State Teachers Retirement System of Ohio
December 18, 2003
Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609
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RE: File No. S7-19-03
I am the Executive Director of the State Teachers Retirement System of Ohio ("STRS Ohio"). STRS Ohio is responsible for investing the pension plan assets for Ohio's public school teachers. We invest on behalf of over 307,000 active and inactive teacher members throughout the State of Ohio and pay benefits to over 108,000 retired teachers.
As we stated in response to your solicitation for comments on S7-10-03, STRS Ohio and its Board very strongly believe that equal access to corporate proxy materials is of significant importance for shareholders who wish to run alternative candidates for board seats and have a meaningful voice in a company's governance. We applaud your efforts to reform the current system.
Now, in response to your proposed rules for Security Holder Director Nominations (File No. S7-19-03), STRS Ohio would like you to consider the following as you work to finalize the proposed rule on Security Holder Director Nominations:
- Triggering Events. We prefer that the final rule include no triggers. However, if triggers must be part of the final rule, we would recommend the following: a) the triggers be immediate, rather than require a two-year delay; b) the `withhold vote' threshold should be lowered to 20% of the votes cast; c) a trigger should be incorporated into the rule that is based on non-implementation of majority-vote-winning shareowner resolutions (related solely to corporate governance and compensation issues, and not related to social, political, or environmental issues), regardless of the proponent's share ownership level; d) the success of withhold and majority vote proposals should be based on votes cast, not shares outstanding, and should exclude broker votes; and e) notice of a triggering event should be posted on the company's website.
- Eligible Nominating Shareholders. The access mechanism should be available to any long-term shareowner or group of shareowners owning in aggregate at least 5 percent of a company's voting stock for at least two years. We agree that shareowners participating in 5 percent groups should be required to sign a group Schedule 13G indicating ownership and intent to nominate candidates. We agree that the access mechanism should not be available to Schedule 13D filers. However, the 13D rules should be amended to clarify that it only applies to shareholders or groups of shareholders who intend to change or modify control of a public company, either through a tender offer of a proxy contest for board control. A 13D `safe harbor' should be established for "short slate" or "just vote no" campaigns.
- Eligible Director Nominees. We agree that candidates should qualify as independent under relevant non-subjective stock exchange listing standards. Shareowner-nominated candidates should be required to represent that they qualify as independent and that they do not have any direct or indirect agreements with the company. However, shareowner-nominated candidates should not have to be independent of the nominating shareowner or group.
- Number of Nominees. We agree that the access mechanism should not be used to unseat a board or facilitate a change in control. However, the mechanism should allow shareowners to nominate at least two directors and less than a majority of the board. The proposed numerical limits overly complicate the rule.
- Eligible Companies. All companies, regardless of state laws, should be eligible for the proposed access procedure. The rule should not be restricted to accelerated filers. The rule should not include any carve-outs for companies taking specific steps or actions.
- Proxy Statement Disclosure. Shareowner-nominated candidates should be permitted to include supporting statements regardless of whether companies include supporting/opposing statements. Such statements should be permitted to be the greater of 1) a minimum of 500 words, or 2) equal in space to the company's supporting or opposing statements.
- Timing Considerations. Notice of determinations to omit shareowner-suggested candidates given 30 days prior to annual meetings does not provide shareowners adequate time to contest a determination and cure a defective notice. The proposed 30-day notice does not provide time for the SEC to resolve disputes, a mechanism for which should be added to the final rule.
On behalf of the STRS Ohio Board, our members, and our retirees, I would like to thank you for giving this request serious consideration. If you have any questions, please reply to this Email.
Damon F. Asbury