Subject: S7-25-97 (Proposed Amendments to Rule 14a-8)

Date:    11/16/97 5:45 PM
     
     
Jonathan Katz, Secretary:
     
My name is Michael Mulroy and I am a former securities attorney currently 
working in the investment banking industry.  As the views expressed herein 
are my own and have been neither reviewed nor approved by my employer, I 
choose not to mention its name.
     
I have four comments with respect to Rule Proposal S7-25-97 relating to Rule 
14a-8 (the "Proposed Rules").  While my comments surely lack the thoughtful 
and detailed analysis represented in other comment letters, and may thus be 
afforded less weight in the staff's review, I am nonetheless thankful to have 
the opportunity to submit this comment letter and excited about the prospect 
of submitting this letter over the internet.
     
1. The Q&A Format.  Redrafting the rule in the form of questions and answers 
is neither necessary nor appropriate, but rather is a back-handed support for 
the Commission's "plain english" initiative.  This initiative, while well 
intended, is problematic in that it exposes corporate issuers to conflicting 
standards: one espoused by the SEC, calling for plain under understandable 
language, and one mandated by the bespeaks caution doctrine and the 
plaintiff's bar, requiring an over-inclusive "kitchen sink" approach.  Rather 
than deal with this dilemma head-on, I am fearful that the staff is merely 
attempting to advance it own position in a somewhat adversarial manner.  Such 
a winner takes all mentality, I believe, serves neither the issuers nor the 
investors the SEC was chartered to represent.  I would further note that the 
Chairman's call to remove "gobbleygook" is yet another example of this 
adversarial position.  Hyperbole and rhetoric has never been the SEC's mantra 
and should not be so today.
     
In an era of increasing institutional ownership, it is odd that the SEC feels 
a need for shorter words and awkward usage (aka simple rules).  As the 
dumbening of America continues to accelerate, I call for the SEC to serve as 
beacon in its corner of the nation.  Rules should be clear and 
understandable, carefully crafted and properly worded.  These goals can be 
accomplished by a good draftsperson, without having to turn the Commision's 
rules to a flyer of frequently asked questions (FAQ).
     
2. Economic Significance Test.  Throughout the Proposed Rules, it is clear 
that the SEC is uncomfortable with its position as "arbiter" with respect to 
the inclusion of proposal, especially those of a social nature.  As our 
governors accept decreased responsibility for their actions (see, eg. 
Congress' recent lambasting of the IRS, or its "punt" to the FCC in the 1996 
Telecommunications Act), it perhaps should not be surprise to see the SEC 
running for cover as well.  Purely objective tests are great for those who 
have to administer them, but that's about it.  Picking a number in the 
slippery slope of reason, not allowing any subjective judgment, is like 
recommending blind obedience to an odd rule - reminiscent of King Salomon's 
proposal to cutt the baby in half ("justice" through the terrorizing of two 
defensless women).  Administrative agency or elected body regardless, you are 
our governors, so govern.  Exercise your discretion as best you can, accept 
the kudos and the cat-calls.  You were appointed or hired for your reason and 
perspective - so use them.  Don't hide behind a number.  On its own merits, 
the purely economic test seems to say that a small footwear company better be 
careful while Nike can pillage Indonesia.  I do not understand that 
rationale.
     
3. The 3% Override.  This is appealing should be fine tuned for the small 
investor.  Specifically, if the small investor solicits more than 3%, the 
issuer should pay the cost of solicitation.  Second, its use as a support for 
the purely objective economic test described above, while not misguided, 
shows that the staff is not altogether comfortable with the test in the first 
place.  A good support to a weak foundation surely is not as good as a strong 
foundation.  Finally, the reference to anti-takeover proposals is 
interesting, but not on the mark.  I think proposals can split into two 
categories: social and corporate governance.  Governance proposals should 
always be included regardless, thus obviating the need for an override.
 Social proposals should either be handled by the staff as in the past or, if
the staff is too uncomfortable, through the mechanisms described in the 
Proposed Rules.
     
4. A New Fundamental Approach.  Reiterating my prior comments, if not the 
SEC, then who?  Shareholder proposals are difficult to deal with because the 
attack the very nature and purpose of the corporation (money makers or 
corporate "citizens" with special responsibilities).  Stepping back, I would 
note that a corporation is a legal fiction to afford its owners limited 
liability.  As such, we should ask whether the  slight incremental expense 
represented by the inclusion of shareholder proposals in proxy materials is 
unfair given the benefit of limited liability.   I think the answer is 
obviously no.  Slight restrictions to avoid abuses are a worthy goal but 
should be extremely limited.  I would recommend a "bad boy" provision and a 
limit of three proposals in any proxy.  They could be chosen based on last 
year's or by random draw.  Surely such a system would allow for clear and 
understandable rules, perhaps even without resorting to the Q&A format.
     
Thank you.
     
Michael H. Mulroy
429 1/2 North Gardner Street
Los Angeles, CA 90036
ph 213-651-2517
e-mail mkmul@aol.com