December 19, 2003
Mr. Jonathan G. Katz
Re: File No. S7-19-03
Dear Mr. Katz:
On behalf of PPG Industries, Inc. ("PPG"), a Pennsylvania corporation with over $8 billion in annual revenues and more than 33,000 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").
PPG has always been a strong supporter of good corporate governance. Long before the Sarbanes-Oxley Act was enacted and before the stock exchange governance standards were revised, PPG had adopted and strictly followed extensive corporate governance standards. Those standards include: detailed independence requirements for our directors; maintaining fully independent audit compensation and nominating committees; and specifying committee responsibilities in writing.
More importantly, PPG has long established Business Conduct Policies and a Code of Ethics. These apply worldwide. Employees are trained on the Policies and Code and annually certify compliance. Our vision statement reinforces to every employee that we will operate our company with unbending ethical standards.
We believe that an unwavering commitment to high ethical standards is the foundation of good corporate governance. New regulations do not necessarily improve corporate governance. New regulations regarding access to proxy material will not necessarily improve a company's focus on its responsibility to shareholders.
We believe that the Proposed Rules will not improve corporate governance. Instead, they will result in divisive, contested director elections and cause companies 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 would change the model of corporate governance that has served society well for hundreds of years, and 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.
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 412 434-2439.