From: Peter Herman [PHerman@DomailleEngineering.com]
Sent: Tuesday, June 03, 2003 3:52 PM
To: 'rule-comments@sec.gov'
Subject: (NYSE 2002-33 and NASD 2002-141) Corporate Governance rule
changes

As a former 16b officer in a company that suffered significant stock price
declines as a result of management actions, I have comments for the
impending rule changes.

First about myself. I rose to the level of EVP in a $700M US company. After
several years, I resigned because of internal management issues that
resulted in a 2 day stock price decline of over 80% 1 quarter after I left.
This event was, in my view, predictable. I know some board members could see
it coming. I know some members of management could see it coming. The
difficulty was translating insight into specific, unpopular, actions. While
it was understood that a problem was likely but not definite, there was no
compelling reason for the board to act......as a body or as individuals.
It's easier to watch failure as a group than it is to take an unpopular
action as an individual. Ultimately, board members do have to act
individually to get a majority built.

As a result I believe the following should be considered:

Getting a board to act as a body is difficult because most do not interact
on a regular basis. Therefore, many member of a board have no idea what
other members are thinking and, therefore, will keep controversial ideas to
themselves. Therefore, the Chairman is a critical role. As such, having a
Chairman as an active member of the management team should be discouraged.
Discouraged by increasing the personal, legal accountability of the
individual and the company if the Chairman is a member of the management
team.

Directors do not feel individually accountable for "lack of action". That is
to say that many difficulties arise from inaction, not improper action.
Until there is personal accountability for each board member to act, it will
be too easy to let management proceed and see what happens. It's very
difficult to force a typical board to act on an unpopular or uncomfortable
topic....ie. remove an incompetent or destructive member of management
protected by the CEO or even removal of the CEO. Therefore, defining
responsibilities of board members to act when shareholder value is at risk
is important. This must be accompanied by legal accountability of the
individual if no action is initiated.

Directors need to feel pressure from legal threats other than the obvious
"ambulance chaser" law firms that pursue troubled companies. The
investigation tactics are repugnant to most sensible shareholders and,
therefore, only the most flagrant violations of law stand a change of
maintaining a "class action lawsuit". Board members know this and view most
"shareholder lawsuits" as a distraction and rarely are they seen as
credible. Shareholders need a vehicle to pursue Management and Directors
other than individual law firms. It's also too difficult to get individual
shareholders together with investing institutions who hold most of the
voting power. Investment institutions make poor legal partners and they are
more interested in turning a troubled stock into an acquisition than fixing
the company.

The CEO should not play a role in the selection committee of board members.

There must be a majority of outside board members on the board. They must
meet every board meeting to review performance WITHOUT any members of
management present including the board secretary.

Investment institutions should be barred from having board seats in
companies they have investments in.

Peter M. Herman
CEO
Domaille Engineering, LLC
(507) 281-0275
Cell (507) 261-4226