Brad L. Callaway
Student at Texas Tech School of Law
4310 33 St.
Lubbock, TX 79410


Chairman Aurthur Levitt
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington D.C. 20549

Dear Chairman Levitt:

		REPLY TO: AMENDMENTS TO RULES ON 
		      SHAREHOLDER PROPOSALS
		       Release No. 34-39093	


			  Introduction

	I am writing to you in response to your release concerning "Amendments to
Rules on Shareholder Proposals."  I have chosen to use the outline that you
used in your release.  I will address the issues that you have requested
comments on under the applicable section title.  I hope that these comments
are of some help to you during your redrafting process.


III. Proposed Amendments

A.	Plain-English, Question & Answer Format


			Plain-English

	The use of the plain-English question and answer format makes this
proposed rule the easiest rule to read yet.  The format for the proposed
rule does away with most of the legalese that can be found in the current
rule. The plain-English trend toward grammar efficiency and common syntax
appears to be a movement that is heading toward the ideal of the informed
investor. The greatest beneficiary of this format will be the average
shareholder. 



		Paragraph A, Section 4

	In paragraph four under section "A" you mention changing the reference to
the "laws of the issuer's domicile" to "the laws of the state of the
company's incorporation." This is a good revision, but the current statute
reads, "the laws of the registrant's domicile."  The words, "issuer's" and
"registrant's" are almost interchangeable, but this is a discrepancy, and
it needs to brought to your attention for whatever it is worth.



		Question # 8, Answer #1

	Under question number eight, answer number one states that a shareholder
or a representative must be qualified under state law:

      (1) Either you, or your representative who is qualified under state
law to present the proposal on your behalf, must attend the meeting to
present the proposal. Whether you attend the meeting yourself or send a
qualified representative to the meeting in your place, you should make sure
that you, or your representative, follow any applicable procedures that are
proper under state law for attending the meeting and/or presenting your
proposal.

	If a company is holding the meeting only via the Internet, then which
state law applies?  Is it the law of the state of incorporation?  Is it the
law of the state form which the shareholder or representative is
logging-on?  Or, is it the law of the state where the broadcaster is
physically present?  Companies will probably not hold their annual meetings
solely via the Internet for quite some time, but it is a question that will
need to be answered some day.


		Question #9, Answer #2

	Under Question number nine, answer number two states that in order to omit
a proposal, a company may rely on a:

     (2) Violation of law: If the proposal would, if implemented, cause the
company to violate any state, federal, or foreign law

	The proposed rule leaves out the phrase that is included in the current
rule, "[W]hich the registrant is subject."  This is a very important phrase
to keep in the rule because it addresses the issue of jurisdiction.  The
way that the proposed rule is written, a company may omit any proposal that
would violate any state, federal, or foreign law.  There probably would not
be any problems omitting provisions that violate state and federal laws,
but a problem might arise when dealing with foreign laws.  The way the
proposed rule reads now, a company could omit a proposal that conflicted
with any foreign law.  

	Suppose a company is not conducting business in China, and that China has
a law that forbids cumulative voting.  The way that the rule has been
proposed, the company could omit a shareholder proposal that called for
cumulative voting because it violates a foreign law.  

	The proposed rule could be changed to read:

(2) Violation of law: If the proposal would, if implemented, cause the
company to violate any state, federal, or foreign law that the company is
subject to; or

(2) Violation of law: If the proposal would, if implemented, cause the
company to violate any state, federal, or foreign law that the company is
under the jurisdiction of;

	If the proposed rule is revised to incorporate this above change, then the
fact patten suggested above will never occur.  Also, this revision will
take out the loophole that companies could use to attach any foreign law
that caters to their interests.



		Question #10, Answer # 2(i)

	Question number ten, answer number two (i) states that a shareholder must
provide:

     (i) A written statement from each of your supporters stating his or
her support for the inclusion of your proposal in the company's proxy
materials for a specific meeting of shareholders. The written statement
must be executed and dated as of a date no earlier than the date of the
company's annual meeting for the previous year. If the company did not hold
a meeting the year before, the statement must be dated no more than one
year before the scheduled date of the meeting for which the proposal is
submitted 

	The language in the second sentence, "as of a date" is not necessary to
convey the meaning of the sentence. The phrase is repetitive, and the
sentence would be more clear if it read:

     The written statement must be executed and dated no earlier than the
date of the company's annual meeting for the previous year.

	The sentence is also unclear as to its application to special meetings.
Is the cutoff date the same (a date no earlier than the date of the
company's annual meeting for the previous year) for proposals for "special
meetings" as it is for annual meetings? 



