December 9, 1997
     
     
                              

U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549
     
     Re:  Request for Comments on Amendments To Rules
          On Shareholder Proposals, Securities Exchange
          Act Release No. 39093
          (September 18, 1997), File No. S7-25-97.
     
     Attn.:  Jonathan G. Katz
             Secretary

Ladies and Gentlemen:

The Business Roundtable is pleased to submit this response
to the recent release by the Securities and Exchange
Commission (62 FR 50682, September 26, 1997; the "Release")
requesting comments on proposed amendments to Rule 14a-8 and
related rules governing the process by which shareholders
can submit proposals to be included in a company's proxy
materials.1

The Business Roundtable recognizes the importance of the
shareholder proposal process to excellence in corporate
governance in the United States.  As we observed in our
Statement on Corporate Governance published in September,
annual meetings of shareholders provide an important forum
for communication between management and shareholders and
among shareholders themselves.  The consideration of both
management and shareholder proposals, however, takes place
largely through the proxy process, which gives all
shareholders, rather than only those who attend the meeting,
a chance to consider relevant matters.  Matters brought to
shareholder attention through the proxy statement should be
matters of significance to the business of the company and
to stockholders as a whole.  Other matters, such as those
relating to personal grievances or political and social
issues that will not have a material effect upon the
company, are more appropriately discussed in other forums.

A key element of the Commission's rules addresses the bases
on which a company may exclude shareholder proposals from
the company's proxy statement.  It is important to note that
the rationale for the exclusionary rule is to provide an
orderly gatekeeping process to balance the interests of all
shareholders from the claims by some that they have a right
to command the resources of the company and the time and
attention of all shareholders. The inclusion of proposals of
little or no significance not only involves additional
publication and dissemination expense, but often diverts
attention from matters more relevant to the overwhelming
majority of shareholders.  Many companies have seen the
value of their annual meetings substantially diminished by
shareholders who seek to dominate meetings to promote
discussion of proposals that are of minimal interest to most
shareholders.  The net effect is that all shareholders are
often asked to underwrite the direct and indirect costs
associated with the interests of a small but organized and
insistent few.  For this reason, it is essential to the
proxy statement and annual meeting process that the goal of
open discussion be tempered by judicious consideration of
materiality.

The Commission's plain-English initiatives, which we
applaud, implicitly recognize that shareholders have limited
time to spend on their decision-making efforts. The right to
command a portion of this limited resource is and should
itself be limited.  Placing before shareholders too many
voting decisions on matters that do not have a significant
impact on the value of their investment carries the risks of
reducing attention devoted to more material issues, creating
shareholder apathy about voting, or causing investors to
delegate voting responsibility to others, thereby breaking
the link between voting and pursuit of economic returns.
That this may already be happening is suggested by the
growth of services that advise institutions on proxy voting
policies, sell pre-packaged voting guidelines, and vote on
behalf of some clients.

The Business Roundtable commends the Commission on its
efforts to craft a package that balances the needs of the
various participants in the shareholder proposal process and
on its efforts to engage all interested constituencies in a
dialogue on this process.  We specifically commend the
Commission for retaining an approach that, with the
exception of the "override" proposal, generally preserves
the existing framework of proxy rules and the Commission's
important role as an arbiter in that process.

The Business Roundtable endorses in principle the package
presented in the Release.  We believe that the proposed
changes, as a whole, will increase shareholder access to
companies' proxy statements and that such right will be
balanced by the obligation to achieve higher levels of
shareholder support or be eliminated from future proxy
statements under the proposed increased resubmission
standards.  However, we wish to emphasize our view that, in
certain important respects, the proposals as currently
drafted would work to the detriment of companies and their
shareholders and should be modified in order to preserve the
integrity of the process under the new rules.

In summary, we note the following:

    We believe it is critically important to raise the
  resubmission thresholds substantially, as proposed in the
  Release, as a means of culling proposals that have been
  rejected by overwhelming percentages of shareholders.
  Without this element, the package as a whole would be
  substantially unbalanced.

