December 31, 1997 Mr. Jonathan G. Katz Secretary U.S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: File No. S7-25-97 Release No. 34-39093 Dear Mr. Katz: Georgeson & Company Inc. is the leading provider of information and services relating to ownership and market activity of publicly traded companies The firm's services include securityholder solicitations, strategic investor relations, corporate governance, financial markets consulting and a variety of analytical and research-based products and software. Since 1935, Georgeson has conducted an estimated 20,000 securityholder transactions, including proxy solicitations, proxy contests, tender offers, exchange offers and consents. In contested situations, Georgeson will work for either dissidents or incumbents, raiders or defending managements. It is our goal to ensure that the proxy process is both efficient and neutral, so that the regulatory balance is not tipped in favor of either management or shareholders. The Securities and Exchange Commission (the "Commission") is proposing revisions to Rule 14a-8, the shareholder proposal rule. Based on our practical experience in conducting solicitation campaigns and advising companies on corporate governance, we believe that the proposed amendments should improve the shareholder proposal process. While the revisions represent a substantial shift in regulatory approach, they take into account changes in the relationship between shareholders and issuers that are highly relevant to the shareholder proposal process. These changes include: ú the increase in stock ownership by fiduciaries; ú the growth in economic, political and voting power of pension funds and other institutional investors; ú the liberalization of shareholder communications following the 1992 proxy rule changes; ú the promulgation of proxy voting standards by the Department of Labor; ú the centralization of proxy processing in ADP Investor Communication Services and the rapid growth of shareholder organizations such as Institutional Shareholder Services and the Council of Institutional Investors; ú the availability of electronic communication and other new technology increasingly accessible to all shareholders, both large and small; and ú a decade of highly successful shareholder activism that has changed the culture of corporate America and established an active role for shareholders in corporate governance. As stated in our March 10, 1997 questionnaire and comment letter, we believe that shareholders should play a greater role in the shareholder proposal process. We applaud the Commission for taking this approach and for seeking to promote a meaningful referendum on issues of importance to shareholders. We believe that by introducing higher resubmission thresholds and shifting responsibility to shareholders through the new override mechanism, the proposed revisions should improve the quality of proposals and increase the relevance of the process to both shareholders and issuers. This approach should have the effect of encouraging proponents to be more selective in targeting companies with poor performance or egregious policies and in drafting proposals related to specific shareholder concerns. Plain-English Question & Answer Format We support the use of plain English and the Q&A format. This approach is particularly appropriate for rules that are designed for use by shareholders, rather than securities lawyers. The Commission's use of plain English in the proposal release should convince skeptics that the results are easy to use and understand. Personal Claim or Grievance Exclusion _ Rule 14a-8(c)(4) We support the continued exclusion of any proposal that "on its face relates to a personal grievance or special interest," but we oppose the revised treatment of "neutral" proposals. A "no view" response from the Division staff, requiring recourse to the courts, would increase cost and reduce efficiency. While these are not easy decisions, resolution at the staff level should continue to be acceptable to all parties. A possible alternative would be to bring "neutral" personal grievance proposals under the override provision (discussed below) and thereby allow shareholders to decide whether such proposals merit inclusion in the proxy statement. The Relevance Exclusion _ Rule 14a-8(c)(5) We support the proposed elimination of the subjective "otherwise significantly related" language and the application of a purely economic standard. Despite the arbitrariness of the suggested $10 million / 3% standard, the approach is practical, has the benefit of clarity, and would increase the efficiency of the process by eliminating debate over relevance. The "Ordinary Business" Exclusion _ Rule 14a-8(c)(7) We endorse the elimination of the term "ordinary business," but we suggest a modification to the proposed new phrasing: "specific operational decisions ordinarily left to the discretion of management." In our view, the term "operational" better describes the category of activities that are the exclusive concern of management. The term "business" is broader, and encompasses elements of policy and strategy that are of legitimate concern to shareholders and their elected representatives, the board of directors. The Resubmission Thresholds: _ Rule 14a-8(c)(12) We support an increase in resubmission thresholds. Shareholder involvement in the proxy process has increased dramatically during the past decade, requiring