From: Valerie Heinonen [heinonenv@juno.com] Sent: Wednesday, September 03, 2003 3:32 PM To: rule-comments@sec.gov Subject: S7-14-03 Attention: Secretary Jonathan G. Katz September 3, 2003 Comment on Proposed Rule: Disclosure regarding Nominating Committee functions and comunications between security holders and Board of Directors FILE NO S7-14-03 RELEASE NO 34-48301 IC 26145 Dear Sir or Madam: On behalf of Mercy Investment Program, I am submitting comments on the SEC decision to increase disclosure with respect to corporate Nominating Committees and shareowner access to the Board of Directors. Mercy Investment Program guidelines emphasize the importance of being an informed, involved and active investor. As such, MIP has participated in many corporate dialogues on social, environmental and corporate governance issues and has been both sponsor and co-sponsor of shareowner resolutions on these topics. Thus, we are extremely interested in the Proposed Rule the SEC has submitted for public comment. We appreciate the SEC decision to present two different proposals on disclosure and shareowner access to the proxy to nominate Directors. MIP strongly believes the combined approach of improved disclosure and the right of investors with a reasonable percent of shares to nominate Directors, place them on the proxy and have them voted upon is integral to improving investor confidence and board accountability. We support the recommendation that requires a company to disclose when it receives nominations from security holders, the procedures for nominating Directors, the process followed after a nomination has been made and minimum qualifications for nominees. Many companies do this already. Additionally, MIP strongly recommends adding to the proposal whether and how the Nominating Committee includes diversity when making recommendations for new Board members. Again, a number of companies do disclose this fact in their nominating committee charters and elsewhere. Diversity in a Board is an important factor in good governance as is witnessed by the fact that TIAA-CREF lists Board diversity in its Corporate Governance guidelines as a positive value. Shareowner resolutions sponsored by religious and other concerned investors have either resulted in a change in company policy and a disclosure of their new policy or the resolution on the proxy received reasonably high levels of support. We therefore recommend that the Nominating Committee be required to disclose if and how issues of diversity, including gender and race, are considered when selecting new Directors and presenting the slate of Directors. Disclosure regarding ability of security holders to communicate with Board of Directors We agree that there must be clear procedures described for a security holder to communicate with Board Committees or Board members. Companies such as Pfizer have already determined a process for communication with outside Directors, including an e-mail box. Since outside Directors are responsible for Committees such as the Audit and Corporate Governance Committees, it is important to be able to communicate directly with those Committees. Thus we support the proposal stating that there be a description of how security holders can communicate with the Board and the Board Committees and action the Board took in response to such input. Investment Companies The proposal includes applying the new disclosure requirements to investment companies (“funds”). We agree that this proposal would benefit fund security holders in improving the transparency of the nominating process. The disclosure should include a description of who on the nominating committee are “interested persons” under the Investment Company Act. SUMMARY: Mercy Investment Program supports the emphasis of these proposals and efforts to advance good corporate governance and increased transparency. We strongly urge that Board diversity be added to disclosure regarding the Nominating Committee’s role and responsibilities. MIP also wishes to emphasize that these disclosures will truly be meaningful when combined with a second step which creates the process whereby shareowners may nominate Directors to be placed on the company proxy for a vote. Yours truly, Valerie Heinonen, o.s.u. MERCY INVESTMENT PROGRAM Valerie Heinonen, o.s.u., Consultant, Corporate Social Responsibility 205 Avenue C, #10E ~ New York, NY 10009 Phone and Fax: 1-212-674-2542 ~ E-mail: heinonenv@juno.com