    We see some theoretical appeal to the concept that
  endorsement by a material percentage of a company's
  outstanding shares might well be a basis for inclusion in
  the company's proxy statement of a proposal that would
  otherwise be excluded under the ordinary business or
  materiality exclusions.  However, unlike other elements of
  the proposed package, this provision is completely new, and
  in its current form is unworkable.

    We can accept the Commission's proposal to reverse
  Cracker Barrel as an element of a comprehensive package of
  amendments that also address interests of the issuer and the
  entire shareholder community.  No action should be taken on
  Cracker Barrel except as part of a balanced package.

    The proposed changes to the rule governing
  discretionary voting of proxies impose unwarranted new
  burdens on companies, giving greater weight than ever before
  to proposals submitted outside the framework of the proxy
  statement.  The result is likely to encourage the submission
  of proposals outside of such framework to the detriment of
  the shareholder community as a whole.

    On other matters, we support the Commission's proposed
  changes to the rules governing exclusion of proposals
  motivated by personal grievances (Rule 14a-8(c)(4)), but we
  also note that the existing rule provides a useful fact-
  finding mechanism, with the SEC acting as arbiter.  On the
  proposed amendment to the rule that now permits companies to
  exclude proposals on the grounds of relevance (Rule 14a-
  8(c)(5)), we believe the standard for exclusion should be
  based on a percentage test uniformly applied to all
  companies. We also support the Commission's proposal to
  retain the minimum-shareholding requirement for shareholders
  wishing to submit proposals, but believe that the minimum
  holding should be substantially larger than as proposed by
  the Commission.

We note in the conclusion some further views based on
current public discussion of the proposals.
                              
                   RESUBMISSION THRESHOLDS

The Business Roundtable supports the Commission's proposal
to raise the resubmission thresholds from the current levels
of 3%, 6% and 10%.  Resubmission standards serve the
important function of culling from the proxy statement those
proposals that, after they have had a fair opportunity for
consideration by all shareholders, have been rejected by
overwhelming percentages of shareholders.  Permitting
exclusion after testing through the voting process thus
respects the rights of all shareholders:  those opposed to -
- as well as those favoring -- the proposals in question.

We expect that the Commission's proposed changes to the
shareholder proposal rules, if adopted, will increase
shareholder access to companies' proxy statements and result
in a greater number of shareholder proposals admitted to a
company's proxy statement.  It thus becomes even more
important to remove those proposals that have not mustered a
sufficient degree of support after having exposure to
shareholders through the proxy statement and voting process.
Also, we believe that a substantially higher resubmission
level is essential in light of the proposed new "override"
provision.  A shareholder who achieves access to a company's
proxy materials should be required to win an even larger
percentage of the vote at the meeting in order to be
eligible for future access.  Therefore, while we believe the
proposed 15% and 30% thresholds are appropriate for the
second and third years, respectively, we believe it would be
better to increase the threshold applicable to the first
year's vote from the Commission's proposed 6% to 10%.

We believe that without the Release's proposed increases in
the resubmission thresholds, the package as a whole would be
substantially unbalanced.
                              
                    "OVERRIDE" PROVISION

In the context of the present package, with a large increase
in the resubmission thresholds, The Business Roundtable
would see some theoretical appeal to the concept that
endorsement by a material percentage of a company's
outstanding shares might well be a basis for inclusion of
proposals that would otherwise be excluded under the
ordinary business or materiality exclusions.  To be
acceptable to the business community, however, the
endorsement percentage could not be less than 5%, the
mechanics of the process require very substantial revision
to make them workable, and there should be a corresponding
benefit to corporations and their shareholders for
undertaking the burden likely to be imposed by this process.

