The following comment on Letter Type R,
Letter Type R:
Subject: Response to File No. S7-19-03
Below is the result of your feedback form. It was submitted by _______________ on _____________________, ___ 2003 at _____
salutation: Dear Secretary Katz,
I am submitting comments regarding the proposed rule on the ability of investors to have more reasonable access to the proxy in order to nominate candidates for corporate boards [File No. S7-19-03]. I am pleased to see the SEC taking such an important step in helping to restore investor confidence in the capital market. The recent corporate scandals have demonstrated that certain boards of directors have failed in their role as investor representatives at public corporations, and it is time for this faulty governance system to be reformed. The current system that allows incumbent boards to select director candidates is one area in need of significant reform. I urge the SEC to support investors' rights to nominate candidates for company boards through the company's proxy statement.
I believe the proposed rule does not go far enough in providing investors with strengthened rights regarding the nominations process. The "triggering events" described in the proposal seem like an "after the fact" prescriptive when the goal should be to prevent poor corporate governance in the first place. The new rule should provide investors, large and small, with greater involvement with the boards that represent them to seek to ensure directors work and make decisions in the best interest of shareholders and other stakeholders.
I believe fair mechanisms are needed for shareholders to place highly qualified and truly independent people on the proxy ballot. Only then can shareholders effectively hold individual board members accountable for their actions. This proposal puts a number of high hurdles in front of shareholders that, the new rule barely improves upon the current process. Under the proposed rules individual investors could find themselves spending hundreds of thousands of dollars of their own money to run a single candidate for the board only to have entrenched executives spending from the corporate treasury (investors' monies) to counter that candidate.
I am sure all would agree the current system in no way resembles an open, democratic election of directors. The triggers in the proposed rule make it even less so. Having direct access to the proxy without triggers seems a modest request, given that few investors would use their rights to nominate unless they felt a board and corporate executives were grossly mismanaging a corporation. The two-year time period to gain access to the proxy could bring more harm than good to a company's governance and performance.
Until corporate directors are held to the highest standards and made more accountable to shareholders, we'll continue having trouble regaining investors' confidence in markets and corporate management. Allowing the owners of companies to have a realistic say in the membership of the board is a valuable way to improve the checks and balances needed to help stop corporate corruption.
Thank you for this opportunity to offer my support for improving shareholder access to the proxy. I trust the Commission will adopt final rules that are in the best interest of shareholders.