December 3, 1999
Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
RE: Proposed "Blue Ribbon Committee" Rules Relating to Audit Committee Disclosure (17 CFR Parts 210, 228, 229 and 240)
File No. S7-22-99
Dear Mr. Katz:
Pursuant to the request of the Securities and Exchange Commission ("SEC"), Meredith Corporation respectfully submits certain comments on the above-referenced SEC's proposed rules relating to audit committee disclosure and the functioning of corporate audit committees, based upon the recommendations recently made by the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees ("Blue Ribbon Committee").
Meredith Corporation, headquartered in Des Moines, Iowa, is a leading home and family media and marketing company which has since  been listed on the New York Stock Exchange ("NYSE"), and is registered pursuant to the Securities Exchange Act of 1934, as amended. Over the past several months, we have followed closely the developments arising from the Blue Ribbon Committee's original proposals, and in particular the responsive positions and views of the NYSE and the American Institute of Certified Public Accountants ("AICPA") Auditing Standards Board.
We are generally supportive of the Blue Ribbon Committee's efforts and embrace the importance of a strong, effective and independent audit committee. However, as discussed below, we believe that certain of the recommendations, and their proposed adoption by the SEC and AICPA, go beyond what is necessary to ensure an effective audit committee.
In June 1999, the NYSE sent letters to the Chief Executive Officers of all its listed companies, including Meredith Corporation, explaining the Blue Ribbon Committee Report and setting forth the NYSE positions on each of the recommendations. In general, Meredith Corporation was in agreement with the NYSE positions and believed that the NYSE offered a well-balanced, practical approach toward increasing the effectiveness of corporate audit committees while balancing practical considerations such as the increased costs of compliance, potential uncertainty regarding legal liability standards and public companies' ability to attract and retain qualified individuals to serve on their audit committees.
Specifically, consistent with the NYSE's stated position, we agree with a number of the recommendations and their adoption by the SEC, including:
However, consistent with the NYSE view, we are concerned about the adoption by the SEC and AICPA of certain other of the Blue Ribbon Committee recommendations. Our specific concerns relate to the following proposals:
We would ask that the SEC seriously consider the perceived benefits of the foregoing proposals, in light of their potential negative implications. In particular, we, along with, we believe, many other public companies, have certain basic concerns:
1. Additional Costs and Time. The additional costs and time burden, especially on small and medium sized public companies, arising from the necessity of complying with these proposals, including increased fees of outside auditors and outside counsel.
2. Increased Liability. The uncertainty that certain of the proposed rules create under otherwise applicable state law "duty of care" and "business judgment rule" standards. In particular, although the SEC staff has stated that it is not their intention that proposed rules increase the risk of liability to audit committee members, we continue to be concerned about effects on audit committee liability and the potential for increased exposure of committee members to non-meritorious shareholder lawsuits. At a minimum, we believe that the SEC should clarify the relationship between the proposed rules and applicable fiduciary obligations of the director under state law.
3. Discouraging Qualified Directors. Meredith Corporation is very concerned about the potential "chilling" effect on the number of qualified candidates for members of the audit committee. Meredith Corporation, along with most other public companies, spends substantial effort recruiting the best possible candidates for directorship. We believe that the prospect of increased liability will discourage qualified candidates from seeking membership to corporate audit committees.
Again, we appreciate the opportunity to comment on the proposed SEC rules. We look forward to the Commission making a well-balanced determination on the appropriate rules for audit committees.
Very truly yours,
John S. Zieser Stephen M. Lacy
Vice President - General Vice President -
Counsel and Secretary Chief Financial Officer