Callaway Golf Company
December 22, 2003
Jonathan G. Katz
Re: File No. S7-19-03
Dear Mr. Katz:
We appreciate this opportunity to provide comments on the Securities and Exchange Commission's ("SEC") proposed rules to require companies to include shareholder nominees for director in company proxy materials under certain circumstances (the "Proposed Rules").
Callaway Golf Company has long been a strong supporter of good corporate governance. Based on our experience, however, we believe that the Proposed Rules will not result in an improvement in corporate governance. Instead, we believe the Proposed Rules will result in divisive, contested director elections and contested elections are not the best means of selecting qualified board members. Rather, we believe an independent governance committee is best suited to select qualified directors with the unique mix of skills and experience needed to oversee each company.
In addition, directors have a fiduciary duty to act in the best interest of the company and its shareholders when nominating directors, a duty not shared by shareholders nominating directors. As a result, we believe the Proposed Rules will result in the election of "special interest directors" who further the agendas of the shareholders who nominated them, rather than the interests of all shareholders and the company's long-term business objectives. Furthermore, contested elections are distracting and expensive and could dissuade qualified individuals from serving as corporate directors or could lead to the creation of divisive boards that have difficulty functioning well as a team, all to the detriment of the shareholders.
For the foregoing reasons, we oppose the adoption of the Proposed Rules. Instead, we believe the SEC should give the significant governance reforms recently enacted by Congress, the SEC, the NYSE and others the opportunity to take effect. These reforms include improvements in the director nomination process and provide for additional disclosure of the nomination process. These reforms will make boards more independent and accountable and should be given an opportunity to work before imposing additional, unproven and burdensome requirements upon companies.
If the SEC nevertheless proceeds to consider adopting the Proposed Rules, we strongly urge it to consider significant modifications in the rules to better align the Proposed Rules with the SEC's stated intent of targeting a small number of unresponsive companies. In particular, we urge the SEC to consider the following:
In conclusion, we urge the SEC to permit the existing corporate governance reforms to work before proceeding with the Proposed Rules. If, however, the SEC determines to move forward with the Proposed Rules, we believe the rules should be significantly modified to address the concerns outlined above. Finally, we urge the SEC to extend the comment period for the Proposed Rules, as we believe the existing 60-day comment period is insufficient for interested parties to comprehensively review, comment and provide requested information on the Proposed Rules.
Thank you for considering our concerns. If you would like to discuss these comments or any other issue, please do not hesitate to contact me at (760) 804-4056.