From: Lynn E. MacDonald [LMACDONALD@TREX.COM]
Jonathan G. Katz
Re: Security Holder Director Nominations
Dear Mr. Katz:
My company, Trex Company, Inc., is opposed to rules recently proposed by the Commission that would afford certain security holders the right to nominate directors to the Boards of Directors of public companies. Trex Company's common stock is listed on the New York Stock Exchange (NYSE).
In accordance with recently adopted NYSE rules, Trex Company has a Nominating / Corporate Governance Committee composed solely of independent directors. These are individuals who have an understanding of the workings of our company, including both our strengths and our weaknesses. They are privy to strategic plans and other such information that make them the most qualified individuals to select candidates that will strengthen our Board and, ultimately, our company.
Successful Boards are those with directors who work well together. These Boards require a collaboration of directors with diverse talents and perspectives and who are open to the viewpoints of all Board members. Individuals nominated by security holders, if elected, would potentially create an atmosphere of contention that is more likely to gridlock the Board rather than facilitate their efforts to work as a team to achieve the goals of the company and its stockholders. A director nominated by a small percentage of security holders with special interests is not likely to bring value to any Board.
We recognize that our shareholders are each part owners of our company. Each year they are given the opportunity to vote for directors, and if they are not satisfied with the performance of a director, they may withhold their vote or vote against that individual.
Rules recently adopted by the Commission and the NYSE, which are intended to make public companies more accountable and transparent, should be given the opportunity to prove their effectiveness before the Commission imposes additional regulation in this area. Our company is one among many fairly small public companies that are paying the price for the wrongdoings of a few large companies. If the Commission adopts the proposed rules, we will incur additional expenses, such as costs for legal counsel and staffing, and need to devote a significant amount of management time and other resources to address security holder nominations, in addition to the expenses we are already incurring as we put internal auditors in place, and other such mechanisms to ensure our compliance with the Sarbanes-Oxley Act and NYSE rules.
Moreover, the additional work required of our Board to comply with the proposed rules would both add to their burden of work, which has already been increased with recent regulation, and detract from their ability to focus on growing a profitable company, which is the ultimate goal for our security holders. We believe the proposed rules will ill serve the interests of our shareholders, as a whole, by creating significant disruption to the workings of our Board at an incalculable expense.
We support Sarbanes-Oxley and the new NYSE regulations that promote transparency and improved corporate governance. However, we also believe that there are more companies looking out for the best interests of their security holders than those that are not. We ask that we not be further penalized for the misdeeds of the few.
Thank you for your consideration,
Lynn E. MacDonald