|Ira M. Millstein||John C. Whitehead|
|Weil, Gotshal & Manges LLP||65 East 55th Street|
|767 Fifth Avenue||26th Floor|
|New York, New York 10153||New York, New York 10022|
Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549-0609
Re: File No. S7-22-99
Dear Mr. Katz:
As Co-Chairmen of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees and on behalf of our fellow Committee members listed in Appendix A to this letter, we congratulate and strongly support the Commission on the publication of Release No. 34-41987, containing proposed rules on audit committee disclosure.
We are encouraged that the proposed rules incorporate many of the recommendations included in our Report of February 1999. While the proposed rules, we believe, capture the spirit our Committee was striving for, we are concerned over the Commission’s proposed annual audit committee report requirement; this proposal has generated wide concern about potential director liability.
Consequently, we recommend that the Commission modify the proposed subsection (a)(4) in each of 17 CFR §228.306 and 17 CFR §229.306 (Item 306), entitled, "Audit Committee Report," to read as follows:
(a)(4) Based on the review and discussions referred to in paragraphs (a)(1) through (a)(3), the members of the audit committee recommended to the Board of Directors that the audited financials be included in the Company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
As our Committee specifically stated in our Report, we had no intention of increasing the incidence of litigation or the risk of liability. Consequently, we respectfully ask the Commission to carefully consider the liability concerns expressed and alleviate them in an appropriate manner.
Ira M. Millstein
John C. Whitehead
John H. Biggs
Frank J. Borelli
Charles A. Bowsher
Dennis D. Dammerman
James J. Schiro
William C. Steere, Jr.