From: Callow@comcast.net [mailto:Callow@comcast.net]
Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
RE: File No. S7-19-03: Security Holder Director Nominations
Dear Mr. Katz:
I am writing in support of the Commission’s proposed rule to increase the opportunities for shareholders to nominate directors at the companies they own.
The proposed rule, if adopted, would move closer toward implementing what should be an unquestioned principle of corporate governance: the ability of shareholders to effectively participate in the nomination (and election) of directors that are truly independent and represent shareholder interests. The past decade has revealed that in far too many companies—Enron, WorldCom, Tyco, HealthSouth, Adelphia, among many others that are not household names—corporate directors have failed to protect shareholder interests and instead served the interests of their corporate managements. Not surprisingly, such directors were nominated solely by their corporate managements.
While the proposed rule is a step in the right direction, and long overdue, the Commission should modify the rule wherever possible to reduce constraints that make shareholder nominations difficult. These include, among others, the percentage thresholds and the elapse of two-years time before shareholders may place nominees on a proxy ballot for a vote. Moreover, the proposed rule should be made applicable to mutual fund companies.
It has been reported that many in corporate management object to the proposed rule saying, among other things, it would give too much power to “special-interest groups” at the expense of most shareholders. Several comments are warranted. First, it’s apparent that corporate management has all too often acted as a special interest group committed to self-enrichment. The proposed rule would begin to address this problem. Second, shareholders are by definition a very special interest group. As company owners, they can be expected to act in their own interest. The proposed rule would improve the ability of shareholders to make their interests known. Third, even where a “special interest group” of shareholders nominates a director (or slate thereof) opposed by management, all shareholders will have an opportunity to decide whether their interests will be advanced by voting For or Against the nominee(s).
In conclusion, I urge the Commission to adopt the proposed rule (with modifications suggested above) to implement the principle of an effective role for shareholders in nominating directors that are truly independent and represent shareholder interests. At the same time, the Commission should reject the entreaties of those corporate managements and their hand-picked directors that seek to thwart adoption of this rule through delay, e.g., “more study,” and proposed modifications that effectively “gut” its substance.
James F. Callow