The following comment on Letter Type F was submitted by
Letter Type F:
Mr. Jonathan G. Katz
RE: File No. S7-19-03
Dear Mr. Katz:
As a corporate director at ______________________________________, I appreciate this opportunity to provide my comments on the Securities and Exchange Commission ("SEC") proposal to require companies to include shareholder nominees for director in company proxy materials under certain circumstances.
Corporate boards and management must hold themselves to the highest standards of corporate governance. However, I am concerned that complicating the director election process by requiring companies to include shareholder nominees in their proxy materials is not good corporate governance and, in fact, will enhance special interest groups’ access to boardrooms. The process of large shareholder institutions turning over their votes to favor the positions of organizations like ISS is a primary concern. The election of shareholder-nominated candidates could create factions on the board, leading to dissension and delay, and could jeopardize the board’s ability to function effectively.
Permitting shareholders to place nominees in company proxy materials would undercut the role of the board and its nominating committee in the important process of nominating director candidates. This is inconsistent with the new New York Stock Exchange ("NYSE") listing standards, which strengthen the role and independence of boards of directors and board nominating committees. Moreover, bypassing the nominating committee, which must be composed solely of independent directors under the NYSE listing standards, would diminish board accountability to shareholders. Finally, the proposed rules could turn director elections into proxy contests, substantially disrupting corporate affairs, causing significant costs to the company and all of its shareholders, and dissuading from board service well- qualified individuals who do not want to routinely stand for election in a contested situation.
The SEC should allow the corporate governance reforms adopted by Congress, the SEC and the securities markets to be fully implemented before proceeding with additional regulation. With the increased independence of boards of directors, the strengthened role and independence of nominating committees and the enhancement of shareholder-director communications, I believe that the issues that led to calls for shareholder access will be addressed.
Thank you for considering my concerns about the proposed rules.