The Business Roundtable

John T. Dillon
International Paper


1615 L Street, N.W.
Suite 1100
Washington, DC 20036-5610
Tel (202) 872-1260
Fax (202) 466-3509

Philip M. Condit
Edward B. Rust, Jr.
State Farm

John J. Castellani
Patricia Hanahan Engman
Executive Director

June 21, 2002

Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Release No. 33-8090, Proposed Rule: Form 8-K Disclosure
of Certain Management Transactions, File No. S7-09-02

Dear Sir:

The following comments are submitted on behalf of The Business Roundtable, an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees in the United States and $3.5 trillion in revenues. The chief executives are committed to advocating public policies that foster vigorous economic growth, a dynamic global economy, and a well-trained and productive U.S. workforce essential for future competitiveness. We appreciate the opportunity to provide you with our views on your recent proposal to require public companies to file current reports describing directors' and executive officers' ("D&O's") transactions in company equity securities, D&O arrangements for the purchase and sale of company equity securities, and loans of money to a director or executive officer made or guaranteed by the company or an affiliate.

In connection with our consideration of this proposal, we solicited the input of our members through a survey to obtain their firsthand knowledge concerning the impact of the proposals, particularly the proposal to require reporting of transactions and loans involving at least $100,000 (collectively referred to as "transactions") within two business days. A majority of our members responding to the survey thought they could meet the proposed schedule, but many pointed out the challenges that they would face in accelerating this timeframe. Accordingly, we are suggesting you consider an alternative approach if you move forward with these proposals. Our specific comments and suggested approach are set forth below.


The Securities and Exchange Commission (the "Commission") is proposing that companies report certain D&O transactions on a Form 8-K filed within two business days following the transaction and that certain other D&O transactions involving less than $100,000 be reported on a Form 8-K filed by the second business day of the week following the week in which the transaction occurs. Currently, the reporting of D&O transactions is the responsibility of D&Os pursuant to the reporting regime adopted under Section 16 of the Securities Exchange Act of 1934 ("Exchange Act"). While many companies assist D&Os with this responsibility, this is not universally the case. In addition, under the current Section 16 reporting regime, reports are not due until, at the earliest, ten days after the end of the month in which the transaction occurs. Moreover, we understand that the Commission is considering requiring D&Os to make their Section 16 filings through EDGAR. Although the proposal does not deal explicitly with EDGAR, because of this interest in extending EDGAR to Section 16 filing and because of the desirability of coordination between this new Form 8-K requirement and the D&O's Section 16 filings, we included the impact of an EDGAR requirement for Section 16 filings in our comments.

According to our survey, in order to meet the new obligations imposed by the proposals, companies will have to hire additional staff, revise their practices and procedures, and implement new systems, software and training. Respondents to our survey indicated that the approximate additional cost of complying with the proposals was $5,000 to $150,000 per year. As importantly as the additional cost, companies will need to change their systems and procedures. The most effective way for a company to meet the proposed time schedule for filing its Form 8-K, either within two days or in the following week, is to establish a pre-clearance procedure pursuant to which D&Os must notify the company in advance of any transactions in the company's securities. Even then, companies may find it difficult to obtain the necessary information to make the required filing within a two-day window. For example, under Exchange Act Rule 10b-10, brokers generally do not report details of a transaction until the third business day after the trade date. Moreover, in contrast to the existing reporting regime under Section 16 in which most reports are filed on a regular basis (10 days after the end of the month in which a transaction occurs), under the proposals, a company will need to be ready to submit a Form 8-K within a fixed number of days of a D&O transaction, which may occur at any time.

Given these difficulties, we would suggest that the Commission adopt the second business day of the following week standard for all D&O transactions, not just those involving less than $100,000. Such a schedule will permit the development of simpler and less costly systems while still providing important required information in a much more timely fashion than is currently the case.

Coordination with Section 16 Reporting

As you know, D&Os already are required to make filings with respect to their transactions in company securities pursuant to Section 16 and the rules thereunder. In order to reduce investor confusion and the burden of duplicate filings, we suggest that the Commission coordinate the two reporting regimes toward the goal of a single filing that would meet both filing requirements. Otherwise, the companies and their D&Os would face unnecessary compliance burdens for duplicative disclosure.

Covered Corporate Officers

The release also requests comments about who should be covered by this new Form 8-K requirement. We support the proposal's suggestion that the company's reporting requirement be limited to the company's directors and executive officers. This would be consistent with the Commission's proxy rules, which require extensive disclosure of background, compensation, stock ownership, and related party transactions with regard to directors and executive officers, on the theory that investors justifiably have a particular interest in these key individuals. It would also ease the burden of compliance for many companies by reducing the number of people whose stock transactions would have to be monitored, while still providing important information about the most significant people in the company.

Transition Period

In the proposing release, the Commission acknowledges that a transition period is necessary and indicates that the proposal will become effective 60 days following Federal Register publication of the final rules. A 60-day transition period is simply not long enough. As discussed above, significant changes in company systems and practices, as well as staffing and training, would be necessitated by the new reporting regime, which would not only shorten reporting times but impose on companies for the first time reporting responsibility for D&O transactions. Accordingly, we would suggest that you consider a six-month delayed effective date.

We appreciate your consideration of these comments, and we would be happy to discuss these matters further or to meet with you if it would be helpful.


Henry A. McKinnell
Chairman of the Board and CEO
Pfizer Inc.
Vice Chairman & Chairman-SEC Subcommittee
Corporate Governance Task Force
The Business Roundtable