September 29, 2007
Nancy Morris, U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-1090
Dear Securities and Exchange Commission,
By providing shareholders with the opportunity to nominate and vote on an independent director of the board, shareholders would have more trust and faith in the business practices of the firm in which they own. File No. S7-16-07 and S7-17-07 would give shareholders more of a voice in the company and would give them a choice of who they feel can truly run the business to the best of their ability; improving efficiency, increasing profits and cash flow, while increasing the stock price. This may also reduce the amount of executive scandals in the world of business.
However, due to the increased turnover of stocks in the market today, many shareholders do not know, nor care, how the business is run as long as there are significant capital gains from owning the stock. Because of the lack of knowledge about the company from the shareholder, the shareholders may not be able to nominate a suitable director to run the company in the right direction. This would lead to a "popularity contest" in which a nominated individual would campaign to receive votes from the shareholders. A person who could know nothing of the internal business practices of the company may become a director, which could lead to disarray and decrease in the stock price; a negative effect of the shareholder choice.
The proposed rules not only would have an affect on shareholders, but on the companies themselves. If shareholders were given the chance to vote and nominate directors, the company would feel a loss of control, and would hurt the CEO's integrity because they would be under a microscope. If a CEO is closely monitored, there may be a lack of motivation to succeed because of the fear of not performing to the independent director's standards.
By providing shareholders with the right to nominate, there might be a negative effect on the company because of the increased time and resources used to support the larger amount of nominations. However while File No. S7-16-07 tries to reduce the number of nomination by allowing only shareholders who own more than 5% of the company the opportunity to nominate and vote, large financial intermediaries who own over 50% of a company at one time may focus all of their votes on the director who they feel will provide the largest increase in the stock price rather than the person who will be the best director of the company.
File No. S7-16-07 and S7-17-07 may be good rules to reduce the amount of CEO scandal and extreme compensation, the rules would lead to many problems within the corporate system and could eventually lead to a lack of freedom a company has to run its own business. From the information provided, I reject the proposed rule of Shareholder Proposals Relating to the Election of Directors