FOR IMMEDIATE RELEASE 2001-10 SEC Chairman Levitt Urges Investor Advocates and Institutional Investors To Weigh in as Nasdaq Considers New Shareholder Dilution Rules Washington, DC, January 11, 2001 - Securities and Exchange Commission Chairman Arthur Levitt today urged prominent institutional and individual investors and investor advocates to voice their opinions to the Nasdaq Stock Market as it considers new rules regarding shareholder approval of stock option grants. * * * * * I seek your support in an effort to protect what I believe should be two unassailable rights of shareholders. Fundamental fairness requires that shareholders have the ability to approve stock option plans that include option grants for officers and directors. In addition, shareholder approval of any plan that materially dilutes their ownership interest is a matter of basic corporate fairness. As you may know, current rules of the New York Stock Exchange and Nasdaq Stock Market allow companies to implement many plans granting stock or stock options to officers and directors without shareholder approval. The rules do not require a shareholder vote on these plans as long as at least one-half of the stock or option grants go to employees other than officers and directors. I strongly believe that shareholder approval should be required for plans that permit officers and directors to receive stock or stock options. Shareholders have the right to judge whether officers and directors are acting fairly in setting their own equity-based compensation. Shareholders should also have the right to approve stock option plans even if those plans do not include grants of options to officers and directors in certain circumstances. These shareholders must have a voice when their investment in a company is being materially diluted by such plans. I recognize that creativity in employee compensation has been a powerful fuel for innovation in our economy in recent years. Without the ability to award options, we would, no doubt, have seen less dynamism from many cash-strapped, high-tech companies. I do not necessarily expect a "one size that fits all" solution for determining when grants of options to employees other than officers and directors should require a shareholder vote. Companies should continue to have the flexibility necessary to move quickly in tight labor markets when implementing employee stock option plans. However, there should be some standard that strikes the proper balance between that need and the right of existing shareholders to protect themselves against unwarranted dilution of their ownership interests. I have recently asked that the NYSE and the Nasdaq Stock Market require shareholder approval for plans that allow stock or stock options to be granted to officers and directors and to develop a standard that requires shareholder approval of any stock option plan that materially dilutes existing shareholder interests. The NYSE has developed a proposal that addresses these issues. They would like to implement their rule changes in conjunction with similar modifications by Nasdaq. In response to my call for change, Nasdaq recently issued a Bulletin soliciting comments on alternatives to the NYSE's proposal, as well as the impact that the NYSE proposal would have on Nasdaq issuers. Nasdaq's deadline for comments on these issues is February 5, 2001. It is absolutely essential that the Nasdaq Stock Market benefit from investors' perspectives as it considers this issue. At stake is the rightful balance between shareholder and management interests, and, in the end, public confidence. I urge you not to miss the opportunity to comment on this matter of fundamental fairness and sound corporate governance. Sincerely, Arthur Levitt # # #