From: Susan Leslie [SLeslie@uua.org] Sent: Monday, September 15, 2003 8:03 PM To: 'rule-comments@sec.gov' Subject: Re: File No. S7-14-03 Unitarian Universalist Association of Congregations 25 Beacon Street Boston, MA 02108 (617) 742-2100 www.uua.org September 15, 2003 Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission 450 Fifth Street NW Washington, DC 20549-0609 COMMENT ON SEC-PROPOSED RULE: NOMINATING COMMITTEE DISCLOSURES & COMMUNICATIONS BETWEEN SHAREOWNERS AND CORPORATE DIRECTORS Re: File No. S7-14-03 Dear Mr. Katz, We submit the following comments regarding Nominating Committee policies and disclosures for Board nominations, and greater vehicles for shareholders to communicate directly with Board members (SEC-proposed rule S7-14-03). This is a thoughtful step in strengthening Directors' accountability and obligation to shareholders, but a step we hope will lead to an even more robust proposal regarding investor access to the corporate proxy statement. The Unitarian Universalist Association (UUA) represents the interests of more than one thousand Unitarian Universalist congregations, on a continental scale. The UUA grew out of the consolidation, in 1961, of two religious denominations: the Universalists, organized in 1793, and the Unitarians, organized in 1825. The UUA has over $150 million of assets under management and in excess of $100 million in retirement plan participant funds. Investor-proposed nominees are rarely given consideration by management during the nominations process. Shareowners therefore rely on expensive and time-consuming proxy contests to bring attention to their candidates, who often lose in contested elections because management spends shareholder assets to oppose such investor nominees. While greater disclosure of the criteria and processes for nominating Board candidates will be quite useful to investors, it may be difficult for the SEC to eliminate boilerplate disclosures. The SEC should also not mistake the tide of letters in support of greater disclosure and communication channels with board members as a sign that shareholder access to the proxy for Board nominations is not needed by shareowners. It is the crucial missing link in Board accountability and strong governance at most corporations. Nominating Committee Disclosures We fully support the recommendations that Nominating Committees disclose when they receive nominations from security holders, as well as the procedures for nominating candidates for the Board. We also support detailed disclosures regarding the qualifications of, and criteria for, Board candidates, including those suggested by investors. We also strongly recommend additional disclosures regarding how the Nominating Committee takes the issue of Board diversity into account when considering candidates for the proxy ballot, and a description of how each candidate meets independence requirements outlined by the stock exchange listing reforms. A number of companies already disclose their commitment to Board diversity in their nominating charters, and diverse shareholder representation is a factor highlighted by TIAA-CREF in its guidelines on Corporate Governance. We further support transparency of the nominators behind candidates for the Board, including those proposed by management, Directors, shareholders, and Board search firms. This information is quite useful to investors in determining conflicts of interest and the measure of independence Board candidates have from management, other Directors, and the company itself. In the interest of honoring the worth and dignity of every person, we believe it is in our long-term best interest to encourage the free, open democratic process and therefore we are fully in support of the SEC proposed rule. In order for UUA committees and commissions to function as effectively as possible, each candidate needs to have the requisite skills, as well as the ability and time to follow through on their tasks and commitments. In addition, the Nominating Committee strives to equip committees, the board, and commissions with people who can offer a variety of cultural competencies and life experiences, with the belief that this will help these working groups to make more effective decisions. The Nominating Committee is particularly interested in identifying qualified candidates who also have connections to, and understanding of, ethnic communities other than those of European descent, youth and young adults, and people with disabilities. The committee does not believe that one must personally be a member of a particular group in order to have developed such cultural competencies. Work and volunteer experience, marriage, travel, and study are examples of avenues through which people can develop cultural competencies and sensitivities outside of their own ethnic, age or cultural community. The Nominating Committee also strives to create working groups that include the participation of both women and men, and which represent people from a variety of geographies, and sexual orientations. Those seeking our nomination should already have demonstrated their leadership skills in their local congregation, district, UUA, theological school, and/or other affiliated UU organization. Shareholder Communications with Board Members In our experience, Board members rarely respond to communications from shareowners. Calls, letters and emails are often routed through Investor Relations or corporate executives, who often decide to filter such correspondence. Such procedures do not uphold the basic premise that Board members directly represent shareholders. The channel of communication between security holders and Boards should be quite clear and easily accessible--not buried 20 pages into a corporate web site. Just as the revised NYSE listing standards proposed direct channels for communicating with Audit Committees, should there be a problem, investors should have direct access -- via emails, phone numbers, faxes, and addresses -- to the Board members representing them, to discuss issues appropriate of Board attention. We further support Boards reporting back to investors a summary of shareholder-Director communications, actions taken in response to shareholder concerns, and if the Board did not respond to particular communications, which executives did and why. Additional Recommendations We would also like to see a summary report in the proxy statement of Director attendance at annual meetings, to know which Board members are forgoing their duty of representing shareholders and addressing their questions at such events. Recommendations under proposed rule S7-14-03 should also apply to small companies and mutual fund companies, as enhanced disclosure would be of great value to all types of investors around these processes. The proposed disclosures, while paving critical improvements to the transparency of corporate elections, are not enough to restore lost confidence in U.S. equity markets. It will be the combination of greater transparency and greater investor access to the proxy for Board nominations that will strengthen shareholder democracy, and Board accountability with it. Sincerely, Jerry Gabert UUA Vice President of Finance and Treasurer Advisor to the UUA Committee on Socially Responsible Investing Unitarian Universalist Association 25 Beacon Street Boston, MA 02108 (617) 948-4305 jgabert@uua.org