BY MAIL and ELECTRONIC MAIL

May 22, 2001

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Attention: Jonathan G. Katz, Secretary

Re: Disclosure of Equity Compensation Plan Information
File No. S7-04-01

Ladies and Gentlemen:

The Committee on Securities Regulation of the Business Law Section of the New York State Bar Association appreciates the opportunity to comment on Release No. 34-43892 (January 26, 2001), in which the Securities and Exchange Commission (the "Commission") requests comments on proposed amendments regarding disclosure of equity compensation plans.

The Committee on Securities Regulation (the "Committee") is composed of members of the New York Bar, a principal part of whose practice is in securities regulation. The Committee includes lawyers in private practice and in corporation law departments. A draft of this letter was circulated for comment among members of the Committee and the views expressed in this letter are generally consistent with those of the majority of the members who reviewed the letter in draft form. The views set forth in this letter, however, are those of the Committee and do not necessarily reflect the views of the organizations with which its members are associated, the New York State Bar Association, or its Business Law Section.

We support the efforts of the Commission to provide additional information to shareholders that they would find useful in making a voting decision; however, we have two major concerns about the proposed amendments. First, we agree with other commenters' concern that the proposal would result in duplicate disclosures, which should be avoided. Specifically, it is our view that the proposed disclosure duplicates the disclosure required by FAS 123. The Committee believes that the disclosure required by FAS 123 is sufficient. If the Commission believes additional disclosure is required, we urge the Commission to work with the FASB to revise the footnote disclosure so that all of the data is presented only once. The Committee believes that shareholders seeking dilution information will know where to find the relevant footnote. If the Commission is concerned that shareholders will not find it, the Commission should require a cross-reference in the proxy statement rather than duplicate disclosures.

Second, we believe the Commission should clarify the purpose in requiring this disclosure. Although the Commission has discussed the proposal in terms of disclosing the dilutive effect of equity compensation plans, the proposed disclosure falls short of addressing dilution. Shareholder dilution also can be caused by the use of stock for acquisitions, secondary offerings, etc. If the Commission is concerned about the dilutive effect of executive compensation, the proposal requires disclosure of data which will be of little use to shareholders. The disclosure is not aggregated and covers compensation of a much broader group than other executive compensation rules. The large amount of data required by the proposal would obscure rather than disclose any self dealing by management.

There are a number of other revisions to the proposed amendments that we urge the Commission to consider.

Content of the Disclosure

Aggregate Disclosure

We recommend that the Commission aggregate the disclosure of plans rather than requiring the separate disclosure of each plan. Separate disclosures of each plan would be burdensome to issuers and would overwhelm shareholders with too much information. Disclosure of individual grants on an unaggregated basis is particularly counterproductive. Aggregate disclosure would provide more understandable information to shareholders about equity compensation plans. Aggregation is consistent with the recommendation of the New York Stock Exchange Special Task Force on Stockholder Approval Policy.¹

We urge the Commission to permit issuers to aggregate all equity compensation information (except those plans requiring shareholder approval in the current year) into two categories: (1) plans approved by shareholders and (2) plans not approved by shareholders. Plans assumed through mergers, consolidations and other acquisitions should be included in the first category unless new grants are permissible, in which case they should be included in the second category.

Other Content Considerations

Many equity compensation plans determine the number of shares to be issued and the date the shares are to be awarded based upon a formula or the occurrence of certain contingencies. These plans would not easily fit in the Commission's proposed table and will require footnote disclosure.

We recommend that the disclosure be in terms of weighted average exercise price, which provides shareholders with more useful information than a long series of individual or grouped option exercise prices. This recommendation is consistent with one made by the NYSE Task Force.

Location of the Disclosure

Proxy Statement or Form 10-K

If the Commission adopts aggregated disclosure, we support the Commission's proposal regarding the location of the disclosure. We would concur with the Commission's proposal that the plan disclosure be included in the proxy statement if shareholders are voting on any plan at a meeting, and in the Form 10-K in years when the issuer is not submitting a plan to a vote of shareholders.

If the Commission does not adopt an aggregated disclosure requirement, we are very concerned about the costs to issuers in providing separate disclosure for each plan in their proxy statements. We note the comments of Lucent Technologies, Inc., submitted to the Commission on April 9, 2001, indicating that their increased printing and mailing costs could be as much as $300,000. If the Commission decides that separate disclosures are required, we believe that proxy statement disclosure would be cost prohibitive. Thus, the disclosure should be provided in only one place, Part III of Form 10-K.² The proxy statement only would include disclosures for the plans as to which shareholder approval is being sought.

Registration Statements

The Commission requested comment as to whether the equity compensation plan disclosure should be required in registration statements filed under the Securities Act of 1933. We believe that the Commission should require the disclosure in registration statements for initial public offerings because issuers have no prior reporting history to which shareholders can refer. Current disclosure requirements do not require detailed disclosure regarding outstanding options and shares reserved for future issuance under equity compensation plans. We do not support a disclosure requirement for follow-on offerings and short-form registration statements because shareholders can refer to the disclosures in the proxy statement or Form 10-K.

Filing Requirement

The Commission requested comment on whether in lieu of, or in addition to, the disclosure required for an equity compensation plan that has been adopted without shareholder approval, a registrant should be required to make the plan an exhibit to the Form 10-K for the fiscal year in which the plan was adopted. We urge the Commission not to adopt such a requirement because it would be burdensome to issuers with very little benefit to shareholders.

* * * * *

We hope that the Commission will find these comments helpful. The undersigned would be available at the Commission's convenience to discuss further any aspect of these comments.

Respectfully submitted,

COMMITTEE ON SECURITIES REGULATION

By:_Gerald S. Backman_____
Gerald S. Backman
Chairman of the Committee

cc: Laura Unger, Acting Chairman
Isaac C. Hunt, Jr., Commissioner
Paul R. Carey, Commissioner
David B. H. Martin, Director, Division of Corporation Finance
Elizabeth Murphy, Chief, Office of Rulemaking, Division of Corporation Finance
Mark Borges, Office of Rulemaking, Division of Corporation Finance
Raymond A. Be, Office of Rulemaking, Division of Corporation Finance