From: Wilson, John [wilsonj@cbis-fsc.com] Sent: Friday, September 12, 2003 2:24 PM To: 'rule-comments@sec.gov' Subject: File No. S7-14-03 September 12, 2003 Jonathan G. Katz Secretary Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0609 Re: File No. S7-14-03, Release No. 34-48301 Proposed Rule: Disclosure Regarding Nominating Committee Functions and Communications between Security Holders and Boards of Directors Dear Mr. Katz: Christian Brothers Investment Services, Inc. (CBIS), a registered investment adviser under the Investment Advisers Act of 1940, would like to submit comments pursuant to the Commission’s August 8, 2003 “Proposed Rule: Disclosure Regarding Nominating Committee Functions and Communications between Security Holders and Boards of Directors” (File No. S7-14-03, Release No. 34-48301). CBIS manages approximately $3 billion for Catholic organizations seeking to combine faith and finance through the responsible stewardship of Catholic assets. CBIS is an active shareholder that works with companies on a number of issues we believe are critical to the long-term value of the investments we make on behalf of our clients. We commend the efforts of the Commission to increase the accountability of directors to shareholders. The duty of directors to act as representatives of shareholders is at the core of corporate governance reforms. Greater participation by shareholders in selecting and monitoring board members can help ensure that directors are free from conflicts of interest that hinder effective corporate governance. As investors deeply concerned about our companies’ responsibilities both to their shareholders and to the world at large, we continually call on our companies to disclose their policies and practices on a range of issues related to corporate governance and social justice. We support the improved standards of disclosure called for in the current proposal. Combined with mechanisms to allow shareholders to influence the selection of board nominees, greater transparency can be an important element of effective corporate governance. However, disclosure alone, without an accompanying right to influence the director selection process, does not provide shareholders with the tools they need to influence the governance of their corporations. The current proposal, while welcome, is insufficient to achieve the goal of “increasing the shareholder participation in the proxy process,” as identified in the July 15 Staff report on Nomination and Election of Directors. The adoption of disclosure requirements should not delay the more substantive process of extending to shareholders the right to nominate directors to the board. In that spirit, we offer the following specific comments: Board Independence The proposal calls for disclosure of any nominating committee member did not meet accepted definitions of independence. We propose that the Commission broaden this requirement to include all board members, and to require that companies indicate the nature of activities that would compromise independence. We believe that nominating committees should be held accountable not just for their own independence but also on their success in producing an independent board of directors. Board Diversity We also propose that disclosure standards include a requirement that boards provide information on the ethnic and gender diversity of their boards, and on the policies and procedures in use to seek out a diverse pool of candidates. Among investors and corporations, there is a growing awareness that selecting from a diverse pool of candidates improves board performance. As companies are currently required to report on the diversity of their workforces, it should be little additional burden to disclose the diversity of board representatives. Shareholder Communication The proposal calls for companies to indicate whether or not they have procedures for shareholder communications with the board of directors. We strongly support this proposal, as Boards cannot represent the interest of shareholders against management without a willingness to listen to the voices of shareholders. We commend the board for its efforts to improve corporate governance, and thank you for the opportunity to share our views on this matter. Please feel free to contact me if you have further questions. Director Attendance Board members cannot serve the interests of shareholders without attending all meetings. We recommend that the Commission expand disclosure requirements to include the attendance records of all directors and reasons for their absence. Securities Companies We support the proposal that securities companies should be covered by these guidelines. Such disclosure would allow security holders better awareness of how trustees are selected. We appreciate the Commission’s efforts to improve transparency. We believe that these rules, combined with greater shareholder access to the proxy ballot, will enhance board accountability. We encourage the Commission to quickly approve these regulations and begin the rulemaking process for the more substantive issues of proxy access. Sincerely, John K. S. Wilson Assistant Director – Socially Responsible Investing John K. S. Wilson Assistant Director - Socially Responsible Investing Christian Brothers Investment Services 90 Park Avenue, 29th Floor New York, NY 10016 (p) 212-490-0800x118 (f) 212-490-6092 (e) wilsonj@cbisonline.com www.cbisonline.com