FirstEnergy Corp.

December 10, 2003
Subject: File No. S7-19-03
Proposed Exchange Act Rule 14a-11- Security Holder Director Nominations

Dear Sir or Madam:

We appreciate the opportunity to comment on your proposed rule concerning Security Holder Director Nominations. We understand the intent of this rule is to encourage greater board and corporate accountability by providing a qualifying individual security holder or security holder group with increased access to the nomination process, as well as the ability to utilize their rights and responsibilities as company owners. We have the following comments regarding Proposed Exchange Act Rule 14a-11:

  • An independent governance committee possesses the specialized company knowledge, as well as the first-hand understanding of the specific skill set and expertise required, to perform the various board functions. As board composition, company competitive challenges and industry landscape change, so will the corporate governance needs of the board. Our existing governance committee considers various legal, financial, industrial and other specialized knowledge and experience in selecting director nominees. The ability to integrate these factors requires an in-depth understanding of a company's current and historical strategic and business terrain and future needs.

  • The thresholds of the proposed criteria resulting in the "triggering" of a security holder nomination are inadequate. Such low thresholds will increase the likelihood of frivolous and unnecessary challenges to annual election candidates. In due course, such disputes will prove costly and distracting.

  • Companies that potentially would be affected by the proposed Exchange Act Rule 14a-11 will require a realistic amount of time to assess actions and events that may eventually qualify as or result in triggering events. Confusion between companies, security holders, director nominees and other involved parties can be reduced greatly if guidelines for the rule have been finalized before companies complete the assessment of their intended actions. Once the SEC has made a final determination as to the exact guidelines to be contained in this rule, we suggest that companies be given at least one year to review and determine a measured response to the those guidelines. This transition period will enable the affected companies to not only review and receive clarification on the complexities of this rule, but also implement any necessary operational or policy changes that may be required. For this reason, security holder actions and voter results should not qualify as triggering events in 2004 under the proposed rule.

  • Ample time has not been given to study the outcome of recently implemented governance reforms initiated by the stock exchanges and the SEC. Appropriate time should be allowed for company compliance to these governance reforms before subjecting company actions to the level of potential shareholder scrutiny and reprisal permitted in the proposed rule. It is not unreasonable to expect that a company may require at least a one-year transition period to design and fully implement new corporate systems in compliance with recent governance reforms. After adequate time for transition has taken place, then the industry-wide outcomes resulting from compliance with these reforms should be thoroughly analyzed before determining a new course of action in the corporate governance arena such as that in the proposed rule.

We concur with the SEC assessment of the continuing need to "align the interests of the board with security holders." Though we agree that there is a need to restore shaken investor confidence in light of the past several years' events in the business industry, we share many of the apprehensions and opinions expressed in the comment letter submitted by the American Society of Corporate Secretaries. The goal of moving expeditiously toward greater corporate and board accountability should not outweigh the need to act prudently and with some degree of caution.

We believe that the multitude of unresolved issues regarding liability, cost, conflict-resolution, shareholder eligibility, nomination criteria, triggering criteria, and other key items of concern must be resolved before discussions regarding rule implementation can take place. Again, we are grateful for the opportunity to express our comments regarding the proposed Exchange Act Rule 14a-11, and intend that our discussion of the above items will assist in formulating a rule that will benefit all of the participants involved in the corporate governance process.


David W. Whitehead
Corporate Secretary
FirstEnergy Corp.