Subject: File No. S7-25-97 October 8, 1997 I offer the following comments on the proposed changes to the proxy regulations. In response to the changes to the rules governing submission of shareholder proposals pursuant to 14a-8 and 14a-4 solicitations, it seems that the SEC has tried to weigh the interests of proponents and companies. The reversal of the Cracker Barrel Old Country Stores decision is long overdue. I would advise taking 14a-8(c)(7) one step further and creating a bright-line inclusion of proposals relating to certain social issues. For example, discrimination and dangerous or questionable labor practices should be taken out of the domain of 14a-4(c)(7). However, the ordinary business exclusion still could be used to exclude proposals relating to day to day management. While companies may claim these proposals call for expensive measures, including these proposals does not always lead to change because many of the proponents do not garner significant support for their issue. Large institutional shareholders tend not to support social issues that would be unduly burdensome either by imposing additional accounting costs by requiring companies to report hiring and labor statistics to the shareholders or by requiring significant operational changes. Because inclusion may, through negative publicity, force companies to reconsider discriminatory or inhumane hiring and labor practices, limiting 14a-4(c)(7) to non-social issues would serve as one additional check on corporate practices thereby promoting social responsibility. Exposing the Achilles heel of a company when the law has been silent or law enforcement has failed could bring about change in corporate behavior and, eventually, in the law. While the proposed change in the administration of the personal grievance clause (14a-8(c)(4)) allows the SEC to avoid burdensome fact-finding, it may result in the status quo for proposals which on their face are neutral but are in fact submitted as leverage with which certain shareholders, especially labor unions, pressure management. While shareholder proposals are an avid route to corporate governance reform, they should not be used as a bargaining chip for labor unions. I would recommend that the SEC change 14a-4(c)(4) to preclude proposals submitted by proponents during a certain time period in which the proponent has an officially documented personal grievance such as a labor dispute with the company or its suppliers. Arguably, unions may merely find a third party to submit the proposal. Nonetheless, for the sake of sound policy, unions should pressure management in formal negotiations not by garnering shareholder interest in an unrelated issue (such as redeeming a poison pill) and then offering to withdraw the proposal if the company will meet the union's demands. Furthermore, it is in the interest of the shareholders that truly do care about the issue to see to it that the proposal is submitted by a party that will not withdraw the proposal when a personal demand is met. Under the proposed change, companies may fear a law suit if they exclude a proposal that is neutral on its face knowing that the SEC will not officially concur in the exclusion. The 14a-4 proposed change will settle some confusion. Companies have been at the mercy of shareholders because the SEC failed to define "reasonable time" in the past. The 45 day rule (while I think 25 days would be plenty) will be a helpful cut-off alleviating companies of the burden of resolicitation to ensure discretion. (In 1991, indenying Baltimore Bancorp discretionary authority, the SEC staff recognized twelve days as a reasonable time prior to a meeting to file dissident proxy materials.) Under the new rule, companies will not be left to guess whether proponents have solicited holders of a majority. [However, another option, in light of 14a-9 and in furtherance of providing access to the proxy statement, would be to amend the proposed rule to read that upon proof of solicitation of holders of a majority (or the required number of shares to carry the proposal), if such proof is demonstrated to the company greater than a specified number of days before the meeting, the company, to retain its discretionary authority, must send amended proxy cards including the proposal, with reference to the portion of the original proxy statement discussing the proposal.] Under the proposed rule, while the proponents will not actually have their proposals appear in the management proxy statement, the requirement of a box on the proxy card allowing shareholders to opt out of giving management discretionary authority is a victory for the proponents as many institutional shareholders will always opt out when given a vehicle to do so. Overall, while fine-tuning may still be necessary, the changes do address some of the quirks apparent in the current system. Individuals and institutional shareholders should be able to influence corporate governance and social policy issues without interrupting the flow of day to day operations. While the proposed changes are undoubtedly the result of compromise, some of the changes to the rules may lead to a culture where the corporations and investors are seen as having the same interests. Sound governance and social policies should lead to better corporate performance, better publicity and a better stock price. Sincerely, Anne C. Stine 305 East 86th Street, Suite 6BW New York, New York 10028