A Division of United States Trust Company of Boston

June 10, 2003

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

Re: File No. S7-10-03 and SEC Release #34-47778

Dear Mr. Katz:

On behalf of Walden Asset Management, I write to urge the Securities and Exchange Commission (SEC) to adopt rules allowing shareholder nominees to appear in the corporate proxy statement.

Walden Asset Management is a socially responsible investment manager with approximately $1 billion in assets under management for individual and institutional clients. Walden is a division of United States Trust Company of Boston, an independently operated subsidiary of Citizens Financial Group.

We believe strongly in good corporate governance. Through letters, numerous dialogues with management and shareholder resolutions we have pressed for a variety of reforms in corporate governance. We have been very pleased with the level of support for some of these resolutions sponsored by Walden (e.g. 80% at Avon and 64% at Gillette on declassifying the board of directors and 56% at EMC on increasing board independence).

As we are all aware, investors have experienced an extraordinary market crisis with trillions evaporating from the equity markets in recent years. Scandals at companies like Enron, WorldCom, Tyco and Healthsouth have highlighted widespread conflicts of interest and a shocking lack of corporate accountability to shareholders. We commend the SEC for the far-reaching series of regulatory reforms initiated to address these issues. However, we believe government regulation alone is unable to ensure that boards of directors are accountable to the shareholders they represent.

Responsibility for director accountability ultimately falls to shareholders. Unfortunately, under the existing corporate election process, shareholders have few ways to hold directors accountable. In fact, in a pale reflection of a true election, shareholders are asked annually to rubber-stamp candidates nominated by the directors themselves.

By opening up the election process the SEC can help restore genuine director accountability by establishing authentic corporate elections. Specifically, granting reasonable access to the proxy will allow shareholders to nominate directors who independently represent our interests. This process will also encourage incumbent directors to be more responsive to shareowner concerns. We urge the SEC to use its current review of the rules governing directors' nominations and elections to give shareholders access to the proxy for our director nominees.

Having indicated our strong support for opening up the process for the election of directors and holding directors accountable, let us refer to specific reforms that we believe would move us toward those goals.

  1. Eliminate Section (I) (8) of Rule 240. At present, 14a-8 allows for exclusion of shareholder resolutions if the proposal relates to an election for membership on the company's Board of Directors or governing body. This precludes or makes it difficult to sponsor resolutions critical of Board performance or the process of elections.

    Elimination of the section would permit resolutions that open up the debate.

  2. Institute a ban on broker votes or uninstructed share voting in tabulating proxy resolution results, including uninstructed voting by Trustees of the Corporation for employee-owned shares. "Brokers usually vote with management to keep on a potential customer's good side," noted Business Week last October. The proposed elimination of these broker non votes eradicates a conflict of interest. However, we support broker votes counting for a quorum, so that the business of the meeting can commence.

  3. Replace "for" and "withhold" options on the proxy card for election of Directors with standard proxy voting options: "for," "against," and "abstain."

  4. Encourage Directors to attend the annual shareholders' meeting. Failure to do so should also be reported in the proxy, as is Directors attendance at Board meetings and committee meetings.

  5. Disclose in the proxy statement how many people were nominated for the Board by shareholders using the normal nomination process and what percentage of the nominees were contacted or interviewed by management.

  6. Disclose in the proxy statement a nominee's familial, professional, and financial relationship to the Company and its executives in the nominee statement to enable an assessment of a director's independence.

  7. Allow access to the proxy for an investor, or group of investors, holding 3% of ordinary shares to nominate a candidate for Director. No doubt such a percentage requirement will be a hotly debated number. A balance must be found between the rights of big institutional investors with significant shares that can gain sufficient support to nominate candidates and the rights of smaller investors who also have rights and responsibilities.

    A low threshold may allow the nomination of "nuisance candidates," however; an excessively high threshold makes a mockery of a process of independent nominations.

    8. Provide identification of nominees and equal space for background information in the proxy to assist investors in making an informed choice. All information on the candidates should be presented in a consistent manner, with the shareholder nominee clearly identified as such.


In working on opening up the process for shareholder nominations for Director, there are additional questions that deserve to be addressed by the SEC.

  1. Should shareholders nominating Directors have limits on the number of Directors they can nominate in a given year?

  2. How should checks and balances be created for the nomination process with regard to a takeover strategy?

  3. In a contested election, does the shareholder nominee run against an individual candidate or simply as a nominee for the Board? If the nominee receives 50% vote along with the management slate, is the size of the Board expanded? Or does the candidate with the lowest vote "lose the election?"

Thank you for the opportunity to present these comments.


Timothy Smith
Senior Vice President
  Heidi Soumerai
Director of Research