December 19, 2003
Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609
Re: File No. S7-19-03
Dear Mr. Katz:
Thank you for the opportunity to provide comment on the proposed rule regarding Security Holder Director Nominations. Although Rural/Metro Corporation supports the ability of its stockholders to submit matters for proxy consideration, we oppose the current measure for the following reasons:
- A contested election is not the most efficient or effective way to select qualified board members. We believe an independent governance committee is best suited to select qualified directors who possess the unique skills and experience needed to oversee each company.
- Shareholder nominees generally represent the special-interest agendas of the shareholders who nominated them rather than the best interests of all shareholders. Directors should represent all shareholders.
- The recent governance reforms initiated by the stock exchanges and the SEC will make boards more independent and accountable. The SEC should allow time for those reforms to work before imposing additional, unproven requirements on issuers.
- The proposed thresholds for triggering a shareholder nomination are too low. They would result in frequent contested elections. Even companies that are performing well could face annual election contests. Annual election contests would be distracting and costly and could dissuade qualified individuals from serving as corporate directors.
- A proposal of this magnitude raises many issues and questions, and could produce unintended consequences. The comment period should be extended for an additional 60 days to allow adequate study and consideration of the issues and potential ramifications of the proposal.
- We believe that companies should be provided a reasonable amount of time to anticipate and prepare for actions and events that may ultimately qualify as a triggering event for shareholder access under the proposed rule. Therefore, shareholder action or voting results during the 2004 proxy season should not qualify as a trigger for shareholder access under the proposed rule. There will be tremendous shareholder and company confusion with disclosures in 2004 proxy statements that attempt to provide information about a shareholder access process that has not been finalized. Moreover, companies may need to add additional governance staff or retain counsel to assist with the proposals that may ultimately qualify as triggering events and related issues.
- We share the concerns and endorse the opinions expressed in the comment letter submitted by the American Society of Corporate Secretaries.
Thank you for the opportunity to provide comment on this proposed rule.
Very truly yours,
/s/ John S. Banas III
John S. Banas III
Senior Vice President and General Counsel