Subject: File No. S7-19-03
From: William Michael Cunningham
Affiliation: Creative Investment Research, Inc.
October 11, 2004
From: William Michael Cunningham [mailto:wmcunningham@earthlink.net]
Sent: Monday, October 11, 2004 2:37 PM
To: rule-comments@sec.gov
Subject: Re: RELEASE NOS. 34-48626; IC-26206; FILE NO. S7-19-03
We note that your Summary Comments neglected to mention our comments on certain sections of the proposal. We have reproduced our response below. Please include these comments in your summary.
Thank you.
Creative Investment Research, Inc.
XVII. Cost Benefit Analysis
O.1. We solicit quantitative data to assist our assessment of the benefits and costs of enhanced security holder access to company proxy materials when there has been a demonstrated failure in the proxy process. Will proposed Exchange Act Rule 14a-11 increase director accountability and responsiveness?
Yes.
If so, what costs would be incurred in instituting responsive policies and procedures?
See our comments on costs above. We believe costs can be minimized by using on-line resources and services. Companies will incur time and monetary costs. While we cannot be certain of the full costs, we refer the Commission to the CFO Magazine Survey on the cost of compliance with the Sarbanes-Oxley Act of 2002. According to the survey, the total costs to implement all portions of the Act are described below:
Less than $500,000
52%
$500,000 to $999,000
23%
$1 million to $2.9 million
16%
$3 million to $5 million
6%
More than $5 million
3%
Source: CFO Magazine.
Survey participants indicated that compliance costs going forward would be as noted below:
Less than $500,000
65%
$500,000 to $999,000
22%
$1 million to $2.9 million
7%
$3 million to $5 million
3%
More than $5 million
3%
Source: CFO Magazine.
Will more accountability and responsiveness lead to better managed boards?
Yes.
What effects, if any, would increased accountability and responsiveness have on the board's time spent in its duties overseeing management?
It is difficult to determine at this point, but we expect that board time spent in duties overseeing management will increase. We believe this is appropriate.
O.2. We solicit quantitative data on the potential increases, if any, of security holder proposals under Exchange Act Rule 14a-8 as a result of these proposed rules. We also solicit quantitative data on how often the two triggering events that would activate proposed Exchange Act Rule 14a-11 would occur.
It is difficult to determine at this point, but we expect the two triggering events would occur no more that 15% of the time. We suggest the Commission review information
O.3. We solicit quantitative date on the time and cost spent in preparing a no-action request to exclude a proposal under Exchange Act Rule 14a-8, the incremental cost spent to print and mail such a security holder proposal and to include a security holder nominee and his/her background information in the proxy materials, and the cost borne by both companies and security holders to solicit security holders regarding a direct access security holder proposal and election of a nominee or nominees to the board.
See our comments on costs above. We believe costs can be minimized by using on-line resources and services.
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