435 North Michigan Avenue
Chicago, Illinois, 60611
December 2, 2003
Via E-mail (email@example.com)
Mr. Jonathan G. Katz
U. S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609
Re: Proposed Rule: Security Holder Director Nominations
SEC File No. S7-19-03
Dear Mr. Katz:
The following is submitted on behalf of Tribune Company in response to the Securities and Exchange Commission's ("SEC") proposal to allow shareholders to use a public company's proxy statement to run a director election contest under certain circumstances.
For the reasons discussed below, Tribune strongly urges the SEC to reject the shareholder access proposal and to continue to allow shareholders who wish to conduct an election contest to do so by means of their own proxy materials.
Tribune has long advocated good corporate governance. Tribune and the Tribune Board of Directors strongly supported the enactment of the Sarbanes-Oxley Act of 2002 and applaud the SEC's efforts over the past 16 months in creating workable regulations to implement the Act. We also support the efforts of the New York Stock Exchange ("NYSE") and the Nasdaq Stock Market in revising their corporate governance listing standards to create a workable framework to balance the interests of corporate and shareholder constituencies in corporate governance matters and to encourage greater transparency in business practices.
In addition to the state law concerns raised by the shareholder access proposals, there are a number of practical concerns to consider, including:
- Influx of special interest directors. The shareholder access proposals will most likely be used by special interest groups that typically have interests and agendas beyond the economic performance of the company. Turning the boardroom into a marketplace of special interests hardly seems in the best long-term interests of the overall shareholder base.
- Fragmentation of Board. Election of dissident directors typically results in a fragmented board, which destroys collegiality, inhibits open discussion and impedes the board's intended function. This will be particularly true as the special interest electorate pursues its particular agenda.
- Increased disruption and cost. Companies already devote substantial amounts of management time and resources to routine annual shareholders meetings. Adding the element of a contested election will result in greater disruption and greatly increase the cost of these meetings.
- Adverse impact on director recruiting. The cumulative effect of the recent corporate governance reforms and the growing perception of increased liability for corporate directors are already making it more difficult for companies to recruit qualified director candidates. Increasing the number of election contests would only exacerbate this problem.
Moreover, the recent wave of corporate governance reforms initiated by Congress, the SEC and the various stock exchanges should work together to positively affect the relationship between shareholders and corporate directors. A move towards greater director independence, the strengthened role of nominating committees and enhanced shareholder/director communication procedures, address many of the concerns raised by the SEC in the shareholder access proposal. The SEC should give these broad-sweeping reforms time to take hold, before hastily approving a shareholder access rule with such far-reaching ramifications and no clear added benefit.
In the event the SEC chooses to adopt some form of shareholder access rules, we believe significant revisions to the proposals are warranted so that shareholder access to a company's proxy materials is limited to those situations involving long-term investors with substantial holdings who are unable to influence corporate management and directors through any of the means currently available. In this regard, we endorse the thoughtful responses and opinions of Wachtell, Lipton, Rosen & Katz, one of our outside corporate counsel, to specific questions raised by the SEC in the proposing release relating to nomination procedure triggering events, proposed shareholder eligibility standards and general applicability of the proposals, as outlined in Wachtell's November 14, 2003 letter to the SEC on this initiative.
If you have any questions regarding our concerns, please do not hesitate to call me.
Very truly yours,
/s/ Crane H. Kenney
Crane H. Kenney