		Question #10, Answer #2(ii)

	Question number ten, answer number two (ii) requires the shareholder to
provide:

     (ii) A written statement from the record holder of each supporter's
shares, specifying the number of shares that the supporter held as of the
date of the statement described in paragraph (j)(2)(i) of this section. It
is your obligation to collect this evidence from your supporters, and to
present it to the company in an organized, understandable form. You must
provide the company with copies of the evidence by the due date for
submitting a proposal. 

	The last sentence in this section mentions providing "copies" to the
company of the evidence.  This sentence does not mention how many copies of
the evidence the shareholder must provide.  In the answer to question
number thirteen the proposed rule mentions an exact number of copies that
must be sent to the parties involved. Why didn't you choose to specify the
number of copies that must be sent in this section?  Should only one copy
of all of the evidence be sent to the company?  Or, should more copies be
sent to the companies?  If only one copy is supposed to be sent, then the
sentence could be revised to read:

     You must provide the company with one copy of all your evidence by the
due date for submitting a proposal. 

	If you would like more than one copy to be sent, the words "one copy"
could easily be changed to suit how may copies that you want the
shareholder to send.  For example:

     You must provide the company with six copies of all your evidence by
the due date for submitting a proposal. 



		Question #11

	The answer to question number eleven currently reads:

     At each company, you may support no more than one proposal sponsored
by other shareholders under the "override" mechanism described in the
answer to Question 10 of this section. Of course, this does not affect your
ability to sponsor your own proposal. If the proposal is your own proposal,
then it does not count against that limit. 

The drafters of this provision left out the word "meeting" in the
introductory clause.  It should read:

     At each company meeting, you may support no more than one proposal
sponsored by other shareholders under the "override" mechanism described in
the answer to Question 10 of this section. Of course, this does not affect
your ability to sponsor your own proposal. If the proposal is your own
proposal, then it does not count against that limit. 

	Also, does it make sense for a shareholder to be able to support two
provisions when most shareholders may only support one?  Why would you
allow shareholders that sponsor their own proposal to support an additional
proposal?  Why not just count the shareholder's own proposal against their
limit?




B. Personal Claim or Grievance Exclusion: Rule 14a-8(c)(4)

	  Since the purpose of Rule 14a-8 is to further the interest of the
security holders at large the ability to present a proposal that contains a
personal grievance goes against the very intent of this rule.  Corporations
and corporate secretaries have voiced their concerns over the abuse of this
process by labor unions.  "Corporate secretaries . . . feel that the
shareholder resolution can be abused by a holder who has an agenda other
than that presented on the face of a proposal.  Labor union proponents are
particularly suspect in the eyes of some companies."

	However, the proposed rule this contingency is remedied through the
company's ability to omit a proposal if it can be demonstrated that there
is a personal grievance underlying it.  This mechanism provides an adequate
check for the company, and it takes the Commission's role completely out of
the process.  The movement by the Commission to take itself out of the
process is a prudent one.

	Unfortunately, this proposal might allow for potential abuses by the
companies.  Under the proposed rule the company has a way to omit proposals
that carry a personal grievance, but do the shareholders have any
protection when a company does not exercise this omission in good faith?
The question that immediately comes into mind is:  What kind of grievance
process does a shareholder have to go through to protest the company's use
of the omission?

	It seems that the shareholder would have to turn to the courts to make a
determination.  A hypothetical fact scenario might go something like this:

     	A labor union, which is renegotiating their members contracts, files
a shareholder proposal that is neutral on its face with ABC Corporation.
ABC corporation determines that this is a facially neutral proposal, but
thinks that it is submitted by the labor union to be used as a bargaining
chip in their negotiations.  The company believes that they possess
adequate factual records to determine that this proposal was submitted as a
personal interest by the labor union. So, ABC elects to omit the proposal
on these grounds, and informs the labor union of their decision.  The labor
union believes that their proposal is valid and has not been filed because
of a personal grievance.  So, the labor union is forced to file a complaint
in State or Federal Court to compel ABC to put this proposal on their proxy
card.  Then the State or Federal Court must make a determination based on
their findings of fact.  

	As you can see, the  proposed rule shifts the determination from the
Commission to the State or Federal Courts.  This is an important new step
in the process because if a shareholder is forced to take their claim into
court, then the court will determine who is truly behind the proposal.
Kenneth A. Bertsch gives the following example, "[C]ompanies may omit
proposals from union members, who as individuals are unlikely to go to
court without outside support.  If a union provides such support, it may
complicate the proponent's case, by suggesting that the union is the true
actor."  This new step of including the courts in the process will shed a
little sunlight on the true intentions of the shareholders.

