From: jutta.baer@basf-ag.de Sent: Monday, February 17, 2003 6:01 AM To: rule-comments@sec.gov Subject: S7-02-03 Mr. Jonathan G. Katz Secretary U.S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington D.C. 20549-0609 Re: Request for Comments on Proposed Rules Concerning Standards Relating to Listed Company Audit Committees File No. S7-02-03 Dear Mr. Katz: I am the legal counsel of BASF Aktiengesellschaft, a NYSE listed German company, and in charge of correct compliance of the company with applicable law. I am writing to express our views regarding the Commission's proposal to adopt standards relating to listed company audit committees pursuant to Section 301 of the Sarbanes-Oxley Act of 2002 (SEC Release 34-47137) (the "Proposed Rule"). The Sarbanes-Oxley Act establishes in Sec. 301 (3) (B) that a member of the audit committee of an issuer, may not, other than in his capacity as a member of the audit committee, the board of directors, or any other board committee accept any consulting, advisory, or other compensatory fee from the issuer. Sec. 301 (3) (C) gives the Commission the authority to exempt from subparagraph (B) a particular relationship with respect to audit committee members, as the Commission determines appropriate in light of the circumstances. The Commission has asked for comments on what appropriate exemptions should be introduced in the Rules. We believe that the Commission should exempt compensation under a retirement or similar plan in which a former officer (in Germany: former member of the Vorstand) or employee of the issuer participates. The Commission should also exempt compensation to non-executive family members employed by the issuer. Our experience shows that the participation of retired officers or employees can contribute significant value to supervisory boards and audit committees. It would be contrary to the overall purpose of the Sarbanes-Oxley Act ? improved corporate governance - to implement rules denying us and other companies the benefit of choosing individuals with broad internal company experience. We believe that compensation under a retirement or similar plan does not impair an audit committee member's independence because such payments are not linked to current or future services for the company by the audit committee member. On the contrary, the payments largely derive from previous contributions of the member to the company's retirement fund, and are therefore based solely on past actions. A retired officer or employee receives these payments regardless of his or her current function and activity. The Commission should also exempt from the prohibition payments to family members who are employed by the issuer in a non-executive position. Such payments do not impair the independence of the audit committee member. The possibility that an issuer could exert any influence on the audit committee member through an employee in a non-executive position is extremely low. In defining non-executive position, the Commission should bear in mind that under German labor law, the term "leitende Angestellte" does not define an executive position but includes many employees in the lower ranks of companies. As a matter of fact in our company more than two thirds of the altogether about 1,400 "leitende Angestellte" are working at hierarchy level 5 (level 1 being the "Vorstand"). We would like to thank the Commission for the opportunity to comment on this Proposed Rule, and for considering our comments in this important matter. Sincerely, BASF Aktiengesellschaft Legal Affairs, Taxes and Insurance Eckart Sünner _______________________________________________________ Dr. Eckart Sünner President BASF Aktiengesellschaft Legal Affairs, Taxes and Insurance 67056 Ludwigshafen Germany Tel.: +49-621-60 49985 Fax: +49-621-60 20540 E-Mail: eckart.suenner@basf-ag.de ------------------------------------------------------------------------ BASF Aktiengesellschaft ZR - D100 Eckart Suenner Tel.: +49 621 60-49985