December 19, 1997
     
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
     
Re: File No. S7-25-97 - Proposal to Amend Rule 14a-8 
     
Ladies and Gentlemen:
     
Compaq Computer Corporation is responding to the request of the 
Securities and Exchange Commission in its Release No. 34-39093; IC-22828 
for comments relating to proposed amendments to Rule 14a-8 regarding 
shareholder proposals.
     
We have the following comments and suggestions to your proposals set 
forth in the Release.
     
General.  In general, we support the majority of the Commission's 
proposals.  In particular, we agree with the changes to the Rule's 
format, including the plain English style and the question and answer 
format.  These changes will help companies and individual stockholder 
proponents more easily understand the purpose and requirements of the 
Rule.
     
We have chosen not to comment on each proposal presented or to answer 
each question posed; the Commission may assume our silence indicates 
support or at least a lack of serious concern.  We have chosen to 
reserve our comments for those areas of substantial policy concern or 
where we strongly disagree with proposed modifications. 
     
Resubmission Thresholds.  We support the Commission's proposal to raise 
resubmission thresholds under Rule 14a-8(c)(12) to 6% on the first 
submission, 15% on the second submission and 30% on the third 
submission.  We believe a shareholder should have a fair opportunity to 
introduce a relevant proposal to all shareholders.  However, once a 
proposal has been rejected by an overwhelming percentage of 
shareholders, such a proposal should not be resubmitted for 
consideration.  We believe that the increase of the thresholds is a fair 
compromise and is reasonable.  Additionally, if statistics in the future 
show that these thresholds are too high, and too many meritorious 
resubmissions are being excluded on this basis, the Commission should 
reevaluate the thresholds at that time.
     
Personal Grievances.  We do not support the proposed change to Rule 
14a-8(c)(4).  We believe it is critical that the Commission remain 
involved in the interpretation of (c)(4) and believe a "no view" policy 
would not be practical or wise.  Companies and proponents rely on the 
staff to give quick, decisive responses these conflicts.  We believe your 
proposed change would put companies under a constant threat of litigation. 
 While we understand that interpreting the rule is difficult and time 
consuming for the Commission, we believe that it is in the best interests 
of both proponents and the corporate community. Not only should the 
Commission be involved in this process, we urge you to be active in 
curbing the multiple abuses that have occurred because certain 
organizations have aggressively used this section to advance personal or 
organizational interests clearly unrelated to their interests as 
shareholders.  Additionally, we suggest that the Commission require that 
each proponent disclose any material relationship with the company, its 
directors, officers and employees so that companies know all relevant 
facts in making these determinations. 
     
The "Relevance" Exclusion.  We support the elimination of the "not 
otherwise significantly related" portion of (c)(5), but we urge the 
Commission to keep the current 5% tests.  For companies the size of 
Compaq, a shareholder proposal addressing an issue with a value of $10 
million is truly insignificant.  
     
After much consideration, we have determined that to fix the threshold 
at any dollar value would be a disservice to either the company or its 
shareholders.  The dollar value chosen would either be too high for a 
particular company, so as to exclude valid shareholder proposals 
relevant to a company's products and sales, or would be too low, so as 
to force shareholders to consider an issue that is not relevant to the 
company's products and sales.  Simply put, all companies are not the 
same when it comes to dollars.  What is relevant to Compaq with $20 
billion in gross sales is not relevant to a company with $334 million in 
gross sales.  Yet, with the proposed $10 million threshold, both Compaq 
and the $334 million revenue company would have the same standard for 
determining what is relevant to their products and services.  The 
current 5% tests, however, would address the differences in those 
companies.  
     
Additionally, we believe that the current three prong test, while not 
perfect, addresses the differences in industries as to what standard 
(revenue, earnings or assets) is a meaningful standard for that 
industry.  We recognize that a straight revenue test, which would be 
relevant in the technology sector, may not be meaningful in other 
industries where total assets is a better measure of their value.
     
In this regard, we note that our position is the same as the position 
taken by the American Society of Corporate Secretaries in their comment 
letter to the Commission.
     