	Any potential abuses of the omission provision in Rule 14 a-8(c)(4) will
be rectified if a shareholder decides to bring a claim in State of Federal
Court.  This new provision streamlines the proposal process by completely
taking the Commission out of it.



C.	Rule 14a-8(c)(5): The "Relevance" Exclusion

	The idea of a purely economic test is a good one, but the $10 million
threshold seems too arbitrary.   It almost goes without saying that $10
million is a significant amount for any company.  Ask any chairperson
sitting on the board of directors of a company if they want to talk about
possibly gaining or losing $10 million and 9 out of 10 of them would say
yes.  I think the same person in the fact pattern above would have the same
response if the amount were $9 million, $8 million, or even $7 million.
The point that I am trying to make is that $10 million is an arbitrary
amount to apply to all companies that at least reach that threshold.
Wouldn't the 3% test act as a better indicator of economic relevance to
each particular company?

	The 3% is also an arbitrary amount that would not stand up to the board of
director fact pattern above if it were replaced with 4% or 5%.  However, if
the threshold for all companies was 3% of a company's gross revenues or
total assets, it would factor in a relative reference point of how a
proposal relates economically to each individual company.  

	A company like General Motors for example, has an operating budget larger
than most small countries' budgets.  Does it make since to apply the $10
million threshold to a company like General Motors when it would be a
fraction of 1% of their gross revenues or total assets?  No.  It would be
more prudent to institute a threshold of 3%, 4%, or 5% because any one of
these percentages would be a better indicator of economic relevance to each
individual company.



D.	The Interpretation of rule 14a-8(c)(7): The 	"Ordinary Business" Exclusion

	First, it is very important for shareholders to be able to voice their
concerns about how a corporation's management is affecting social issues.
Debate about how a corporation is conducting their business is essential
for a healthy corporate community.  The proposed rule voices this concern
and attempts to address it head on.

	The only issue of concern revolves around the phrase "significant social
issues."  The Commission even admits in section "D" of the proposal that it
has had to reverse its position on several different issues such as plant
closings, manufacturing tobacco products, executive compensation, and
golden parachutes.  My concern is that the Commission will be deciding what
"significant social issues" are in relation to management functions.  

	It is not a good idea to let the Commission determine on a case by case
basis what are "significant social issues."  This type of subjective
determination is just too arbitrary and capricious.   Although debate about
how a corporation is conducting their business is essential to a healthy
corporate community, a case by case determination by the Commission is not
a good alternative to the current policy.  The Commission should not
reverse its policy on Cracker Barrel.

	Debate concerning how a corporation is affecting social issues is
important, but the proper forum for this speech is not on a proxy card.
Let shareholders and other concerned groups speak against corporate
practices, but let them do it in the "New York Times" editorial section or
on "Nightline" with Ted Koppel.  Let them march four-abreast to the proper
legislature and make their social concerns heard there, but not by means of
proxy.  Let debate concerning these matters take place in informal
discussions with management outside the proxy process.   Social issues are
important, but the proper forum for addressing these issues is not on a
company's proxy card. 

	RJR Nabisco made the following statement in response to a questionnaire
sent out by the SEC, "Allowing anti-tobacco activists to use SEC rules for
this purpose [to address social issues] does nothing to protect and inform
individual investors or to foster management responsiveness.  Proposals
should reflect the concerns of shareholders as investors, not as social or
political activists."

	On the other end of shareholder proposal movement are activists such as
Evelyn Davis who says, "Are the corporations so afraid of me, a 67-year-old
leftover from WWII?"  It would be difficult to speak on behalf of all
corporations, but the answer to her question is probably yes.  The word to
describe the way corporations feel about Ms. Davis may not be "afraid," but
more like "annoyed."   Annoyed because they will have to put on their proxy
cards proposals that foster little support, and have little relevance to
management functions.  To be fair to Ms. Davis, she has in the past
suggested many worthwhile proposals.   However, if the policy on Cracker
Barrel is reversed, it is possible that this will open the door up for
social proposals from Ms. Davis and others that do nothing to foster
shareholder responsiveness, but instead draw marginal support and slow the
proxy process. 

	Shareholder reform has been very important to the growth of corporate
governance over the years.   For example, shareholder reform has led to
such worthwhile proposals as the restructuring of "poison pill" bylaws that
corporations adopted in the 1980's.  Also, shareholder reform has proposed
resolutions to repeal classified boards.  These types of issues deserve
merit because of their direct connection to corporate governance.  This
merit is evident by the number of shareholders that support these positions.  
	
