|Gregory F. Pilcher
Senior Vice President, General Counsel
and Corporate Secretary Fax
|Writer's Direct No.
May 7, 2003
Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549-0609
Re: File no. SR-NYSE-2002-33
Ladies and Gentlemen:
This letter is submitted in response to the request by the Securities and Exchange Commission (the "SEC") for comments on amendments proposed by the New York Stock Exchange (the "NYSE") for its Listed Company Manual (SEC Release No. 34-47672). We do not attempt herein to comment generally on the proposed listing standards. Instead, we address only proposed listing standard 303A(3).
The NYSE commentary to proposed listing standard 303A(3) states that "a company must disclose a method for [interested] parties to communicate directly and confidentially with the presiding director or with the non-management directors as a group. That method can follow the same process established for communications to the audit committee required by Section 303A(7)(c)(ii)."
We assume that the intent of the NYSE commentary described above is to require a company to establish procedures pursuant to which interested parties can make their views and concerns known to non-management directors, and that the requirement can be satisfied by any reasonable method designed to accomplish the purpose. Presumably, reasonable methods would include the use of an existing confidential hotline or other device managed by company personnel as part of the company's corporate compliance program, with the responsible company personnel reporting hotline reports or other communications intended for non-management directors directly to such directors. However, as drafted, the reference in the NYSE commentary to "communicat[ing] directly . . . with the . . . non-management directors" is confusing because it could be read to require "first-hand" communications between interested parties and non-management directors. We request that you clarify this point of potential confusion.
In that regard, any requirement that the company facilitate first-hand communications between any interested party and non-management directors would be unnecessarily burdensome for such directors. First-hand communications likely would lead to non-management directors receiving, and therefore being obligated to review, all manner of comments and complaints from customers, suppliers, shareholders, employees and others, likely including communications about matters that are immaterial to a company's business or the directors' duties. Furthermore, many companies to which the proposed NYSE listing standards will apply already have in place mechanisms designed to inform their audit committees of concerns raised by employees and others regarding accounting, internal accounting controls and auditing matters. As suggested above, and as contemplated by the NYSE commentary to proposed listing standard 303A(3), a company's mechanism for informing its audit committee of accounting and auditing concerns could be modified and used as a conduit for communications intended for non-management directors.
We thank you for the opportunity to comment on the proposed listing standards. We would be happy to discuss with you our comments or any other matters you feel would be helpful in your review of our comments. Please do not hesitate to contact me if you would like to discuss these matters further.
Very truly yours,
Gregory F. Pilcher