
Executive Director


99 Chauncy Street, 6th Floor
Boston, MA 02111