	However, there are some proposals that only gain marginal support that are
clogging up companies' proxy cards.  RJR Nabisco said in their reply to a
questionnaire given by the SEC that, "The company seeks to exclude some
proposals because we receive too many.  For example, 17 of the 45 pages of
text of the 1997 proxy statement are consumed by shareholder proposals,
which for the most part draw only marginal support." 

	The time and the money spent on these proposals should discourage the
Commission from broadening the forum of shareholder proposals to include
employment related social issues.  Already the range of time and money that
companies spend on the existing proposals is staggering.  The Investor
Responsibility Research Center had this to say:

     	"Although almost all of the companies we looked at said they do not
include more than about three shareholder proposals in their proxy
statements each year, the amount of time and money that they said they
spend dealing with the proposals submitted by shareholders varied
dramatically, ranging from $1,000 to $100,000 and from four hours to 366
hours."

	Shareholder reform is important.  Debate about how corporations affect
social issues is important.  Still, the proposed rule should not extend the
debate about employment related social issues to shareholder proposals.
The policy behind Cracker Barrel should not be reversed.




E.	Rule 14a-8(c)(12): The Resubmission Thresholds

	Unfortunately, my opinion on Cracker Barrel is probably not the popular
one at the moment.  The Commission will most likely reverse its stance on
Cracker Barrel, so it is a good thing that they have proposed making the
resubmission thresholds higher.

	Raising the resubmission thresholds acts as a counter balance to reversing
the Cracker Barrel decision.  With the reversal of Cracker Barrel, there
will be an increased number of proposals that companies will feel are of
little or no relevance to their businesses.  By increasing the resubmission
thresholds companies can "weed out" the proposals that do not have adequate
support of their shareholders.  Although this seems to be a quid pro quo
for reversing Cracker Barrel, it will benefit to the shareholder proposal
process.




F.	Proposed Override Mechanism

	Although I do not like to admit it, the override mechanism is a good idea.
 I say that I do not like to admit it because I usually side with the
corporate view of what should and shouldn't be included in this rule.
However, this override mechanism allows for shareholders to voice their
support of a proposal without unnecessarily burdening the companies.  The
burden of proof in this override mechanism is on the shareholder and not
the company.  The shareholder must prove that there is support for their
proposal before it is put on the proxy card.  This makes the proposal
system more efficient because the company is not burdened with any more
work other than responding to this override evidence.

	It is important to look at the size of the company when addressing the
issue of a shareholder using their own shares to count in the 3% override.
This issue will probably not arise in large companies as much as it will in
small companies because there are more shareholders that own 3% of the
shares of small companies than there are shareholders that own 3% of the
larger ones.  Since this is the case, if a shareholder is able to use their
own shares to count toward their 3%, then the potential for abuse will
affect more small companies than large ones.  This is probably not what the
Commission intended to happen when it proposed the rule.  One way to hamper
this potential for abuse is to not count the proposer's shares.  This will
help smaller companies because a shareholder would have to get at least one
other shareholder to support their override. 

	Alternatively, if the Commission decides to allow a single shareholder's
shares to count toward the 3%, then instituting a requirement for how long
that the shareholder has held the shares should apply.  Since the burden to
prove support for the shareholders is so high, this high standard should
carry over to the time requirement as well.  All of the supporters of an
override should be required to have owned their shares for at least two
years. Although this time limit may seem high, it will help prevent any
potential abuses of the proposal process.  This time limit will work by
preventing special interest groups or individuals from purchasing stock for
a short length of time only to institute their own special interests. 



(Sections G. - I. of the release  are beyond the scope of this reply.)


		Conclusion

	For the most part, the proposed amendments, if passed, will produce a more
efficient system for the shareholder proposal process.  Also, the
plain-English question and answer format will make Rule 14 a-8 easier to
understand to the average investor.  One concern I have about the proposed
rules is that companies will be overly burdened with proposals that will be
of little or no relevance to them because of the reversal in policy on
Cracker Barrel.  However, the other safeguards proposed in this release
will provide adequate protection for companies to screen out  irrelevant
proposals that gain only marginal support.  I support the package of
proposed rules.

Thank you for the opportunity to respond to your proposed amendments.  

Sincerely,

/s/ Brad L. Callaway

Brad L. Callaway
Student at Texas Tech School of Law

You may contact me by any of the following means:

Home Address:
4310 33rd St. 
Lubbock, Texas
79410

Email Address:
xyblc@ttacs.ttu.edu