Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Dear Mr. Katz:
As Chairman and Chief Executive Officer of The Liberty Corporation, I wish to express our opposition to the Securities and Exchange Commission’s (“SEC”) proposed rules giving open access to management’s proxy statement to shareholders for the following reasons:
- A contested election is not the best way to select qualified board members. An independent governance/nominating committee is best suited to select qualified directors with the unique mix of skills and experience needed to oversee each company.
- Many companies take a year or longer locating qualified individuals who have neither independence issues nor conflicts that could create problems for the company with regulatory agencies. The timeframe proposed by the SEC may not allow the time necessary for companies to complete the research required.
- Recent rules adopted by the SEC require companies to disclose in their proxy statement additional information regarding the process for nominating directors, including how candidates to be nominated are identified and evaluated. In addition companies must disclose whether any candidates put forward by large, long-term shareholders (or groups of shareholders) have been rejected. These new regulations, together with additional reforms enacted by the Sarbanes-Oxley law and the stock exchanges, provide shareholders with the information they need to evaluate the performance of their company’s governance/nominating committee and its processes.
- 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.
- Shareholder nominees will inevitably represent the special interest agendas of the shareholders that nominated them rather than the interests of all shareholders. Directors should represent all shareholders, and their actions should promote the best interests of the company as well as its shareholders.
- The proposed thresholds for triggering a shareholder nomination are too low and would result in frequent contested elections. Even companies that are performing well could face annual election contests, which would be distracting and costly and could dissuade qualified individuals from serving as corporate directors. Companies need directors who can focus on developing new products, capturing new markets and creating jobs while returning value to shareholders, not directors with special interest agendas.
- Consideration should be given to allowing companies to exclude the nominee(s) of a shareholder upon the resignation of the director who creates a triggering event. Such action by the director would “cure” the independence or other governance problem that resulted in the withheld votes, and there would be no reason to give shareholders access to the proxy statement. Such access would only serve to promote the shareholder’s agenda.
- Companies should have 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 expand their governance staff or retain counsel to assist with the proposals that may ultimately qualify as triggering events and related issues.
- 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.
- I share the concerns and endorse the opinions expressed in the comment letter submitted by the American Society of Corporate Secretaries.
I strongly encourage the SEC to allow the corporate governance reforms already enacted to be fully implemented before proceeding with more regulation. With the increased independence of boards of directors, the strengthened role and independence of nominating committees and the enhancement of shareholder-director communications, the unfortunate circumstances that led to calls for shareholder access are being addressed. The SEC should be careful not to create obstacles through unnecessary regulations that may impede the performance of companies.
Chairman and CEO
The Liberty Corporation
135 South Main Street
Greenville, SC 29601
P.O. Box 502
Greenville, SC 29602-0502
Main Phone: 864-241-5400
Direct Phone: 864-241-5496
Main Fax: 864-241-5401