Neither companies, nor shareholders, nor the Commission have
had experience working with this concept.  This makes
imperative careful implementation with full consideration of
its details and potential problems.  In general, it should
serve as a safety valve for the inclusion of proposals that
would otherwise be omitted, but proposals admitted under
this new concept should be the exception rather than the
rule.

The provisions of the rule need to assure the integrity of
the process by which the "override" is achieved, while at
the same time not distorting the existing processes to
accommodate this exceptional mechanism. The need for further
study of this prominent building block of the Commission's
proposal underscores the wisdom of not adopting the reform
package for the 1998 proxy season.

The proposal in its current form has numerous structural
problems that may result in conflicts over interpretation of
the rules, substantial abuse by proponents who try to "game"
the new system and, in effect, conduct multiple shareholder
solicitations in the guise of assembling endorsements for a
proposal, or the inclusion of proposals supported by persons
who are not shareholders at the time of the company's
meeting.  Our concerns are noted below:

    The percentage required should be uniform for all
  companies and set at not less than 5%.
  
      The purpose of a business enterprise is to generate
     economic returns to its owners.  Because of this,
     corporation law recognizes that shareholders receive votes
     in proportion to the number of shares they hold, which is in
     proportion to their economic interest, rather than each
     shareholder receiving one vote.  Consequently, it is
     appropriate that an ownership percentage be the relevant
     standard and that it be set at a significant level.  The
     proposed 3% threshold is too low a standard, and a more
     appropriate standard would be 5% to 10%, which is a  more
     commonly recognized standard of materiality.  Likewise, it
     should not suffice that a certain number of shareholders
     seek inclusion of a proposal, regardless of their percentage
     ownership.

    Use of the "override" should be limited to proposals
  that recommend but do not require action by the company.
  
      The "override" is relevant only in those circumstances
     where both the company and the Commission would otherwise
     agree that the proposal is immaterial or deals with matters
     of ordinary business. Because of this limited role, the
     "override" should apply only to proposals that recommend
     action by the company or the Board of Directors and do not
     purport to compel any corporate action.

    Shareholders should be allowed either to propose or
  endorse only one proposal per company in each proxy season.
  
      Although the Release has been structured to permit a
     shareholder to endorse a proposal without indicating whether
     the shareholder intends to vote for it, requiring each
     shareholder to choose only one proposal to back furthers the
     important goal of bringing to a vote only those matters
     which are truly significant to shareholders.  Without such a
     limitation there will be a strong possibility that
     shareholders will engage in reciprocal endorsement
     arrangements to assure that they receive support for
     inclusion of a proposal when they seek it.

    Shareholders should be required to choose either to
  seek the requisite percentage endorsement or to seek
  inclusion on grounds independent of the "override", but
  should not be permitted to pursue both avenues within the
  same proxy season.
  
      We believe the system would be more equitable and
     efficient if proponents who decide to seek inclusion of
     their proposal in a company's proxy statement on grounds
     independent of the "override" are limited to that avenue of
     access for that proxy season.  If the company determines to
     exclude the proposal and the Commission's Staff issues a no-
     action letter, the shareholder will be free to conduct an
     "override" solicitation in the following proxy season.
     Alternatively, a shareholder would be free to submit
     evidence of the required endorsement in lieu of seeking a
     decision by either the company or the Commission as to the
     applicability of either the ordinary business or the
     materiality exclusions.  One might refer to this as an
     "endorsement" mechanism rather than an "override" mechanism.
     Restructuring the proposal in this way would make this
     approach analogous to the Commission's rules which permit
     exempt communications or proxy solicitations by
     shareholders, but not both in the same relevant proxy
     season.  In contrast, the proposed mechanics will
     unnecessarily tax the amount of Commission and issuer
     resources devoted to a single shareholder request within a
     single year.
  
      The proposed 40 day response time distorts the entire
     proxy process to accommodate a method for submitting
     proposals that should be the exception rather than the rule.
     If a shareholder were to submit a proposal just after the
     conclusion of a company's annual meeting for consideration
     at the company's next annual meeting, the company would be
     required to take a position on exclusion with respect to the
     proposal many months earlier than now required.
  
