December 15, 2003
Jonathan G. Katz
Re: File No. S7-19-03
Dear Mr. Katz:
On behalf of Fluor Corporation, a Delaware corporation with approximately $10 billion in annual revenues and more than 30,000 employees worldwide, I appreciate this opportunity to provide comments on the Securities and Exchange Commission ("SEC") proposal to require companies to include shareholder nominees for director in company proxy materials under certain circumstances (the "Proposed Rules").
Fluor Corporation has long been a strong supporter of good corporate governance. We supported enactment of the Sarbanes-Oxley Act of 2002, and we appreciate the SEC's efforts to implement the Act. We also support the newly revised New York Stock Exchange and NASDAQ Stock Market, Inc. corporate governance listing standards, which we believe will foster sound corporate governance. At Fluor Corporation, we have strengthened independence requirements for our directors; appointed a lead independent director; appointed fully independent audit, compensation and nominating committees; specified committee responsibilities in written committee charters; and implemented company codes of ethics and corporate governance principles, among other things.
Based on our experience, we believe that the Proposed Rules will not represent an improvement in corporate governance. Instead, they will result in divisive, contested director elections and the consequent need to expend significant corporate resources in support of board-nominated candidates. They also could lead to the nomination and 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. Moreover, the Proposed Rules could lead to the creation of divisive boards that have difficulty functioning well as a team. Such management by referendum could stifle the innovation that is an essential characteristic of American business.
For all of these reasons, we oppose the adoption of the Proposed Rules. Instead, we believe that the SEC should permit the significant corporate governance reforms enacted by Congress, the SEC, the NYSE and NASDAQ to become fully operational. If the SEC nevertheless proceeds to consider adoption of the Proposed Rules, we strongly urge it to consider significant modifications in the rules to better accord with the SEC's stated intent of targeting a small number of unresponsive companies. As proposed, the rules would impact many U.S. public companies - regardless of their corporate governance practices or their responsiveness to shareholders. In particular, the trigger based on a majority-vote shareholder proposal to activate shareholder access would apply to any company, not merely those companies that have failed to respond to shareholder concerns. In addition, the possible third trigger discussed in the release, a company's failure to implement a majority-vote shareholder proposal, also would apply to any company and does not take into account the board's fiduciary duty when considering its response to a shareholder proposal.
Finally, the Proposed Rules do not adequately consider the realities of the proxy process, including the considerable influence of proxy voting guidelines of institutional investors and Institutional Shareholder Services ("ISS"). It is likely that ISS, as well as many institutional investors, will revise their proxy voting guidelines to support shareholder access proposals, and many shareholders will vote in favor of such proposals at all companies, if for no other reason than to make access available in case a company is not responsive in the future. If access to company proxy materials is to be required, the SEC must revise the Proposed Rules to account for these realities and to target only those companies where shareholders have not had adequate access to an effective proxy process.
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 (949) 349-6775.
cc: Hon. William H. Donaldson, Chairman, U.S. Securities and Exchange Commission