Date:    11/02/2000  10:52 AM

Subject: Auditor Independence: File No. S7-13-00

You might consider the following more flexible policy to encourage 
auditor independence.  Give each company the choice of --
     
(a) following your proposed standards for hiring an independent auditor; 
OR
(b) choosing the auditor by competitive shareowner vote.
     
In the current system, management chooses the auditor, and shareowners 
merely rubber-stamp that choice.  Under option (b) however, shareowners 
would choose (by vote) among several auditing firms competing for the 
position.  This would encourage auditors to build their reputations in 
the eyes of investors rather than in the eyes of management, creating 
new pressure for higher standards.  Investors could decide how important 
auditor independence is to them, and how it should be assessed.
     
The average investor may seem ill equipped to make such assessments on 
her own.  But she would not make them on her own.  She would benefit 
from consensus-building discussion by the entire investment community, 
including proxy advisory firms.  It is much easier to assess reputations 
of auditors than of board members, because there are only a handful of 
auditing firms, versus hundreds of board candidates for a diversified 
portfolio of stocks over the years.
     
Of course, the devil is in the details -- there are good and bad ways of 
implementing this general idea.  To keep management from restricting 
competition, any qualified auditor should be allowed onto the ballot, 
and there should be at least two candidates.  Especially if management 
is permitted to recommend voting for their favored auditor, preferential 
voting should be used when there are more than two candidates, to avoid 
splitting the opposition vote: each voter could rank the candidates 
instead of just choosing her most-preferred one.
     
Even if the management-recommended auditor is never voted out, a rising 
percentage of opposition votes would provide a healthy early warning to 
the auditor, that its reputation is slipping and corrective action is 
required.
     
This proposal would create a competitive market for auditor reputation, 
allowing the SEC to get out of the complex business of assessing degrees 
of independence in such detail.  Investors would be given the power and 
flexibility to determine standards of auditing services that best meet 
their needs.
     
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Mark Latham, Founder                       
The Corporate Monitoring Project           
10 Miller Place #1701                       
San Francisco, CA 94108, USA