May 8, 2003
Mr. Jonathan G. Katz
Re: Release No. 34-47672, April 11, 2003, Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto by the New York Stock Exchange, Inc. Relating to Corporate Governance, File No. SR-NYSE-2002-33
Dear Mr. Katz:
This comment letter is being submitted on behalf of Anadarko Petroleum Corporation, a New York Stock Exchange ("NYSE") listed company, in response to the request for comments by the Securities and Exchange Commission (the "Commission") to Release No. 34-47672 (the "Release") regarding the NYSE proposed rules on Director Independence Standards.
While we support the NYSE for proposing significant corporate governance reforms, we would like to comment on the proposed bright line test for director independence. Section 303A, 2(b)(iv) of the NYSE proposed rules states that:
We believe that such a commercial relationship entered into in the ordinary course of business is not material to independence until it is at least 5% of consolidated gross revenues of a company. We also believe that the existence of such a relationship should give rise only to a rebuttable presumption of a lack of independence.
We are concerned that this director independence standard federalizes the area of corporate law and erodes the Board of Directors' authority and business judgement unnecessarily.
Elimination of the Bright Line Restriction in Favor of a Rebuttable Presumption
The existence of a commercial relationship between a director's employer and the company should raise only a rebuttable presumption of a lack of independence. The NYSE has already proposed many useful guidelines for director independence that we have adopted. However, we believe this absolute standard is overly restrictive and should be modified.
We suggest that the existence of a defined commercial relationship between a director's employer and the company should constitute only a rebuttable presumption of a lack of independence. The business judgment exercised by the Board regarding the materiality of this relationship is the same as that made regarding other relationships between the company and its directors. The Board should be allowed to make its judgment regarding materiality and to support its decision in the event that a business relationship exceeding 2% (or other percentage) of gross revenues is determined to be immaterial. In the process of supporting its decision regarding materiality, more information is provided about the precise nature of the relationship between the director and the company than is the case if the company simply identifies the director as an interested director.
Raise the Materiality Threshold from 2% to 5%
Alternatively, if it is decided that a bright line test for director independence in light of a commercial relationship is necessary, then we suggest that the NYSE and the Commission consider raising the materiality threshold from 2% to 5% of annual gross revenues. We believe that a 2% is a too low a threshold and that 5% is a preferable figure because:
We support the NYSE's efforts to improve the corporate governance systems of listed companies, and we have energetically adopted the required and suggested improvements in our company's corporate governance. We hope that our suggestions regarding director independence will be considered and used to further improve corporate governance systems while enabling the Board of Directors to continue to make reasonable business judgments on behalf of the corporation.
cc: The Board of Governors of the New York Stock Exchange