Relational Investors LLC

VIA EMAIL

June 12, 2003

Mr. Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

Re: File No. S7-10-03

Dear Mr. Katz:

Relational Investors LLC ("Relational") is a $2 billion registered investment adviser, specializing in strategic investments in publicly traded companies. Relational, as a significant stockholder, has often sought board representation at its portfolio companies. On behalf of Relational, I am pleased to respond to Release 2003-46 issued by the Commission soliciting public views to assist the Division of Corporation Finance to formulate possible changes in the proxy rules.

As we have painfully learned in recent years, poor boardroom dynamics can be extremely expensive to stockholders and our economy. Recent corporate scandals, from "Enron" to "HealthSouth," have been characterized by one common thread - poor board performance. In many cases these boards were populated with highly qualified people with excellent track records in business. Despite that fact, the boardroom dynamics did not produce a timely, positive reaction to prevent major scandals and resulting catastrophic losses to stockholders.

Positive change must start with a robust and inclusive process for determining board composition. Unfortunately, today that process is dominated by incumbents, many of whom have powerful vested interests in the status quo. We are convinced that this phenomenon is the root cause of poor boardroom dynamics. "Independence" is too narrowly defined by whether board members have conflicts of interest rather than how they were selected for the board.

The proxy process should provide shareholders the ability to participate in corporate governance and exact accountability from corporate managers. Relational has identified a primary issue in the proxy voting system that prevents shareholders from efficiently participating in the director selection process.

The current proxy voting rules make the proxy machinery virtually inaccessible to shareholders. In the election of boards of directors, for example, management's nominees are the only director candidates that appear in the proxy statement. We propose allowing qualifying shareholders limited access to the issuer's proxy materials to nominate director candidates.

Much of the reform responding to the recent scandals has focused on symptoms. Very little focus has been paid to the root causes of boardroom malaise. By providing shareholders access to the corporate proxy to nominate directors, the SEC will inject an increased level of accountability into the director selection process.

Rather than spur an onslaught of challenged director elections, such a policy will refocus companies' own nomination processes on preemptively eliminating vulnerability to outside challenges. As illustrated by the recently adopted Apria Healthcare Group Inc. policy outlined below, a regulatory scheme can be readily devised that will appropriately strike a balance between reasonable access for shareholders with long-term commitments to their companies and undue administrative burdens on the companies.

As chairman of the board of Apria Healthcare Group Inc., I advocated, and Apria's board of directors recently adopted, a "shareholder access" policy which serves as an excellent model for a rulemaking. The complete policy was filed with the Commission in Apria's Proxy Statement dated June 11, 2003, and is attached hereto. The policy's key provisions are:

  1. The Company will include in its annual meeting proxy statement information concerning up to two nominees submitted by any stockholder or group of stockholders.

  2. For inclusion in the Company's proxy statement, a stockholder nomination must be submitted by one or more stockholders that have owned beneficially at least 5% of the Company's common stock for two years or more, as of both the date the nomination is submitted and the record date for the annual meeting. Each stockholder or group of stockholders submitting nominations in accordance with this policy is referred to herein as a "Nominating Stockholder." A stockholder may only participate in the nomination of two candidates.

  3. The information included in the Company's proxy statement concerning each stockholder nomination will be limited to that information concerning the candidate and the Nominating Stockholder required to be disclosed in accordance with the rules of the Securities and Exchange Commission.

  4. Stockholder nominations must be submitted to the Secretary of the Company, in writing, not less than 90 nor more than 150 days prior to the first anniversary of the Company's previous annual meeting. Each nomination must indicate the incumbent director for whose board seat the nomination is submitted.

  5. Only two stockholder nominations will be included in the Company's proxy statement for each board seat. If more than two such nominations are received by the Company for the same board position, the nominee(s) of the Nominating Stockholder(s) beneficially owning the most shares of the Company's common stock will have priority.

  6. Any Nominating Stockholder nominee who does not receive at least 25% of the votes cast in the related election of directors will be prohibited from serving as a Nominating Stockholder nominee for four years from the date of the annual meeting in question.

