From: Scott Klinger, Responsible Wealth [sklinger@responsiblewealth.org] Sent: Monday, December 22, 2003 4:42 PM To: rule-comments@sec.gov Subject: File No. S7-19-03 December 22, 2003 Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549-0609 Subject: File No. S7-19-03, Shareholder Access to the Proxy Ballot for Director Nominations Dear Secretary Katz, I am writing to express Responsible Wealth's support for greater shareholder access to the proxy for purposes of nominating director candidates. While we are grateful to the SEC for considering this important issue, the provisions outlined under S7-19-03 are far too restrictive to make a significant difference. In particular, the triggering events are too limiting and the time frame before democratic board elections can occur, too long. Responsible Wealth is a national network of wealthy individuals who are concerned about growing economic inequality in the United States. One of the concerns of our members is weak corporate governance practices that fail to provide accountability for corporate leaders. Since 1998, our members have filed more than 50 shareholder proposals on issues of executive pay, and broader corporate governance concerns. In 1999, we filed our first resolution, with American International Group, asking the company to put up multiple director nominees for board seats. When our members arrived outside the annual meeting and began handing information to arriving shareholders, the company called the New York City police department. When the officer arrived, he asked what we were doing, and our members answered, "we are talking about democracy -- how shareholders pick corporate directors." The officer, then turned to the AIG representative and asked if the company opposed democracy, and he sheepishly replied, "well, no." The officer left and allowed our members to continue to educate their fellow shareholders on the issue. Democracy -- that is the real issue in S7-19-03. Do shareholders have the right to nominate and elect directors, or will they only continue to have the right to rubber stamp the election conducted by the Nominating Committee behind closed doors? In 2000 and 2001, one of our members nominated two individuals to the Board of Walt Disney, fulfilling all of the requirements put forth by the company and ascertaining that each individual, if nominated, was prepared to serve. Both individuals were highly qualified in matters of corporate pay. One individual was the former general counsel of the U.S. Senate Finance Committee, the other the founder and 20-year director of a large national non-profit. Walt Disney Company did not even bother to conduct a cursory interview with either shareholder nominee, though they did add new directors during that time. In 2002, in a private dialogue with a large international oil company on the subject of shareholder nominations to the Company's Board, the Company's Secretary laughed heartily after he reported that someone had nominated a truck driver to the Company's board. A discussion ensued about the laughter and our members pressed company officials, suggesting that truck drivers were major consumers of oil products and could perhaps provide a useful perspective inside the board room. At Citigroup's 2002 annual meeting, CEO Sandy Weill spent the first ten minutes of that meeting defending the virtues of Citigroup director, C. Michael Armstrong, then CEO of AT&T. Shareholder after shareholder criticized Mr. Armstrong's leadership at AT&T and queried Mr. Weill about why such a person should be a Citigroup director. Mr. Weill finally shut off debate and pronounced Mr. Armstrong one of Citigroup's finest directors. A month later, the Jack Grubman story in which Mr. Weill sought Mr. Armstrong's help in ousting former Citigroup co-CEO John Reed was reported, casting the annual meeting exchange in a vastly different light. These four examples paint a picture that suggests that significant reforms of the director nomination and election process is an idea whose time has come. The problems of good corporate governance are widespread -- board rooms are too clubby, and directors have too narrow a set of experiences. Just as shareholders seek an investment portfolio comprised of diverse stocks, so too should board rooms be made up of directors with different backgrounds, perspectives and life experiences. The director nomination process needs to be democratized. Rule S7-19-03 places too much power in the hands of the very largest shareholders, and does not give enough room for shareholders to organize their shares into larger blocks for purposes of nominating directors to the proxy. Companies should also be required to report on the names and qualifications of nominees proposed by shareholders, but not selected by the Nominating Committee. In addition, companies should be required to summarize the conversations between shareholders and directors. The provisions of proposed rule S7-19-03 should be extended to small companies and to mutual funds, where the lack of board independence is especially acute. We hope the Commission will modify the proposed rule S7-19-03 to lower the thresholds required for shareholders to nominate directors, and to compress the timeline required to hold these elections. It is time that the democratic traditions that we are all proud of as Americans, be embraced by corporations in the governance process. It is time that those who wish to lead American businesses in a highly competitive marketplace, themselves be willing to compete for their jobs as directors. Thank you for considering the views of Responsible Wealth's members. Respectfully, W. Scott Klinger Co-Director Responsible Wealth 37 Temple Place, 2nd Floor Boston, MA 02111