From: Wilson, John [wilsonj@cbis-fsc.com] Sent: Wednesday, March 31, 2004 10:59 AM To: 'rule-comments@sec.gov' Subject: File No. S7-19-03 Release Nos. 34-48626; IC-26206 March 31, 2004 Jonathan G. Katz Secretary Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0609 Re: File No. S7-19-03 Release Nos. 34-48626; IC-26206 Dear Mr. Katz: Christian Brothers Investment Services, Inc. (CBIS), a registered investment adviser under the Investment Advisers Act of 1940, would like to submit comments pursuant to the Commission's October 14, 2003 "Proposed Rule: Security Holder Director Nominations" (File No. S7-19-03 Release Nos. 34-48626; IC-26206). CBIS manages approximately $3.5 billion for Catholic organizations seeking to combine faith and finance through the responsible stewardship of Catholic assets. CBIS is an active shareholder, working with companies on a number of issues we believe are critical to the long-term value of the investments we make on behalf of our clients. CBIS submitted comments on this proposed rule during the initial comment period. At this time, we would like to reiterate our support for the principle of shareholder access to the proxy and the main points we raised in the original submission. The goals of proxy access should be to increase the accountability of boards to shareholders and to help ensure improved corporate governance. In order to achieve these goals, the process for shareholder nominees must follow some basic principles: * Shareholders should have the right to nominate candidates to the board. * The nomination process should remain the primary responsibility of the nominating committee of the board. * The process must be broadly inclusive. Since management should be accountable to all shareholders, this process should be open to smaller shareholders. We are concerned that the current proposal creates obstacles to shareholder nominees that would exempt most companies from shareholder nominees, create an unreasonably long timeframe for replacing underperforming directors, and exclude all but the largest shareholders from the process. Moreover, while this proposal aims to empower shareholders, most will have no more rights as a result of this rule. The rule would create classes of shareholders and offer more rights to large than to small shareholders. We are concerned that companies may feel a sense of accountability to the largest shareholders that they do not feel to others. The result of the proposal is a minimal and uneven expansion of shareholder rights, and a mechanism for corporate accountability that most companies could safely disregard. We question, therefore, whether this proposal represents a meaningful improvement of shareholder rights or an effective mechanism for board accountability. Our specific concerns are detailed in our letter dated December 5, 2003. The following summarizes our suggested changes, made in the previous submission: * We believe that shareholder director nominations should be possible without "triggers." * The threshold for nominating directors should be lowered to 1%, bringing it in line with the holdings necessary to file a "direct access" proposal. * The limitation on the size of security holder groups should be relaxed or eliminated to facilitate the participation of small shareholders. * We believe that if triggers are used in any capacity, any mandatory shareholder resolution that passes should qualify as a "trigger." * The process for challenging and omitting nominees and "direct access" proposals should follow the model of rule 14a-8, as with other shareholder proposals. We understand that some commentators have suggested that, rather than adopting this proposed rule, the Commission should allow shareholders to reject the candidacy of any director nominee who receives a vote of less than 50%. While we support this idea as a complement to the proposed rule, we cannot support it as a substitute. The right to reject nominees has little meaning if no replacement is available. Such a suggestion might have merit, however, if shareholders also had the ability to select the rejected nominee's replacement. Any proposal should also include a clear standard for determining which of the nominees in a contested election were successful. We appreciate the work of the Commission in all its efforts to protect and promote shareholder rights, and thank you for the opportunity to submit these comments. Please contact me with any questions. Sincerely, John K.S. Wilson Director - Socially Responsible Investing John K. S. Wilson Director - Socially Responsible Investing Christian Brothers Investment Services 90 Park Avenue 29th Floor New York, NY 10016 (p) 212-490-0800x118 (f) 212-490-6092 (e) wilsonj@cbisonline.com url: www.cbisonline.com **** Important Notice **** For the protection of our participants, Christian Brothers Investment Services, Inc. DOES NOT ACCEPT INSTRUCTIONS REGARDING PARTICIPANT ACCOUNTS BY E-MAIL and CBIS policy does not permit employees to transmit CBIS or participant policy decisions, participant account instructions, or information such as account names, numbers, custody numbers, PIN’s, or other identifying information by email. CBIS strongly recommends that participants refrain from email transmission of such information. The information contained in this transmission is confidential. It is intended for the sole use of the addressee. 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