From: LKauf81509@aol.com
Sent: Wednesday, December 04, 2002 12:19 PM
To: rule-comments@sec.gov
Subject: File No. S7-36-02

My name is Lawrence H Kaufman.  I am retired from the salaried world 
where I have been an executive employee of several major public 
corporations.  I now write on transportation public policy issues 
for several specialized publications. 

Considering that mutual funds and other institutions that would be 
covered by the proposed rule now own approximately 20 percent of the 
equity in public corporations, I urge the Commission to adopt the 
rule as proposed.  Individual shareholders truly have no influence 
on corporate behavior.  Our holdings are too small to influence most 
proxy votes and it is exceedingly difficult to the point of impossible 
for us to engage in collective action. 

The mutual funds and other institutions that gather investment funds 
from individuals have a fiduciary responsibility to manage those 
funds on our behalf.  To the extent that they do so they will profit 
by the fees they earn by making those investments grow.  They also 
are in a unique position to encourage, if not force, public 
corporations to operate more in the interest of their owners than 
of their managers. 

Much of the current problem with securities markets is the general 
belief on the part of the public that the system is "rigged" against 
the individual investor.  That may be a harsh judgment, but nonetheless, 
it is not all that far from the truth.  Boards of directors, if not 
outright dishonest, certainly have been less than diligent in 
representing the ownership of numerous companies.  Audit committees 
have not exercised their responsibilities.  Executive compensation 
approved by boards of directors no longer bears any relationship to 
the contribution of executives to the success or failure of the 
institutions they manage.  Failed executives are sent off with huge 
severance packages when, in fact, they should simply be sent off.  
Those of us who believe in risk-reward in the business world see a 
distortion in which success is rewarded handsomely (and I have no 
objection to this), but failure also is rewarded handsomely.  Even 
independent directors, as defined by the NYSE, do not exhibit as much 
independence as they could and should.   

I understand that financial companies managing investments for millions 
of individual investors don't want this rule adopted.  They fear that 
proxy votes on behalf of those to whom they have a fiduciary responsibility 
might result in retaliation when it comes to their sale of investment 
management services to the pension funds, etc., of those same companies.  
If that is true, then these institutions have a conflict of interest, just 
as investment companies have a conflict between their investment banking 
activities and their retail brokerage activities.  One objection to the 
proposed rule is that public disclosure of proxy votes will bring additional 
pressure on the managers of these investment firms.  Poppycock!  If anything, 
by representing the ownership of these corporations, such behavior might 
help change corporate behavior.  From my days in the corporate world, I 
know that issuing companies tend to treat investment companies as valued ! 
customers; they are unlikely to apply unreasonable pressure on them.  And 
to the degree that they do, any professional money manager who cannot deal 
with such pressure should immediately resign and turn his/her job over to 
someone more qualified. 

If specific proxy votes must be made public, there is no doubt in my mind 
that the companies that now control 20 percent of the equity in public 
issuers will cast those votes in a way that will contribute to improved 
corporate governance.  Given the choice between displeasing executives of 
companies they hold or seeing their investment customers move their 
investments to competitors that more adequately represent their interests, 
I daresay they will choose the latter.   

The thrust of this proposed rule is to aid in improving corporate governance 
and thereby restore the public's confidence in the proper working of the 
system.  The Commission should adopt the proposed rule with little or no change. 

Thank you. 

Lawrence H Kaufman 
24607 Foothills Drive North 
Golden, Colorado 80401 
303-526-2128