From: Sumanta Ray [SRAY@cwa-union.org] Sent: Monday, December 15, 2003 11:46 AM To: rule-comments@sec.gov Subject: File No. S7-19-03 December 12, 2003 Mr. Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington D.C. 20549-0609 Dear Mr. Katz: Re:File No. S7-19-03 I am writing on behalf of the Communications Workers of America (the "CWA") which represents 700,000 participants and beneficiaries of pension funds with assets in excess of $400 billion that are invested in companies listed on our national exchanges. I am also a trustee of the CWA Pension Fund. I am writing today to offer supporting comments on Securities and Exchange Commission proposal S7-19-03 regarding shareholder director nominations and equal access to corporate proxy statements. Recent scandals at companies like WorldCom and Adelphia have exposed how self-dealing CEOs and lame-duck boards can have devastating consequences for corporations and the investors, employees and communities that depend on them. We, therefore, want to commend the Commission for proposing historic new rules that could, for the first time, give institutional shareholders the ability to challenge CEOs' power to handpick their own directors. The proposed rules reflect the Commission's thoughtful and careful approach to this very significant corporate reform. In particular, we welcome those safeguardsincluding significant ownership and holding period requirements, and limitations on the number of shareholder nomineesthat ensure that the rules do not facilitate corporate raids or result in potentially frivolous nominees at numerous companies. As proposed, however, the rules also contain certain barriers that would make them difficult for even the largest investors to use, and impossible to do so in a timely manner. Taken together, these barriers may undermine the intent and spirit of the proposed rules. In particular, we believe the triggering requirements are unnecessary given the substantial ownership required for shareholders to place nominees in the proxy. Moreover, the two proposed triggers create serious additional problems. First, the proposed triggers entail a two-year process, an untenable delay at a company or board in crisis. Second, the proposed one percent ownership requirement for shareholders to submit a triggering proposal is far too high. A shareholder seeking to introduce such a proposal at the average S&P 500 company would need to hold shares worth over $180 million; we believe any shareholder that meets the existing 14a-8 requirements should be able to sponsor such a proposal. Third, the proposed 35 percent director withhold threshold is also too high given historical experience, and should be lowered to 20 percent. In addition, while we support a significant ownership requirement for placing nominees in the proxy, we believe the proposed 5 percent threshold is too high. This threshold would require a shareholder or shareholder group seeking to place nominees in the proxy of the average S&P 500 company to own shares worth roughly $900 million. We encourage the Commission to lower the threshold to 3 percent, a level that would more fairly balance the Commission's concerns with the interests of corporations and their shareholders. Finally, we believe that any shareholder group meeting these requirements should be allowed to include a minimum of two directors in the proxy, regardless of the size of a company's board. By adopting final rules that truly give responsible long-term investors timely and effective access to the proxy, the Commission can introduce genuine accountability to a boardroom culture that for too long has been characterized by cozy relationships and a resulting unwillingness to challenge management. This is certain to yield significant benefitsin terms of board of director independence, performance and accountabilitythat extend well beyond the few companies where the new rules are actually used. On behalf of the CWA members who are participants of pension plans, I thank you for this opportunity to offer our strong support for this historic proposal, and encourage the Commission to adopt final rules that are responsive to our concerns. Sincerely, Morton Bahr President