From: Patty Rath [pattyrath@comcast.net] Sent: Friday, June 13, 2003 8:27 AM To: rule-comments@sec.gov Subject: File No. S7-10-03 Comments on S7-10-03 Investing - buying shares in - the economic life of this country is something to which I have long been committed, and it has surely served me well. However, over time my understanding of how investing could be better understood and utilized began to shift. In 1996 I became a member of Responsible Wealth, and over the next several years filed three shareholder resolutions calling for CEO compensation reform which would link the size of a company's highest paycheck to that of the lowest. Regarding the current question as to the nomination process for candidates to corporate boards, I fully support Responsible Wealth's proposals outlined below. The Responsible Wealth project of United for a Fair Economy supports the adoption of rules to allow direct shareholder nominees to the proxy ballot. We believe that coalitions of at least 25 qualified investors collectively owning 1% of outstanding shares should be able to nominate individuals to fill up to 25% of the Board seats that are up for election. While several corporate governance reform efforts have been adopted over the last year, the real reform remains restructuring a board election process whereby boards nominate themselves, leaving shareholders with a largely ceremonial role of affirmation. Broadening the experiential diversity of directors and breaking some of the endemic personal ties among directors that lead to inherent conflicts of interests will strengthen business, protect shareholder value and increase corporate accountability. Responsible Wealth is a network of hundreds of affluent Americans who work together for greater economic fairness. Over the last five years our members have submitted more than 50 shareholder proposals focusing on executive pay, corporate board elections, and other matters of corporate governance. In 2000 and again in 2002 one of our members sought to take advantage of the existing process for shareholders to nominate directors to the Board of Walt Disney Company, of which she was a long-time shareholder. The two individuals nominated by our member were of national stature - one of the former chief counsel of the US Senate Finance Committee, the other the founder and director of a well-respected national non-profit. In neither year, did Disney even so much as contact the shareholder's board nominees and only in 2002 did Disney even respond to the shareholder with a cursory letter explaining that neither nominee would be considered. In another dialogue over shareholder nominees to the board with a major international oil company, representatives of the company laughed when explaining that one of the candidates nominated by a shareholder the previous year was a truck driver. Our members found nothing amusing about a truck driver sitting on an oil company board, in fact the customer perspective of such an individual might bring valuable insights into the board room. The current system of shareholders suggesting names to board nominating committees is a sham set up to make shareholders think they have a role in a process that is incestuously controlled by sitting directors. Responsible Wealth believes that nominating a director for the proxy ballot should require a higher threshold than that required for submitting a shareholder proposal. We favor a qualification process that includes both a coalition of investors, and a threshold of stock ownership. Specifically, we believe that a group of at least 25 investors, collectively owning at least 1% of a company's stock shall be required to directly nominate a director to the ballot. Each of the 25 investors shall meet the rules governing introduction of a shareholder proposal (presently $2,000 worth of stock for one year prior to filing the proposal.) We believe the coalition of investors is important to protect against the power of large institutional investors, which could single-handedly nominate director candidates. Requiring a coalition of investors would require even powerful institutions to persuade other investors to join in the effort. Requiring an ownership threshold would assure that direct access to the ballot would not be trivialized. We further believe that each qualified shareholder coalition should be able to nominate candidates to fill no more than 25% of the director candidate seats up for election. This condition will serve to prevent the direct shareholder nomination of directors to be used as a takeover device. The nominating of shareholders shall provide a supporting statement of up to 200 words for each director candidate nominated, outlining the qualifications of the candidate and how the nominee would improve the Board. In order to ease shareholder compliance with recently enacted laws and regulations, the Company shall provide a chart of director nominees denoting which meet independence and audit committee qualifications. In adopting new rules governing direct shareholder nominations for director, the commission should make two additional changes to its proxy rules. First, the Commission should no longer allow broker non-votes to be counted in support of the management slate of directors. Furthermore, the Commission could insure fairer elections by mandating that director nominees be listed alphabetically, rather than as a Director- nominated slate followed by shareholder-nominated alternatives. Second, the Commission should repeal the Rule 14a-8(i) exclusion which has been interpreted broadly to limit criticism or critique of the Board's effectiveness and competence. If candidates are to be placed in nominations against an existing slate of sitting directors, the additional candidates must be free to express their disagreements with the judgments of the current Board, without having those disagreements stifled as statements that impugn the integrity of the Board.