From: Karin Uhlich [karin@economicintegrity.org] Sent: Friday, June 06, 2003 5:37 PM To: rule-comments@sec.gov Subject: S7-10-03 The Southwest Center for Economic Integrity 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, a serious gap exists in that reforms regarding board elections have not yet been adopted. Restructuring these processes to provide greater voice and involvement for shareholders goes to the root of many corporate governance issues raised in recent years. In adopting proposed reforms investors would have a critical mechanism through which to insure that qualified and responsive individuals are nominated and elected to represent their interests concerning key areas of concern, incluidng acounting/auditing and executive compensation. The Southwest Center for Economic Integrity works in the region to help communities hold corporations accountable. We educate investors about corporate and industry practices and their impacts, and provie information and support to assist them in expressing their views as shareholders in order to encourage constructive reforms. Bringing a higher measure of democracy to corporate boards and elections is long past due. Without such reforms, the existing processes -- such as having shareholders suggest nominees -- offer nothing more than a false sense of fair and open systems. More specifically we support the proposals outlined in the comments prepared by Responsible Wealth (a project of United for a Fair Economy). Nominating a director for the proxy ballot should require threshold higher than that required for submitting a shareholder proposal. We also 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). The requirement of a coalition of investors is important to protect against the power of large institutional investors, which could single-handedly nominate director candidates. The coalition threshold would require even powerful institutions to persuade other investors to join in the effort. Further, the ownership threshold would assure that direct access to the ballot would not be trivialized. We also support the proposal 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 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. Thank you for your time and consideration. Karin Uhlich Southwest Center for Economic Integrity Tucson, AZ