Jonathan Katz

Secretary, SEC

450 5th Street NW

Washington, DC 20549

Dear Mr. Katz:

I am writing on behalf of St. Joseph Health System to comment on the proposed Amendments to Rules on Shareholder Proposals under File No. S7-25-97.

Our Health System, sponsored by the Sisters of St. Joseph of Orange, has been involved in advocacy and corporate social responsibility for the last five years. We are writing as an investor who values strong financial returns as well as corporate responsiveness to environmental and social concerns and forward-looking corporate governance policies.

We believe the shareholder resolution process has played an absolutely pivotal role in encouraging companies to be responsible corporate citizens as well as responsive to their stockholders. There are literally thousands of examples over the last 25 years in which shareholder advocacy has prompted a company to reassess an important policy or practice. Whether the issue was investing in apartheid South Africa or environmental concerns, diversity in Burma, or reforming corporate governance practices, we believe shareholder input has been effective.

We are very concerned about any Rule change which unfairly penalizes shareholder initiatives. We believe the package of proposed Rules is a serious setback for shareholder democracy and unnecessarily restricts our ability to file resolutions.

As shareholders we first attempt to communicate or dialogue with a company, and only if the company is unresponsive, do we file a resolution. We believe the shareholder resolution has been an important tool pressing corporations to be responsive to their investors and the larger public. We believe the SEC’s new rules should protect our rights as shareholders and should continue this avenue for democratic expression to management.

We oppose a number of the proposed Rules and urge the SEC to change the final Rule.

1. The resubmission threshold - The proposed jump to 6%, 15%, and 30% is a monstrous and unfair increase which particularly penalizes shareholders working on social and environmental issues. This increase would further insulate management by making it more difficult for investors.

Most thoughtful corporations are well aware that a 10% vote is significant indication of concern about an issue, especially when many institutional investors follow the tradition of automatically voting for management. If one imagines the number of shares of Unocal necessary to reach a 15% or 30% vote, it is overwhelming.

Management already has the proxy voting process stacked in its favor. We note that all resolutions are advisory and not binding on a company regardless of the vote total. The 6%, 15%, or 30% vote level is unnecessary and unfair to investors.

2. Personal Grievance - The new Rule would allow a company to argue that a resolution sponsor was motivated by a "personal grievance" or some other hidden motive, and the SEC could then simply issue "no opinion." We believe the SEC is abdicating its responsibility and should allow any resolution that was acceptable on its own merits to be included on a proxy.

3. The Override Provision - The proposal that a shareholder can file a resolution by gathering 3% of the votes to support its filing is a proposal that will be virtually impossible for most individual and institutional investors. This proposal is only viable for huge pension funds.

Since the vast majority of corporate governance resolutions usually get on a proxy automatically, this provision primarily affects social and environmental resolutions.

The proposed 3% override would become a rule with no practical application. If the SEC supports an override plan, the percent of shares backing a proposal needs to be much less.

4. An issue must deal with $10 million of a company’s business - This proposal leaves open a number of unanswered questions. Ironically, no corporate governance resolution has to meet this test,why the double standard?

Also, how does a company, the SEC or a sponsor decide if an issue like child labor or a pattern of discrimination in employment relates to $10 million of a company’s business? Or, what if a company was about to make a new investment, perhaps in a country with a horrendous human rights record (like apartheid South Africa), but hadn’t invested a dollar yet? This Rule would prevent a resolution on this issue.

5. Discretionary voting by management - Under Rule 14(a)(4) a shareholder can present a resolution at the company’s stockholder meeting for a vote and solicit votes independently, but not put it in the company proxy.

However, the proposed rule allows management to seek discretionary authority to vote against such a resolution and nay other business brought up at the stockholders meeting without giving the shareholder the right to vote for the resolution on the proxy. This is unfair and undemocratic.

6. Right to review Management’s statement against a resolution - The new Rule would strip shareholders of their right to review a proposed management statement opposing a resolution to see if there was any false or misleading statements. This means that a company has no accountability for the veracity of the statements in the proxy while shareholders have to defend the accuracy of every word in their resolutions.

The Rule should be even handed and balanced providing for checks and balances for investors and companies.

We believe the voice of investors needs to be heard clearly by the SEC as you finalize the Rules. We urge you to take these issues into account.


Mary Ann Gaido

Director of Advocacy

St. Joseph Health System

440 S. Batavia

Orange, CA 92868