The following comment on Letter Type N,
Letter Type N:
Mr. Jonathan G. Katz
Re: File No. S7-19-03
Dear Mr. Katz:
As an Elected Corporate Officer [or Title] of Pfizer, Inc., a Delaware corporation with $32.4 billion in annual revenues and more than 130,000 employees worldwide, I appreciate this opportunity to provide 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.
Pfizer long has been recognized as a leader in corporate governance. A substantial majority of our directors are independent - both in fact and appearance - and our Audit, Compensation and Corporate Governance Committees are composed entirely of independent directors. We maintain, and make available to our shareholders, a set of corporate governance principles designed to exceed New York Stock Exchange ("NYSE") corporate governance listing standards. Our board and each board committee are required to conduct self-evaluations at least annually, and we have a full orientation and continuing education process for our board members. Executive sessions of our outside directors are held regularly, at least four times a year. Finally, we provide information to our shareholders, both in our proxy statement and on our website, on how to contact the Chairs of our Audit, Compensation and Corporate Governance Committees and our outside directors as a group.
In my role as an Elected Corporate Officer [or Title] of Pfizer, I have serious concerns about the SEC's proposed director nomination and election rules. Specifically, I do not believe that complicating the director election process by requiring companies to include shareholder nominees in their proxy statements is good corporate governance. On the contrary, it will result in divisive, costly proxy fights and the consequent need to devote significant corporate resources to support board-nominated candidates. It also could lead to the election of "special interest directors" who promote the agendas of the shareholders who nominated them, rather than the long-term interests of the company and all of its shareholders.
In addition, permitting shareholders direct access to company proxy statements would undermine the recently adopted New York Stock Exchange ("NYSE") and NASDAQ corporate governance listing standards, which strengthen the independence and responsibilities of board nominating committees. In this regard, I strongly believe that independent nominating committees, acting in accordance with their fiduciary duties to the company and all of its shareholders, are best positioned to assess the skills and qualities desirable in new directors in order to maximize the board's effectiveness. Turning the responsibility to nominate directors - even one or two directors - over to special interest groups, who have no corresponding fiduciary duty to the company or its shareholders, would be a serious mistake.
Finally, I am concerned that the proposed rules go far beyond the SEC's stated intent of targeting a small number of unresponsive companies and will impact many public companies that are, in fact, responsive to their shareholders. In particular, the trigger based on a majority-vote shareholder proposal to activate access would apply to any company, not merely those companies that have failed to respond to shareholder concerns. Furthermore, the trigger based on a director's receipt of more than 35 percent of "withhold" votes would not give the board and its nominating committee an opportunity to respond to shareholder concerns about a director before the company's proxy process is deemed ineffective. The possible third trigger, a company's failure to implement a majority-vote shareholder proposal (other than a proposal to activate access) does not demonstrate the ineffectiveness of the proxy process and, equally troubling, does not take into account the board's fiduciary duty to act in the best interests of the company and its shareholders.
For these reasons, I oppose adoption of the proposed rules. Instead, I believe the SEC should permit the significant corporate governance reforms enacted by Congress, the SEC, the NYSE and NASDAQ to be fully implemented. If the SEC nevertheless proceeds to consider adoption of the proposed rules, I strongly urge the agency to consider significant modifications in the rules to address the concerns outlined above. Finally, I encourage the SEC to extend the comment period for the proposed rules, as I believe the existing 60-day comment period is insufficient for interested parties to comprehensively review, comment and provide requested information on the proposed rules.
Thank you for considering my concerns.
cc: Hon. William H. Donaldson, Chairman, U.S. Securities and Exchange Commission