December 11, 2003
Jonathan G. Katz
Re: File No. S7-19-03
Dear Mr. Katz:
As Chairman of the Board and CEO of Pfizer, Inc, a Delaware corporation with $32.4 billion in annual revenues and more than 120,000 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 past two years have seen more corporate governance reform than the previous 20, and these reforms are having a real impact on American companies and their boards of directors. Pfizer has strongly supported these reforms. In fact, Pfizer long has been recognized as a leader in corporate governance. A substantial majority of our directors are independent - both in fact and appearance - and our Audit, Compensation and Corporate Governance Committees are composed entirely of independent directors. We maintain, and make available to our shareholders, a set of corporate governance principles designed to exceed New York Stock Exchange ("NYSE") corporate governance listing standards. Our board and each board committee are required to conduct self-evaluations at least annually, and we have a full orientation and continuing education process for our board members. Executive sessions of our outside directors are held regularly, at least three times a year. Finally, we provide information to our shareholders, both in our proxy statement and on our website, on how to contact the Chairs of our Audit, Compensation and Corporate Governance Committees and our outside directors as a group.
In light of Pfizer's commitment to good corporate governance and my role as Chairman of the Business Roundtable, I have spent substantial time considering the issues raised by the SEC's proposed director nomination and election rules. In short, I am very concerned that the proposed rules will not represent an improvement in corporate governance and, quite the opposite, threaten to bring the worst of partisan politics into corporate governance. Contrary to the SEC's stated intent of targeting a small number of unresponsive companies, I fear that the proposed rules will impact even the best-run 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. Moreover, the trigger based on a director's receipt of more than 35 percent "withhold" votes, while more appropriate than the first trigger, would not give the board and its nominating committee an opportunity to respond to shareholder concerns about a director before the company's proxy process is deemed ineffective. Finally, the proposed thresholds for shareholders to submit a proposal to activate access and to nominate directors are too low to justify the substantial cost and disruption of the proxy contests that inevitably would result.
Based on my experience, I believe that the proposed rules will have serious, unintended consequences, including:
In fact, I feel so strongly about this matter that I submitted a letter to the Manager's Journal detailing my concerns. My letter was recently published in the Wall Street Journal (attached).
For all of these reasons, I oppose adoption of the proposed rules. Instead, I believe the SEC should permit the significant corporate governance reforms enacted by Congress, the SEC, the NYSE and NASDAQ to be fully implemented. If the SEC nevertheless proceeds to consider adoption of the proposed rules, I strongly urge the agency to consider significant modifications in the rules to address the concerns outlined above. Finally, I encourage the SEC to extend the comment period for the proposed rules, as I 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 my concerns. Please do not hesitate to contact me at (212) 573-5915 if you would like to discuss these comments or any other issue.
cc: Hon. William H. Donaldson, Chairman, U.S. Securities and Exchange Commission