December 1, 2003
Secretary Jonathan Katz S7-19-03
Dear Secretary Katz:
News stories over the last few years about financial improprieties among American corporations show that companies have to change they way they operate. The Enron and WorldCom affairs are cases in point. SEC proposals changing the selection process for candidates on corporate boards of directors are only a part of widespread changes. I have decided to write you as part of the public comment on your proposal. The thrust of my response is that this is not required, and could be a bad idea. While the goals are probably sound, many boards have recently fixed their procedures, so the whole proposal is superfluous.
I have invested in stocks for more than four decades. I have developed a fairly diversified portfolio, with the goal of providing for my retirement. Under those circumstances, I am suspicious of any changes that might limit or reduce my earnings. Permitting unqualified members to sit on boards, and so disrupt their operations, is a poor idea. Your proposed regulations comprise real risks for that sort of development, even though I believe you had not planned it that way. Simply encouraging greater shareholder participation in corporate governance won't guarantee superior results.
My viewpoint is that democratization does not provide sound corporate governance. In fact, your proposal may make effective corporate governance more difficult. The changes may complicate the work of boards, in part by interfering in the work of independent committees used to select new candidates. Hampering these committees' efforts will not do companies any good. The proposal has serious flaws and should be dropped, regardless of its worthwhile intent.