      The imposition of a short response time will discourage
     discussion with proponents because it will become necessary
     for companies to object formally to proposals rather than
     risk losing their rights by the passage of time.  The
     result, we believe, is likely to cause companies to seek to
     exclude more proposals than they might otherwise if they had
     the opportunity to discuss alternatives with the proponent.
  
      If the Commission adopts a revised schedule for
     submission of earlier responses by companies, a company
     should nevertheless be permitted to utilize the existing
     time frames for excluding a proposal on the basis of
     mootness.  There would be no point in having a matter that
     is moot go forward for a vote.

    The mechanics of the endorsement process undermine its
  integrity.
  
      The required endorsement percentage should be
     maintained through the record date of the shareholder
     meeting.  The Release would allow proponents to solicit
     support up to a full year before any vote on the proposal,
     without any assurance that the endorsers will continue to be
     shareholders at the time of the annual meeting.  This rule
     could, for example, be abused by an interest group that
     passed ownership of a share block from one member to another
     with each successive group signing an endorsement during its
     period of ownership.  While this concern might be addressed
     by introducing the concept of a "bona fide" owner, the more
     important point is that the lack of a continuing ownership
     requirement undermines a critical purpose of the rule -- to
     ensure that matters of importance to the company's current
     owners be brought to a vote of the shareholders.  While we
     do not propose that endorsers promise to continue to own the
     shares they hold at the time they give their endorsement, a
     subsequent sale by them should negate their endorsement.
     Endorsers should be required to advise the company if they
     sell their shares prior to the record date of the
     shareholder meeting and companies should have the right to
     require evidence of the necessary ownership as of such date
     as well as of the date the proposal was first submitted.
  
      Outstanding shares should be based on a more current
     date rather than, as proposed, based on the total number of
     shares outstanding for the year before the year for which
     the meeting is held.  The rule as proposed could cause
     proposals to be based on an outstanding share number that
     fails to reflect significant changes in shares outstanding
     as might be caused by mergers or recapitalizations as well
     as more routine transactions.  Outstanding shares could, for
     example, be determined as the number published in the
     company's quarterly report on Form 10-Q most recently filed
     before the date the proposal is submitted to the company.

    The rules should explicitly specify that a proponent
  conducting an "override" solicitation will not have access
  to shareholder lists unless they are otherwise eligible
  under the Commission's rules.
  
      We believe that the rule as proposed does not intend to
     allow shareholders access to shareholder lists or company
     mailings pursuant to the Commission's existing rule
     governing such access (Rule 14a-7), but we urge the
     Commission to make this explicit.  There is no basis to
     grant a federal right to shareholder lists for the limited
     purpose of the "override".  Other effective means exist for
     shareholders to communicate with those who might share their
     interests in the subject matter of the proposals, including
     forums that represent institutional investors, individual
     investors and socially active investors.
  
      If proponents pursuing an "override" were given access
     to shareholder lists under the proxy rules, we would have
     substantial further comments on necessary amendments to the
     procedures governing such access.
                              
                 REVERSAL OF CRACKER BARREL

Cracker Barrel served the useful purpose of establishing a
bright-line test to permit companies  to exclude from proxy
statements shareholder proposals that addressed employment
policies, notwithstanding possible assertions that the issue
in question raised important social policy issues.  The more
general purpose, which we support, was to eliminate
proposals that dealt with matters of ordinary business and
that should not, in the normal course, be the subject of
shareholder vote.  While it is often the case that the
matters raised are very important in their own right, they
are often not appropriate for action by shareholders and are
more properly within the purview of the board of directors
and management.  Because of the nature of some of the
proposals, some companies have chosen to permit the
proposals to go forward even though they would have been
permitted to exclude them under the Cracker Barrel standard.

