The Business Roundtable


April 8, 2003

Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549

Re: Release No. 33-8186, Proposed Rule: Implementation of Standards
of Professional Conduct for Attorneys, File No. S7-45-02

Dear Mr. Katz:

The following comments are submitted on behalf of The Business Roundtable, an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees in the United States and $3.7 trillion in annual revenues. The Business Roundtable strongly supported enactment of the Sarbanes-Oxley Act of 2002 (the "S-O Act"), and we support the Securities and Exchange Commission's efforts to implement the S-O Act. We believe the law will go a long way toward establishing new, higher standards for America's corporations. As CEOs, we are committed to maintaining a strong economy, a vibrant workforce, and creating new jobs.

We appreciate the opportunity to provide you with our views on Securities and Exchange Commission ("Commission") proposals to create additional standards of professional conduct for attorneys appearing and practicing before the Commission and impose new reporting requirements for public companies.

Up-the-Ladder Reporting

The Commission recently adopted final rules requiring attorneys to report evidence of misconduct up-the-ladder within a company. As we stated in our initial comment letter on that proposal, the Roundtable supports the notion of an up-the-ladder reporting requirement, and we commend the Commission for moving forward with these rules. A copy of our initial comment letter is attached. In addition, we appreciate the Commission's efforts to address our concerns about Qualified Legal Compliance Committees ("QLCCs") being authorized to "direct" the board of directors to take certain remedial actions. The revised rules, which authorize QLCCs to "recommend" remedial actions to the board, represent a marked improvement.

Reporting Out

At the same time it adopted the final rules, the Commission extended the comment period for proposed rules that would impose withdrawal and "reporting out" obligations on attorneys who do not believe a client's board of directors has responded appropriately to evidence of misconduct. The Commission also proposed an alternative approach that would require a company - rather than its attorney - to file a report on Form 8-K disclosing that the attorney has withdrawn or stopped participating in a matter for professional reasons.

We appreciate the Commission's recognition of the controversial nature of its "noisy withdrawal" proposal and the need for additional time for comments. As we stated in our initial comment letter, we have serious concerns about the noisy withdrawal proposal. We also have concerns about the alternative Form 8-K proposal and the impact it could have on public companies. Specifically, we believe either proposal would undermine the relationship between attorneys and their organizational clients and deter officers, directors and employees from seeking advice from counsel on sensitive matters. Corporate executives will be reluctant to confide in counsel, and companies will be less likely to retain counsel, if they believe that any disagreement with counsel could lead to notification of the Commission. As a result, attorneys could be excluded from the very situations in which legal advice is most needed to prevent violations. We do not believe this outcome would further the Commission's goals.

Alternative Approach

Although both proposals would interfere with the attorney-client relationship, we believe the alternative Form 8-K approach is even more troublesome than the original proposal. It could require public disclosure of disagreements between a company and its attorneys before the company has had the opportunity to fully investigate an attorney's claims. Forcing a company to announce such disagreements on Form 8-K, within two days after receiving an attorney's notice of withdrawal or failure to receive an appropriate response, could give investors the impression that the company has violated the law - causing significant damage to the company's stock price and reputation when no such finding has been made. As a result, companies faced with the threat of withdrawal (and subsequent public disclosure) could effectively be compelled to acquiesce to their attorney's position - even if the board of directors disagrees in good faith with that position. In this regard, the alternative proposal would replace the judgment of the board with the judgment of a single attorney. We do not believe this represents good corporate governance.

Finally, the alternative proposal would require disclosure beyond that required by the original noisy withdrawal proposal. Under the original proposal, an attorney would be required to notify the Commission that he or she is withdrawing for "professional considerations," but the attorney would not have to disclose the nature of the disagreement. The alternative proposal, on the other hand, would require the company to disclose not only that its attorney has withdrawn or stopped participating in a matter, but also the circumstances related to the withdrawal. This extension of the proposal raises serious attorney-client privilege concerns.

As we stated in our initial comment letter, it is vital that the Commission's rules not impair the willingness of corporate officers, directors and employees to share their concerns with counsel. Encouraging full and frank communications with counsel is the best way to assure legal compliance, and we urge the Commission not to adopt rules that would interfere with this goal.

We appreciate your consideration of these comments, and we would be happy to discuss these matters further or to meet with you if it would be helpful.


Henry A. McKinnell, Ph.D.
Chairman of the Board and CEO
Pfizer Inc.
Vice Chairman-Corporate Governance Task Force
Chairman-SEC Subcommittee
The Business Roundtable

Attachment: December 20, 2002 letter

cc: Hon. William H. Donaldson-Chairman, U.S. Securities and Exchange Commission
Hon. Paul Atkins-Commissioner
Hon. Roel Campos-Commissioner
Hon. Cynthia A. Glassman-Commissioner
Hon. Harvey Goldschmid-Commissioner
Alan L. Beller-Director, Division of Corporation Finance
Giovanni P. Prezioso-General Counsel