Conclusion

The recommendation outlined in this proposal is based on the proposition that shareholders have both a meaningful role to play in corporate governance and a legal right to participate in such governance, and that the Commission's enabling legislation charges it with the authority and duty to provide for fair and meaningful corporate suffrage. Shareholders should not be allowed to interfere in the day-to-day management of a corporation. At the same time, it must be recognized that sophisticated new techniques in corporate law and finance should not be permitted to disenfranchise shareholders by, in effect, transferring decision-making authority over fundamental corporate questions from shareholders to managers or incumbent board members who often have conflicts of interest in deciding such questions. The proposal submitted today seeks to restore, or install, an appropriate balance to corporate governance.

We appreciate your willingness to consider this proposal. We would welcome the opportunity to participate in an open dialogue with the Commission and its staff to consider these and other improvements to the proxy voting system.

Sincerely,

/s/Ralph V. Whitworth

Ralph V. Whitworth
Principal

Enclosure

APRIA HEALTHCARE GROUP INC.

POLICY REGARDING
ALTERNATIVE DIRECTOR NOMINATIONS BY STOCKHOLDERS

  1. The Company will include in its annual meeting proxy statement information concerning up to two nominees submitted by any stockholder or group of stockholders in accordance with this policy. The form of proxy solicited by the Company will include the names of stockholder nominees, in addition to the nominees approved by the Board of Directors.

  2. For inclusion in the Company's proxy statement, a stockholder nomination must be submitted by one or more stockholders that have owned beneficially at least 5% of the Company's common stock for two years or more, as of both the date the nomination is submitted and the record date for the annual meeting. Each stockholder or group of stockholders submitting nominations in accordance with this policy is referred to herein as a "Nominating Stockholder." A stockholder may only participate in the nomination of two candidates.

  3. The information included in the Company's proxy statement concerning each stockholder nomination will be limited to that information concerning the candidate and the Nominating Stockholder required to be disclosed in accordance with the rules of the Securities and Exchange Commission ("SEC"). The Nominating Stockholder will be responsible for providing a written statement of such information at the time the nomination is submitted. Nominating Stockholders are responsible for any proxy solicitation activities in which they wish to engage, including compliance with applicable SEC rules.

  4. Stockholder nominations must be submitted to the Secretary of the Company, in writing, not less than 90 nor more than 150 days prior to the first anniversary of the Company's previous annual meeting. Each nomination must indicate the incumbent director for whose board seat the nomination is submitted. The Nominating Stockholder and each of its nominees must submit, with the nomination, a signed statement acknowledging that:

      a) each nominee, if elected, will represent all Company stockholders in accordance with applicable laws and the Company's charter and by-laws;

      b) each nominee, if elected, will comply with the Company's (i) Code of Ethical Business Conduct, (ii) Code of Business Conduct and Ethics for Members of the Board of Directors, (iii) Stock Ownership Requirements for Directors, (iv) Corporate Governance Guidelines, and (v) any other applicable rule, regulation, policy or standard of conduct applicable to the Board of Directors and its individual members; and

      c) the Nominating Stockholder will maintain beneficial ownership of at least 5% of the Company's common stock through the date of the annual meeting at which the Nominating Stockholder's nominee(s) will stand for election.

    In addition, each nominee must submit a fully completed and signed Questionnaire for Directors and Officers on the Company's standard form, and each Nominating Stockholder must agree that any form of proxy solicited by it will include, in addition to the name(s) of its nominee(s), the names of all other nominees appearing in the Company's proxy statement.

  5. Upon receipt of a Nominating Stockholder nomination, the Corporate Governance and Nominating Committee of the Board of Directors shall seek to communicate with the Nominating Stockholder for the purpose of discussing, among other things, the possibility of the Nominating Stockholder's nominee(s) being included in the Company's slate of director nominees.

  6. Only two stockholder nominations will be included in the Company's proxy statement for each board seat. If more than two such nominations are received by the Company for the same board position, the nominee(s) of the Nominating Stockholder(s) beneficially owning the most shares of the Company's common stock will have priority.

  7. Any Nominating Stockholder nominee who does not receive at least 25% of the votes cast in the related election of directors will be prohibited from serving as a Nominating Stockholder nominee for four years from the date of the annual meeting in question.

  8. The Corporate Governance and Nominating Committee of the Board of Directors is authorized to adopt such rules and procedures as it deems appropriate for the purpose of implementing this policy and to determine any questions of interpretation that may arise hereunder.