CORNINGFebruary 18, 2003 via e-mail - rule-comments@sec.gov Jonathan G. Katz, Secretary
RE: File No. S7-02-03
Dear Mr. Katz: We are pleased to submit this letter to the Securities and Exchange Commission (the "Commission") in response to the Commission's request for comments on it proposed rules implementing standards relating to listed company audit committees, as contained in Release Nos. 33-8173; 34-47137; and IC-25885 (the "Proposing Release"). Corning Incorporated has employed a 50/50 owned equity company on several occasions over the years to facilitate the commercialization of new technologies. A prime example is Dow Corning Corporation, which has The Dow Chemical Company as the second 50% owner. Companies of this structure have been used by others as well. Cingular Wireless, which has already commented on the proposed rule, offers another example. Corning adopts the comments submitted to you by Dow Corning Corporation (February 14, 2003) and by Cingular Wireless (January 30, 2003). Either through modifications to proposed Rule 10A-3(c)(1), or to proposed Rule 10A-3(b)(1)(iv)(B), or by a proposed rule to permit the Commission to grant exemptions in appropriate circumstances, we believe that there should be flexibility for a 50/50 owned equity company to list debt securities on one of the national exchanges. It would be unnecessary and cumbersome for the parent companies, who each have audit committees with independent directors, to recast the board of directors at the equity venture level. At the same time, for the reasons stated in the Dow Corning letter to you, adequate protections for the holders of the equity venture's debt securities can be provided by other means. These means would include: the interests of the parent companies, through their audit committees, in having accurate financial statements that will be included by equity accounting in the financial statements of the parent companies; CEO/CFO certifications by the executives of the equity venture company; direct review by the audit committee of the equity venture company (which typically will be senior executives of the parent company); with an outside auditor attesting to the financial reporting. In addition, disclosure would be made to the debt holders, who would then make their own informed decision about purchasing these debt securities. We appreciate this opportunity to comment on the Commission's proposal.
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