June 23, 1999

Catherine R. Kinney
Group Executive Vice President
Office of the Chief Executive
New York Stock Exchange, Inc.
20 Broad Street, 17th Floor
New York, NY 10005

Brian Lane
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W., Mail Stop 0401
Washington, D.C. 20549

Re: Comments on the Report and Recommendations of the Blue Ribbon Committee on
Improving the Effectiveness of Corporate Audit Committees

Dear Ms. Kinney and Mr. Lane:

At the request of the Audit Committee of Callaway Golf Company's Board of Directors, we have reviewed the Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees. This letter sets forth our views and comments.

Recommendation 1. We think that the standard for the exceptional and limited circumstances where a director could serve despite the existence of certain relationships should be revised as follows:

A director who has one or more of these relationships may be appointed to the audit committee, if the board, under exceptional and limited circumstances, determines that membership on the committee by the individual is required by in the best interests of the corporation and its shareholders, and the board discloses, in the next annual proxy statement subsequent to such determination, the nature of the relationship and the reasons for that determination.

It is hard to conceive of a situation where any particular individual's membership on an audit committee would ever be "required by" the best interests of the corporation and its shareholders, even in circumstances where it is clearly in the best interests of the Corporation and its shareholders for a particular individual to serve on the committee

Recommendation 3. If adopted, Recommendation 3 would require that each member of an audit committee be or become "financially literate". Neither the Recommendation nor the accompanying report indicates how the required level of "financial literacy" would be established. As noted in the Blue Ribbon Committee's report, financial literacy could be

attained in a variety of ways -- past employment experience, professional certification, "comparable" experience or background or company-sponsored training programs. This list is not comprehensive and, as recognized by the Blue Ribbon Committee, a director's ability to be an effective audit committee member may not, in fact, require any particular expertise. Additionally, as a practical matter, not all public companies have or can recruit directors who have specific financial management or accounting backgrounds.

Due to the problems of defining and implementing a "financial literacy" standard, the adoption of such a criterion for audit committee membership could create enhanced liability for committee members, and will create substantially increased concern about potential liability for those who serve or are considering serving on audit committees.

We think the undefined and subjective "financial literacy" requirement should be eliminated from Recommendation 3.

Recommendation 5. Recommendation 5 recommends proxy statement disclosure regarding the audit committee's charter, including whether the audit committee "satisfied its responsibilities in compliance with its charter."

We believe that there should be no requirement to disclose any assessment of whether the audit committee "satisfied its responsibilities." The concept of committee "satisfaction" of its responsibilities will be elusive and related disclosure will not be meaningful. We also believe that such disclosure, even with safe harbor protection, would become an invitation to lawsuits based on breach of duty claims, among others. We therefore recommend that the requirement to disclose committee "satisfaction of its responsibilities" should eliminated from Recommendation 5.

Recommendations 8, 9 and 10. Recommendation 8 would require the outside auditors to discuss with the audit committee a number of issues, including the "clarity" of the company's financial disclosures and the "degree of aggressiveness or conservatism" of the company's accounting principles. Recommendation 9 would require that a letter from the audit committee containing disclosures regarding the audit committee's discussions with the outside auditors, including discussions of the "quality" of the accounting principles as applied by the company, be included in the company's annual report. Additionally, the audit committee would be required to state whether or not it believes that the company's financial statements are fairly presented in conformity with generally accepted accounting principles ("GAAP") in all material respects. Recommendation 10 would require that the reporting company's outside auditor confer with the audit committee (or the chairman of the committee) and a representative of financial management before filing each Form 10-Q, and preferably before any public announcement of financial results. Topics such as significant adjustments and management judgments would be required to be discussed.

These three recommendations would require extraordinary time commitments by committee members, would result in substantial redefinition of the respective roles of the audit committee, management and outside auditors and would present potential liability issues for committee members. The audit committee should remain in the role of providing oversight and be permitted to rely on information provided by management and experts in accordance with state corporate laws. Outside auditors are specifically engaged to apply and interpret GAAP and provide technical accounting services and the role of the audit committee should not be confused with that of the outside auditor. While the Blue Ribbon Committee states that it does not intend to endorse a higher duty of care for audit committee members, the practical reality of added responsibilities and disclosure requirements set forth in these recommendations will result in increased liability exposure for committee members. For all of the above reasons, we believe that adoption of Recommendations 8, 9 and 10 will make it more difficult to retain and recruit audit committee members. We therefore urge reconsideration and deletion of Recommendations 8, 9 and 10 from any proposed rulemaking.

Thank you for the opportunity to express our views. If you have any questions or comments, please do not hesitate to contact me.

Very truly yours,

David A. Rane
Chief Financial Officer