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September 12, 2003

Jonathan G. Katz, Secretary
U.S. Securities & Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609


Dear Mr. Katz:

The Nathan Cummings Foundation is an institutional investor with an endowment of approximately $385 million. Because we take a long-term approach to stock ownership we consider corporate governance a major issue. The high profile incidents of management abuses over the last few years have highlighted the important oversight role that boards of directors should be, but too often are not, doing effectively. This raises real issues concerning the qualifications and selection processes for independent directors. Because of the need to insure that directors are qualified and have the integrity and temperament to provide effective oversight, we strongly support the SEC proposed rule on nominating committee disclosures and communications between shareholders and corporate directors.

In addition, the Foundation believes that Corporations who do not consider environmental and other societal impacts because of an over-emphasis on near-term profitability are likely not to survive as long-term business models. The actions taken by boards affect both the near-term and the long-term value and financial condition of our companies. They also affect the quality of the society in which we live. Therefore, it is imperative that boards be composed of diverse set of well-qualified individuals who have perspectives beyond that of management's and who are responsive to shareholders' concerns.

As the July 15, 2003 Staff Report: Review of the Proxy Process Regarding the Nomination and Election of Directors notes, the proposed changes, along with the important matter of shareholder access to the proxy, should help to increase corporate directors' responsiveness to shareholder concerns and enhance board accountability and diversity. With these expectations in mind, we submit the following comments regarding the SEC-proposed rule S7-14-03 relating to nominating committee disclosures and shareholder-director communications.

The Nathan Cummings Foundation strongly supports the proposed disclosure requirements regarding the director nomination process. The Foundation believes that the following disclosures are of particular importance: a) the process the company uses to identify director candidates; b) the qualifications and standards used to evaluate director candidates; c) other sources which have submitted director candidates, whether solicited or unsolicited, and d) the policies and procedures used to review candidates suggested by shareholders. The Foundation also strongly supports the provision requiring enhanced disclosure by companies who do not nominate candidates suggested by an investor or group of investors who have owned at least 3 percent of the company's stock for over a year. All disclosure requirements should apply to all companies-including mutual fund companies-with registered securities.

While the Foundation supports the proposed rules regarding nominating committee disclosure, it believes that the following modifications would increase the transparency and accountability of corporate boards of director:

  1. Companies should be required to provide prompt disclosure in the Form 8-K Report of any changes to procedures for shareholders to submit recommendations for director candidates.

  2. Companies should be required to disclose whether the same criteria are used in the evaluation of shareholder and company-nominated board candidates.

  3. In addition to the name of each candidate's sponsor, companies should be required to disclose the sponsor's title and firm and any professional, familial or financial relationship between the candidate, sponsor, company and company executives.

  4. Companies should be required to include the name of any rejected candidate, suggested by a 3 percent holder or holders, who consents to being identified in the company's proxy statement.

In addition to these modifications, the Foundation recommends the following additions to the proposal:

  1. We strongly recommend disclosure on whether and how the nominating committee takes issues of diversity into account in making recommendations for new board members. Disclosure requirements should include information on if and how they take the issue of diversity, including diversity of gender and race, into account in developing the slate of directors and selecting new directors.

  2. We recommend a requirement that companies disclose their policies regarding director attendance at shareholder's meetings in their Form 10-Q reports.

  3. We recommend enhanced disclosure of relationships between directors, corporations and corporate executives.

The Nathan Cummings Foundation strongly supports the SEC's proposed rule on nominating committee disclosures and communications with shareholders. This rule is an important first step. We also look forward to the second important step - formulating procedures to give shareholders access to the company proxy card so that they can present director candidates directly to the shareholders. We urge the Commission to develop this second rule and to implement both of these important shareholders' rights reforms.

As the SEC notes on its website under the section entitled The Investor's Advocate: How the SEC Protects Investors and Maintains Market Integrity, the SEC's primary mission is to protect investors. By implementing this proposed rule and then providing shareholders with access to the management proxy to nominate directors, the SEC will better serve the interests of investors. These steps will allow long-term shareholders to address problems caused by managements who use the current proxy rules, corporate assets and other shareholder resources to prevent accountability for their conduct.

The Foundation appreciates the opportunity to comment on these important proposals and thanks the Commission for its leadership on this important topic.

Lance E. Lindblom
Chief Executive Officer & President
Caroline L. Williams
Chief Financial & Investment Officer