New Jersey Division of Investment
Department of the Treasury

October 31, 2002

Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609

Re: Release No. 34-46620; File No. SR-NYSE-2002-46
Release No. 34-46649, File No. SR-NASD-2002-140

Dear Secretary,

I am writing on behalf of the New Jersey Division of Investment, Department of the Treasury (the "Division") to comment on the New York Stock Exchange ("NYSE") and the NASDAQ stock markets' proposed rule changes relating to shareholder approval of equity compensation plans and the voting of proxies.

The Division, under the jurisdiction of the State Investment Council, has the investment responsibility for 181 funds, including seven pension and annuity funds. Total assets of these pension and annuity funds are approximately $58 billion, which are used to support pension obligations to over 600,000 current and retired New Jersey government employees.

Overall, we are pleased with the direction of these proposals, as we believe that shareholder oversight of equity compensation plans is desirable given the potential for misuse of these plans.

In particular, we support the NYSE proposal to prohibit broker voting on equity compensation proposals. As you know, current NYSE and AMEX rules allow brokers to vote on certain "routine" proposals - including most stock compensation plans - if the beneficial owner has not provided voting instructions at least 10 days before a scheduled meeting. We believe that the NYSE proposal to eliminate such voting on equity compensation plans is a step in the right direction, and we urge the exchange to continue to evaluate this issue and consider whether it would be appropriate to abolish broker voting on other matters as well.

We also concur with the NYSE's proposed elimination of the "treasury stock exception" for equity compensation plans. Currently the NYSE exempts treasury shares from rules governing when compensation proposals must be subject to a shareholder vote. As a result, aggressive repurchasers of stock may fund plans with treasury shares and escape shareholder votes on these programs. The NYSE proposals in this regard are appropriate and should be adopted.

Even though we support the two major items described above, we do have concerns with several exemptions contained in the two proposals.

  • We do not believe that inducement awards should be exempt from shareholder approval. Companies should either plan for these awards as part of existing shareholder-approved plans, or make such awards contingent on subsequent shareholder approval.

  • The NASDAQ should be required to adopt the NYSE's proposed approach regarding repricing provisions in equity plans. We strongly support the requirement for shareholder approval on repricing proposals, and believe that the NASDAQ should adopt the NYSE approach.

  • Shares available under pre-existing shareholder-approved plans acquired via mergers or acquisitions should be subject to shareholder approval. Otherwise, acquired plans may be structured in ways that are opposed by the shareholders of the acquirer.

Finally, we urge the Commission to work with the American Stock Exchange to insure that the AMEX adopts standards that are substantially similar to the standards proposed by the NYSE and NASDAQ. We understand that the AMEX is considering listing standards that fall far short of the ones proposed by the other exchanges.

Thank you for the opportunity to comment on these proposed NYSE and NASDAQ rule changes. Please feel free to contact me with any comments or questions.


William G. Clark
Deputy Director

cc. Richard Grasso, NYSE Hardwick Simmons, NASDAQ
Steven Kornrumpf, Director, N.J. Division of Investment