From: James McRitchie [mailto:jm@corpgov.net] Sent: Saturday, March 29, 2003 1:10 PM To: chairmanoffice@sec.gov Cc: mzucker@organize.afscme.org; concerne@host16.ipowerweb.com; Anny@cii.org; brees@aflcio.org; mgarland@aflcio.org; plgreen@worldnet.att.net Subject: Citigroup "no action" letter and open ballot petition 4-461 Dear Chairman William H. Donaldson, I urge the Securities and Exchange Commission to overturn the SEC's "no action" letter that allows Citigroup to exclude American Federation of State, County and Municipal Employees' (AFSCME's) binding proposal from its proxy, and similar decisions with respect to proposals submitted by AFSCME to AOL Time Warner Inc., Exxon Mobil Corp., Bank of New York Co., Eastman Kodak Co., and Sears Roebuck & Co. I understand you have received similar requests for reconsideration from the California Public Employees Retirement System (CalPERS), Connecticut Treasurer Denise Nappier, New York City Comptroller William C. Thompson Jr., Michigan Treasurer Jay B. Rising, Keith Johnson, general counsel of the Wisconsin Investment Board, and many others. The SEC should not prohibit a vote to allow a shareholder or groups of shareholders to include director nominees on the company's proxy card. I urge you to take this matter up with the full board of the SEC and to retract the "no action" letters. Boards were created to represent the interests and concerns of shareholders, not management, and should be constructed with this in mind. Even the Conference Board's Blue Ribbon Commission on Public Trust and Private Enterprise (January 2003) acknowledged that investors "have no meaningful way to nominate or elect candidates short of waging a costly proxy contest." William B. Chandler III, Chancellor of the Delaware Court of Chancery, and Leo E. Strine, Jr., Vice Chancellor of the Delaware Court of Chancery, have called for a corporate election system that would "require equal access to the proxy machinery between incumbents and insurgents with significant (e.g., five or ten percent) nominating support...the rhetorical analogy of our system of corporate governance to republican democracy will ring hollow so long as the corporate election process is so tilted towards the self-perpetuation of incumbent directors." ("The New Federalism of American Corporate Governance System," Penn Law and Economics Institute conference on Control and Transactions, 2/8-9/2002). Shareholders are increasingly frustrated by corporate elections that provide no reasonable avenue for input by owners into the selection of directors. Entrenched managers and directors will only improve corporate governance when they can be held personally accountable-through the possibility of being voted out of office and replaced by candidates nominated by shareholders. Ownership-based governance is likely to reduce the corrupting influence of concentrated power and reduce the need for oversight regulators. I also urge the Commission to take up petition 4-461, Request for Rulemaking To Amend Rule 14a-8(i) To Allow Shareholder Proposals To Elect Directors, which addresses the same issue through a revision of the SEC's own regulations. A recent background paper by the $3 trillion Council of Institutional Investors indicated that petition has "re-energized" the "debate over shareholder access to management proxy cards to nominate directors and raise other issues." See Equal Access - What Is It? at http://www.calpers.org/whatshap/calendar/board/invest/200303/Item08d-03.pdf. CalPERS and the Council of Institutional Investors recently endorsed open ballot resolutions. Yet, the SEC has still not taken up the petition in a proposed rulemaking. Patrick McGurn of Institutional Shareholder Services has called an open ballot the "holy grail" of corporate governance. It is also a keystone for those of us seeking a richer, more democratic society. I urge you to take the steps necessary to open the corporate ballot to shareholder nominees in order to unleash the self-regulating power of free markets, and to ensure directors are truly independent and accountable. Sincerely, James McRitchie, Editor CorpGov.Net 9295 Yorkship Court Elk Grove, CA 95758 Tel: 916.691.9722