Because of these factors, we understand the considerations
that would lead to a reversal of Cracker Barrel, but we
emphasize that the relaxation of the Cracker Barrel
position, if implemented without balancing adjustments in
other aspects of the shareholder proposal rules, will tilt
the process unduly toward those shareholders and interest
groups who seek to use the process as a forum for special
interests.  Thus, a reversal of Cracker Barrel should be
effected only as an element of a balanced package of
amendments that also address interests of the issuer and the
entire shareholder community.
                              
               DISCRETIONARY VOTING OF PROXIES

The Commission's proposal to amend the rule governing
discretionary voting of proxies (Rule 14a-4) imposes
substantial new burdens on companies and would encourage
shareholders to submit proposals outside the proxy statement
process.  This is especially disappointing because we
believe the proposed changes were intended to establish
greater certainty for companies with respect to their right
to exercise the discretionary authority normally granted as
part of the proxy process.

As proposed, a company would be deemed to receive timely
notice of a proposal submitted outside the framework of the
proxy statement process if it received the notice at least
45 days (or such date specified by the company's advance
notice by-law) before the date on which the company first
mailed its proxy materials for the prior year's annual
meeting.  This aspect of the proposal, in itself, would add
useful certainty to the definition of timely notice, but we
note that a company would also be required to:

    "Discuss" the nature of any such matter.  Currently,
  under the Commission's Idaho Power no-action letter, it is
  sufficient to "advise" shareholders of the nature of any
  such matter.  While we doubt the Commission intended any
  difference in the resulting disclosure standard, we propose
  for clarity that the language be revised to continue the
  "advise" standard expressed in Idaho Power.

    Add a box to the proxy card enabling shareholders to
  withhold discretionary voting authority with respect to the
  matter.  Currently, a box on the proxy card is required only
  if the proposal is the subject matter of an opposing proxy
  solicitation.  We believe the current standard should be
  continued.

    File their proxy materials in preliminary form with the
  Commission.  Currently, such filing is not required as a
  result of amendments adopted by the Commission in 1992 to
  limit preliminary filings that otherwise unnecessarily add
  to the cost and time burden for companies and the
  Commission.  A company should not be required to file its
  proxy materials in preliminary form with the Commission as a
  result of a shareholder proposal submitted outside the
  framework of the proxy statement process.

Each of the above proposed changes gives greater weight to
proposals submitted outside the framework of the proxy
statement than they have had before.  The result is likely
to encourage the more frequent resort to such proposals to
the detriment of shareholders whose principal source of
information is a company's proxy statement.  Although we
believe the Commission intended the proposed amendments to
address concerns expressed by companies arising from earlier
Commission and judicial interpretations of the discretionary
voting rule, the amendments as currently proposed impose new
administrative burdens on companies and, by encouraging
proposals outside the proxy statement process, work to the
detriment of the shareholder community as a whole.


                              
                        OTHER MATTERS

Personal Grievances

The Commission proposes to amend the rule that now permits
companies to exclude proposals arising from a personal
grievance (Rule 14a-8(c)(4)).  The rule now results in the
Commission Staff acting in a fact-finding mode if a company
asserts that a proposal that is neutral on its face is
motivated by a personal grievance.  The Commission proposes
that Staff would no longer act in a fact-finding mode and
take no position in such circumstances.  If the company
excluded the proposal the company and the proponent would
then have to resolve any differences through the judicial
process.

We support the Commission's proposal as an alternative to
the existing rule. It is appropriate to exclude a proposal
that is neutral on its face when in fact it is motivated by
personal grievance for the same reason courts exclude
plaintiffs who do not have standing to bring a claim: they
waste the resources of the process, and it is likely that if
the matter in question is important, it will be best and
most appropriately presented by those who have a genuine
interest in the outcome.  Thus, we would strongly oppose any
suggestion that facially-neutral proposals be added to a
company's proxy statement without some fact-finding where a
company asserts that a personal grievance is present.  We
believe that the Commission Staff has played a useful role
as arbiter in such circumstances, but we also believe that
companies would act responsibly when seeking to exclude
proposals based on the proposed revised rule, and therefore
support it.

