Sent: Wednesday, December 17, 2003 8:23 PM
Subject: S7-19-03:

                            December 17, 2003

File No. S7-19-03

Dear SEC Secretary Jonathan Katz,

        I was pleased to hear that the SEC is accepting public
comment on proposed rules to permit shareholders to nominate
director candidates.  The SEC staff should be applauded for its
care in administering the proxy rules, particularly since 1970.
It has often taken the needs of shareholders to heart, and in
times when many corporations fail to properly disclose earnings
and stonewall shareholders in other ways, it is nice to know that
the SEC is considering reforming some aspects of the disclosure
process.  Although the advocates of shareholder democracy were
once just a small band of mischief-makers (Lewis Gilbert et al.)
there are now many institutional investors and labor
organizations that have admirably taken up the cause of
shareholder democracy.  The quest for greater participation in
corporate decision-making has once again brought us to an
important group of decisions.

One thing that I found to be true in my dissertation ("The
Securities and Exchange Commission and the Shareholder Proposal
Rule: Agency Administration, Corporate Influence, and Shareholder
Power, 1942-1998") was when proxy rules become too complicated
the SEC staff can be overburden with disputes among shareholders
and issuers.  The proposed rules and discussion surrounding them
is rather complex and the SEC should continue to take care in
adopting rules that will not be too difficult for the staff to
administer.

        Although the discussion is not really on the table, the
SEC might consider allowing shareholders owning 5% of a
corporation (or a group of shareholders owning this amount) to be
entitled to nominate one board candidate to run against
management's candidates.  This will help shareholders put
management on notice that they will not be ignored.  The ability
of shareholders to nominate director candidates should not just
be "tied closely to evidence of ineffectiveness or security
holder dissatisfaction with a company's proxy process."  Since
there are large number of shareholders there will always be some
level of shareholder opposition to management and the board based
on economic performance, long-term incumbency, social behavior of
the corporation, potential conflict of interest of a board
member, etc.  Thus, having a basic level of shareholder democracy
afforded to stockholders via a nomination mechanism is important
regardless of whether the proxy process has "failed to permit
security holder views to be adequately taken into account (,)" in
some particular way.  When there is clear evidence of failure
then shareholders should be allowed to nominate two director
candidates or more depending on the size of the board, and be
able to nominate them with only 1% of shareholders (instead of
5%).

Negative economic performance in itself should not trigger
allowing extra shareholder nominees.  There are some reasons for
poor economic performance (recessions) that are beyond the
control of management.  Delisting, being sanctioned by the SEC,
the NASDAQ, or an exchange, or having management or board
directors indicted on criminal charges (related in some way to
the corporation), or a significant restatement of earnings (>15%)
should all be deemed appropriate criteria for allowing
shareholders to nominate more director candidates.  Furthermore,
there should be a greater number of shareholder nominations
permitted for corporations not adopting a shareholder proposal
that received over 50% of the vote.  While this may involve the
SEC staff in some disputes over whether the board had adopted and
management had implemented the substance of a shareholder's
proposal, the number of shareholder proposals that receive
greater than 50% of the vote are small enough to not overburden
the staff.

Since small filers exist in "the land of the giants," they should
be exempt from proposed rule 14a-11 at least for the time being.
I'll defer to the SEC staff on what constitutes a small filer or
issuer (< 10 million shares?).

Management and the existing board should be prohibited from
electioneering against shareholder nominees (aside from stating
that the nominee was offered by shareholders).

The SEC staff might also consider extending the comment period an
additional 30 days.  With snow falling and the Holidays rapidly
approaching many of us have lots on our minds aside from
corporate governance issues.  This would give the stockholding
public a greater chance to participate.

Sincerely,

Phil Nicholas Jr.

463 Herrington Hill RD

Greenwich, NY 12834

(518) 692-9025