DNP Select Income Fund Inc.
55 East Monroe Street, Suite 3600
Chicago, Illinois 60603
December 15, 2003
Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549-0609
Dear Mr. Katz:
I am the Chairman of DNP Select Income Fund (NYSE:DNP) (the "Fund"), a closed-end diversified investment management company incorporated under the laws of Maryland. I appreciate this opportunity to comment on the Securities and Exchange Commission ("SEC") proposal to require companies to include shareholders' director nominees in company proxy materials under certain circumstances. As Chairman of the Fund since its inception in 1986, I would like to bring my practical experience to bear on some of the issues raised by the proposal.
I agree with Congress, the SEC and the securities markets that corporate boards and management must hold themselves to the highest standards of corporate governance. However, I believe that the proposed new rules, by making it easier for special-interest shareholders to create contested elections, will have a harmful effect on corporate governance and will make it harder for public corporations to attract and select board members who possess top qualifications and are committed to acting in the best interests of all shareholders.
I have had the opportunity to observe the director nomination process closely for the past seventeen years and have found that candidates with strong credentials who would make excellent directors are increasingly concerned about the potential liability exposure that directors of public companies face. I believe that the prospect of facing contested elections, when added to existing liability concerns, will further discourage qualified director candidates from standing for election.
I would also like to respond to one of the specific questions posed by the SEC's proposing release (Question C.3). As proposed, the shareholder nomination procedure could be triggered if at least one of the company's nominees receives "withhold" votes from more than 35% of the votes cast. The proposing release asks whether 35% of the votes cast is the correct trigger. In my view, it is not. First, the required percentage should be a majority, so that a mere minority of shareholders is not able to trigger the drastic measures embodied in the proposed rules. Second, the required percentage should be of the total number of outstanding shares, not just the number of votes cast. The reason is that, practically speaking, a significant number of shareholders of public companies choose not to cast a proxy vote. Even though companies regularly devote substantial time and effort to "getting out the vote," many shareholders fail to respond, generally because they are satisfied with the way that corporate affairs are being conducted. By excluding those non-voting shareholders from the denominator, the rule proposal would effectively count them in the "withhold" camp, which I believe would be a serious mischaracterization of their position. All shareholders, whether voting or not, should be included in the denominator, and the trigger percentage should be measured as a percentage of the total number of outstanding shares.
Thank you for considering these concerns about the proposed rules. If you would like to discuss these comments or any other issue, please do not hesitate to contact me at (312) 630-4604.
Claire V. Hansen, CFA