Relevance

The Commission proposes to amend the rule that now permits
companies to exclude proposals on the grounds of
immateriality (Rule 14a-8(c)(5)).  The rule now provides
that a company may exclude a proposal if it fails to meet
both a quantitative and a qualitative test.

First, the rule as proposed would provide that, under the
quantitative test, a company would be permitted to exclude a
proposal relating to a matter involving the purchase or sale
of services or products which represents the lesser of $10
million in gross revenues or total costs or 3% of the
company's gross revenues or total assets.

    We believe that rather than the threshold amount being
  an arbitrary $10 million for large companies, a more
  reasoned approach would be to apply a materiality standard
  based on a percentage test uniformly applied to all.  We
  support the 5% standard in the current rule rather than the
  proposed 3% standard and we support an economic test on
  broader grounds than now proposed.

Second, the Commission proposes to eliminate the qualitative
test that now permits exclusion only if the proposal is not
"otherwise significantly related" to the company's business.
We support elimination of this vague qualitative standard in
the interest of clarity.  If the Commission nevertheless
determines to retain a qualitative standard, we believe it
should be expressed as "is not otherwise material to the
company's business".  This latter standard would more
precisely underscore the requirement that the proposal must
have some relationship to an economic materiality test.

Eligibility to Submit Proposals

Finally, we support the Commission's preservation of the
requirement that in order to be eligible to submit a
proposal, a shareholder must continuously have held for at
least a year by the date of submission of the proposal a
minimum amount of securities entitled to vote at the
meeting, and to continue to hold those securities through
the date of the meeting.  We believe, however, that the
requisite minimum amount of securities should be
substantially higher than as proposed by the Commission.
                              
                         CONCLUSION

The Business Roundtable believes the Commission has
presented a basic framework from which meaningful and
workable changes can be achieved.  However, as noted above,
several aspects require further study in order to ensure
that the new proposals do not exacerbate current problems or
create new ones.

As we comment on the Commission's proposals, we are aware
that certain proponent groups have obtained considerable
publicity for their opposition to particular elements of the
package.  We have sought in our comments to Commission staff
and discussions with proponent groups to be receptive to a
wide variety of issues and concerns.  In the context of the
Commission's proposals, including the proposed resubmission
thresholds of 6%, 15% and 30%, we have considered in an open
manner the application of the "override" concept even though
it is a highly problematic concept.  If the resubmission
thresholds or other important elements of the package are
altered as a result of opposition from proponent groups, the
concept of  the current "package of proposals" will
disappear, and it will be more appropriate to consider each
element of any revised Commission proposal on its own
merits.  In such circumstances, we would oppose the
"override". Moreover, because of the various technical
objections to the mechanics of the override, making the
"override" provision workable and fair might render it so
complex to administer that it would not be worth keeping at
all.

In addition to the comments addressed here, representatives
of The Business Roundtable's Corporate Governance
Coordinating Committee will be pleased to discuss more
detailed suggestions and alternatives with the Commission
staff.  Thank you for this opportunity to comment on these
issues.
                              
                              Sincerely,
                              
                              
                              
                              Walter V. Shipley
                              Chairman & CEO
                              The Chase Manhattan
                              Corporation
                              Chairman, Corporate Governance
                              Task Force
                              The Business Roundtable



cc:  The Honorable Arthur Levitt
     The Honorable Norman S. Johnson
     The Honorable Isaac C. Hunt
     The Honorable Paul R. Carey
     The Honorable Laura Unger



WA972820.163/5+
_______________________________

  1    The Business Roundtable is an association of more
  than 200 chief executive officers of leading U.S.
  corporations employing over 10 million people.  The CEOs
  examine public policy issues that affect the economy and
  develop positions which seek to reflect sound economic
  and social principles.