March 4, 2004

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

Re: File No. S7-03-04
Release No. IC-26323, Investment Company Governance

Dear Mr. Katz:

This letter is submitted on behalf of the Business Roundtable, an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees in the United States and $3.7 trillion in annual revenues. We appreciate the opportunity to provide our views on the Commission's proposals to strengthen the corporate governance practices of mutual funds and other investment companies registered under the Investment Company Act of 1940 (collectively, "funds"). Although the proposals do not directly impact the governance of Business Roundtable companies, there is one aspect of the proposals that the Business Roundtable believes is both unnecessary and troubling.

Specifically, the proposals would require that the chairman of a fund's board of directors be an independent director. As a technical matter, the proposals apply only to funds that rely on certain exemptive rules promulgated by the Commission under the Investment Company Act of 1940. As noted in the Commission's proposals, however, almost all funds either currently rely on at least one of these exemptive rules or anticipate doing so in the future. Accordingly, in practice, the independent chairman requirement would apply to most funds.

Historically, the vast majority of public corporations in the United States has followed a governance model that focuses on leadership by a single individual occupying the positions of both CEO and chairman of the board. Most U.S. companies find this structure desirable because it makes clear that the CEO/chairman has the responsibility to manage the company's business under the oversight of the board. Although funds differ from business corporations because they are generally managed externally by investment advisers, among other things, the Business Roundtable believes, as we stated in our Principles of Corporate Governance (2002), that each company should make its own determination of what leadership structure works best, given its present and anticipated circumstances. Each board - whether of a public company or of a fund - should actively consider the leadership structure that would be most appropriate at any particular point in time for the organization it oversees. A fund board may determine, depending on a variety of factors unique to the fund, that it is (or is not) in the best interests of fund shareholders to appoint an independent chairman.

The Business Roundtable also believes that mandating the appointment of an independent chairman is unnecessary. Companies are responding to concerns about the need for greater independent board oversight by considering a variety of practices, including: (1) increasing the number of independent directors on their boards; (2) holding regular executive sessions of their non-management and/or independent directors; (3) appointing a "presiding" director whose responsibilities include chairing the executive sessions; and (4) appointing a "lead" independent director, whose responsibilities also may include providing input on agendas for board meetings, and facilitating communications by the non-management directors with the CEO/chairman and management.

In this regard, the Commission's proposals contain corporate governance enhancements that make the requirement of an independent chairman unnecessary. The proposals include a supermajority independence requirement that would increase the percentage of independent directors on fund boards to at least 75%, so that no more than one quarter of a fund's directors could be "interested persons" of the fund. The proposals also mandate that independent directors meet at least once quarterly in separate sessions, outside the presence of directors who are "interested persons." In addition, the proposals require that fund boards evaluate their performance at least annually and give independent directors the authority to retain outside advisers as necessary, and without obtaining the consent of management, to assist them in carrying out their responsibilities.

These enhancements will strengthen independent board oversight, making it unnecessary to mandate the appointment of an independent chairman for funds. Increasing the representation of independent directors on a fund's board and holding quarterly executive sessions of the independent directors, in particular, will further encourage a boardroom culture that is conducive to candid dialogue and to independent decision-making that is guided by the best interests of fund shareholders. In this regard, the supermajority requirement will empower a fund's independent directors to appoint an independent chairman of the board if they determine, in the exercise of their judgment as directors, that an independent chairman is in the best interests of fund shareholders.

For these reasons, the Business Roundtable does not believe that it is necessary or appropriate to require as a matter of Commission regulation, and without regard to funds' particular circumstances, that the boards of directors of essentially all funds have an independent chairman.

Thank you for considering our comments. Please do not hesitate to contact Patricia Hanahan Engman at the Business Roundtable if we can provide you with further information.


Steve Odland
Chairman, President & CEO
AutoZone, Inc.
Corporate Governance Task Force
Business Roundtable

cc: Hon. William H. Donaldson, Chairman, U.S. Securities and Exchange Commission
Hon. Paul S. Atkins, Commissioner Hon. Roel C. Campos, Commissioner Hon. Cynthia A. Glassman, Commissioner Hon. Harvey J. Goldschmid, Commissioner Mr. Paul F. Roye, Director, Division of Investment Management