American Bankers Association

July 10, 2003

Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: Possible Changes to the Proxy Rules, File No. S7-10-03, May 1, 2003.

Dear Mr. Katz:

The American Bankers Association ("ABA") welcomes the opportunity to offer its views on possible changes to the Securities and Exchange Commission's ("Commission") proxy rules and regulations and interpretations regarding procedures for the election of corporate directors. Specifically, the Commission has directed the Division of Corporation Finance to address shareholder proposals, the nomination process, elections of directors, the solicitation of proxies for director elections, contests for corporate control, and disclosure and other requirements imposed on large shareholders and groups of shareholders. It is the ABA's understanding that the issue of giving shareholders access to the company's proxy statement for board nominations is to be included within the Division's review.

As the Commission is aware, corporate governance issues are very important to the ABA and its members.1 Under the guidance of ABA's Corporate Governance task force, the ABA has actively participated in the Commission's efforts to implement the Sarbanes-Oxley Act, offering constructive comment on issues ranging from audit committee and director independence to internal controls. Several of these regulations, most notably the proposed NYSE and NASDAQ listing standards, address board independence issues and mandate the establishment of independent nominating committees. We believe that the Commission should allow ample time for these rules to be fully implemented before considering whether there are other measures that should be considered for improving both director independence and the board nomination process.

The ABA is also concerned that giving shareholders access to the company's proxy statement may result in politicizing the corporate election process, resulting in special interest candidates that, if elected, will contribute to the balkanization of company boards no longer able to function as a cohesive unit. Allowing multiple candidates to be listed on company proxies will confuse shareholders as they will be unable to distinguish easily the board-nominated candidates from those nominated by various interest groups. In addition, companies will incur significantly increased costs in preparing proxies and proxy statements on behalf of candidates not of the company's choosing.

We note that shareholders are not without the ability to access the corporate nomination process. Responsible companies allow shareholders input on director nominations. If this access should prove unsatisfactory, shareholders have the ability to challenge board-nominated candidates through proxy contests. Indeed our members report that bank and bank holding company shareholders are not at all reticent to conduct election contests.

For all of these reasons, the ABA strongly urges the Commission and its staff to refrain from allowing shareholders access to a company's proxy for board nominations. We believe that it is in the best interests of the investing public, as well as Corporate America, for the Commission to allow the many excellent corporate governance proposals emanating from the Sarbanes-Oxley Act to be fully implemented and their effectiveness assessed before any other measures for improving director independence and election issues are taken up.

Sincerely yours,

Sarah A. Miller

cc: Elizabeth Murphy
Lillian Cummins
Grace Lee

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1 The ABA brings together all categories of banking institutions to best represent the interests of this rapidly changing industry. Its membership-which includes the community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks-makes ABA the largest trade association in the country.