From: BREWER PAUL [pjbrewer@ust.hk]
Sent: Thursday, April 24, 2003 12:04 AM
To: rule-comments@sec.gov
Subject: Sec File No. 4-461

Secretary Katz:

 As a US citizen and shareholder in several US companies, I support the
efforts of the Committee of Concerned Shareholders and James McRitchie
with respect to their Petition for Rulemaking (SEC File No. 4-461) to
allow shareholder proposals to elect directors onto the boards of US
corporations.

 Increasing the ability of shareholders to add directors to a
board could be helpful in restoring proper governance in some
extreme situations. However, to be effective it is clear that
shareholder proposals would also need to be able to create new seats on
a board so that shareholder proposals could potentially elect a new board
majority. 

 While I support the spirit of the proposal, the proposal is not without
its problems. It is easy to imagine corporations inundated with
nomination proposals that, even if announced, would never pass. Also,
corporations will find ways to resist the proposed rules just as they
have resisted other ways to change or influence management, raising
transactions costs wasted within the organization.  

Staggered board terms, fixed numbers of directors, and ability to serve on
committees could be used to limit the ability of shareholders to effect
change by limiting the number of directors up for election at any given
time and by limiting the effectiveness of new directors unsupported by
the old majority.

Dr. Paul J. Brewer
Department of Economics
Hong Kong University of Science and Technology
Clear Water Bay
Kowloon
Hong Kong