The Business Roundtable

John T. Dillon
International Paper
  1615 L Street, N.W.
Suite 1100
Washington, DC 20036-5610
Tel (202) 872-1260
Fax (202) 466-3509
Philip M. Condit

Edward B. Rust, Jr.
State Farm

May 15, 2003

John J. Castellani

Patricia Hanahan Engman
Executive Director


Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549

Re: Proposed Rule Change and Amendment No. 1 by the New York Stock Exchange, Inc.
Relating to Corporate Governance, File No. SR-NYSE-2002-33

Dear Mr. Katz:

The following comments are submitted on behalf of The Business Roundtable, an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees in the United States and $3.7 trillion in annual revenues. As CEOs, we are committed to maintaining a strong economy, a vibrant workforce, and creating new jobs. We appreciate the opportunity to provide you with our views on corporate governance listing standards proposed by the New York Stock Exchange, Inc. (the "Exchange").

We applaud the Exchange's efforts to strengthen investor confidence and enhance the corporate governance practices of listed companies through its proposed listing standards. At the same time, we have concerns about one aspect of the proposals that would require the board's compensation committee to have the "sole authority" to determine compensation for the CEO. This language reflects a change from the Exchange's original proposal, filed last August, which would have required the compensation committee to "set" the CEO's compensation.

If adopted as proposed, the new requirement could preclude the full board, or the independent directors who do not serve on the compensation committee, from playing a role in decisions relating to CEO compensation. In this regard, it could diminish the accountability of CEOs to the full board. In addition, we believe that the "sole authority" language is only appropriate with respect to audit committees where Section 301 of the Sarbanes-Oxley Act of 2002 requires that the audit committee be "directly responsible" for the appointment, compensation and oversight of the independent auditor. As discussed below, this departs from established principles of corporate governance, and it should not be applied to compensation committees.

Under established principles of corporate governance, committees derive their authority from - and function as a part of - the full board. If the board determines, in its business judgment, that it is advisable to delegate to the compensation committee sole responsibility for determining CEO compensation, then the board should be permitted to do this. On the other hand, it should not be required to do so. The result of such a requirement may be to lose the value that comes from having the independent directors who do not serve on the compensation committee bring their experience and perspectives to bear on CEO compensation. Forcing boards to employ artificial measures to meet the proposed listing standards - such as placing every independent director on the compensation committee - is not good corporate governance.

In short, we submit that listed companies should retain the flexibility to determine how CEO compensation decisions are made by the independent directors of the board. We appreciate your consideration of these comments, and we would be happy to discuss these matters further or to meet with you if it would be helpful.


Franklin D. Raines
Chairman and CEO
Fannie Mae
Chairman-Corporate Governance Task Force
The Business Roundtable

cc: Hon. William H. Donaldson - Chairman, U.S. Securities and Exchange Commission
Hon. Paul Atkins - Commissioner
Hon. Roel Campos - Commissioner
Hon. Cynthia A. Glassman - Commissioner
Hon. Harvey Goldschmid - Commissioner
Annette L. Nazareth - Director, Division of Market Regulation
Giovanni P. Prezioso - General Counsel