adjustment of the minimal resubmission percentages that were pegged to the low shareholder turnout that was the norm prior to the rise of activism. We recommend a different approach to administering resubmission thresholds. First, we suggest that the thresholds be calculated as a percentage of outstanding shares, rather than votes cast. This approach would eliminate differences in the counting of abstentions and would make voting results comparable from year to year and for different companies. Second, we suggest that the resubmission threshold for the first year should be 5% of outstanding shares _ a requirement that is in line with other regulatory and disclosure standards. For each subsequent year, we suggest a doubling of the resubmission threshold. Thus, the resubmission thresholds would be: first subsequent year _ 5% of outstanding shares second subsequent year _ 10% of outstanding shares third subsequent year _ 20% of outstanding shares fourth subsequent year _ 40% of outstanding shares any subsequent year _ a majority of outstanding shares These thresholds would foster an up-or-out approach, eliminate the repetition of stale proposals that achieve only minimal support, and stimulate proponents to craft proposals directly linked to shareholder concerns. Proposed Override Mechanism We support the override mechanism, which is at the core of the Commission's effort to delegate responsibility to shareholders and reduce regulatory involvement in the shareholder proposal process. We believe that the override would provide shareholders with an extraordinarily powerful tool whose potential impact cannot yet be assessed, and therefore the minimum override percentage should be no less than 5% of outstanding shares, rather than the proposed 3%. We agree that a proponent's shares should be includable in calculating the percentage and that override supporters should be limited to one proposal per company. We do not think that a proponent should have to await Division action before undertaking an override effort. We think override supporters should commit to continued ownership through the shareholder meeting _ the same standard that applies to the proponent. Discretionary Voting Authority _ Rule 14a-4 We are concerned that the Commission's revisions to Rule 14a-4 would encourage the development of an alternate path for shareholder proposals _ in effect, an end run around the safeguards and limitations of Rule 14a-8. In our view, Rule 14a-8 should be the mechanism for introduction of shareholder proposals, and Rule 14a-4 should be regulated as a mechanism for non-management solicitations. We support the introduction of a 45-day notice requirement (which, as the release points out, could be overridden by a company's advance notice by-law). However, we think the Commission should reconsider its treatment of discretionary voting by management on non-14a-8 proposals. Shareholders should not be encouraged to use 14a-4 as a back-door alternative to Rule 14a-8 or as a tactic to pressure or harass management. Instead, Rule 14a-4 campaigns should be recognized as counter solicitations in which the burden is on proponents to solicit shareholder support rather than relying on the cancellation of management's voting discretion. We would keep the 45-day notice requirement and we would permit the exercise of voting discretion whenever management's proxy materials included the prescribed disclosures. We would not require a reference to the non- management proposal on the proxy card or a box for shareholders to withhold discretionary voting authority. In our view, proponents using Rule 14a-4 should supply their own form of proxy, to be mailed by management if the proponent does not request the shareholder list. As a practical matter, the Commission's suggestion to bring a non-management proposal indirectly into management's proxy through a checkbox designated "withhold discretionary voting authority" would be confusing, cumbersome and possibly misleading. As electronic proxy voting and Internet voting become available in the next year, proponents relying on Rule 14a- 4 will have practical and inexpensive means of soliciting and receiving shareholder votes that will be far more effective than the management proxy for a bona fide counter solicitation. Conclusion The proposed revisions to Rule 14a-8 have been the target of severe criticism from activist organizations. Resistance to change and fear of higher standards are predictable. For many years proponents have benefited from handicapping that was built into Rule 14a-8 to protect access by small shareholders. But shareholder demography has changed in the past decade, and the handicaps need to be adjusted. The proxy statement is not a billboard. Proponents should be required to establish a clear link between their proposals and the interests of other shareholders. This does not mean that proposals dealing with social and political issues do not belong in proxy statements; in fact, many proponents of such issues have successfully demonstrated the ties between the policy questions that concern them and the economic performance of targeted companies. Regardless of the type of proposal, all proponents should be held to the same standard they impose on corporate boards and managers _ their activities must maximize shareholder value. Respectfully submitted, Georgeson & Company Inc. By: ______________________ John C. Wilcox Chairman