Override Mechanism.  We believe the inclusion of a shareholder override 
provision is reasonable.  We think, however, that only shareholders with 
a significant interest in a company should be able to override the 
staff's decision that a proposal is excludable under (c)(5) and (c)(7). 
The SEC has already determined, in the beneficial ownership rules, that 
5% is an acceptable standard for determining what a significant interest 
is in a company.  That is why we believe that the threshold should be 
5%, rather than 3%.  Thus, only a significant beneficial owner, or a 
group of owners with a significant interest, would be able to override 
the "relevance" and "ordinary business" tests.
     
Additionally, we believe that the override should not apply if any 
proposal excludable under (c)(5) or (c)(7) is also excludable on the 
basis of some other provision of Rule 14a-8(c).
     
Mootness.  We are concerned that the Commission may have unwittingly 
proposed a change to the "mootness" exclusion that would narrow the 
provision rather than clarify it.  Matters may become moot for reasons 
other than implementation; therefore, we suggest retaining the current 
language or adding "or if there is no longer any need to consider the 
proposal because of changed circumstances."
     
Cracker Barrel.  In interpreting the "ordinary business" exclusion under 
Rule 14a-8(c)(7), we agree with the Commission that such provision 
should be used "to confine the resolution of ordinary business problems 
to management and the board of directors since it is impracticable for 
shareholders to decide how to decide such problems."  We believe Cracker 
Barrel furthers this policy and provides a helpful "bright line" test in 
addressing employment-related proposals involving social issues.  At the 
same time, in view of the controversy surrounding this decision and in 
the spirit of compromise, we would support reversing Cracker Barrel and 
returning to a case-by-case approach in light of the broader package of 
reforms included in the overall proposal.  However, we firmly believe 
Cracker Barrel should not be reversed without the adoption of many of 
the other proposed changes to Rule 14a-8 which seek to strike a fair 
balance in the shareholder proposal process for all interested parties.
     
Furthermore, we believe that the rule is unclear as to whether it applies 
to specific business decisions made by the board of directors as well as 
management.  In the release (as quoted above), you state that Rule 
14a-8(c)(7) is based on principles of state law which leave ordinary 
business problems to the board of directors as well as management, and 
not shareholders.  We agree with your language in the release, but we 
believe that the language of the rule, which refers only to "management", 
leaves open some debate for business decisions determined by the board of 
directors.  In many companies, the solutions for dealing with ordinary 
business problems are determined by the board of directors, with 
management implementing the plans developed by the board.  Thus, we 
recommend adding the words "or the board of directors" after the word 
"management" in the first sentence in (c)(7).
     
        Discretionary Voting Authority.  Many companies currently include in
their bylaws advance notice provisions that require shareholders to give 
prior notice to the corporation of any business to be brought by the 
shareholder at any meeting.  Most of these provisions, including 
Compaq's, state that unless timely notice is given, the matter may not 
be brought by any shareholder at the meeting.  Thus, unless prohibited 
by state law, companies can avoid any Rule 14a-4 proposals by moving the 
date for which such notice is to be given to 120 days prior to the date 
on which the corporation first mailed its proxy materials for the prior 
year's annual meeting of shareholders.  In that case, companies would 
not have to make any disclosures under 14a-4(c)(2) because all 
shareholder proposals received prior to the advance notice deadline 
would be treated as 14a-8 proposals and would be governed by those 
rules.
     
        Additionally, we agree with the American Society of Corporate
Secretaries and the American Corporate Counsel Association that Rule 14a-4 
is unfair to companies in that it requires us "to discuss the nature of 
such matter" without the benefit of the Rule 14a-8 rules.  The rule is 
also unclear as to what constitutes "notice" of a matter to be brought by 
a shareholder.  Is a rumor sufficient to require disclosure? Does notice 
need to be received directly from the proponent?  Does it need to be 
written?  How are electronic mail rumblings addressed to non-management 
employees to be treated?  We believe the rules as drafted would be 
confusing to companies attempting to comply because it does not give much 
guidance.
     
        In recognition of the differing interests of companies and shareholders
in this matter, we have tried to balance our overall position on these 
proposed changes.  Once again, we reiterate that we support 
comprehensive changes to the rules and not piecemeal changes which would 
favor one side or the other.  
     
Very truly yours,
     
COMPAQ COMPUTER CORPORATION
     
     
     
By:     /s/ J. David Cabello            
                Senior Vice President, General Counsel 
        and Secretary