LETTER OF FORTY-EIGHT CORPORATE AND SECURITIES LAW PROFESSORS …

    LETTER OF FORTY-EIGHT CORPORATE AND SECURITIES LAW PROFESSORS
         IN SUPPORT OF INCLUDING PROPOSED BYLAW AMEDNMENTS
                  IN THE COMPANY'S PROXY MATERIALS

                                                                              February 2, 2006

BY MAIL, FACSIMILE, AND EMAIL

Brian G. Cartwright, Esq.
General Counsel
Office of the General Counsel
U.S. Securities and Exchange Commission
100 F Street NE
Washington, D.C. 20459

        RE: Inclusion of Proposed Bylaw Amendments in Company Proxy Statements

        We, the undersigned, are forty-eight law professors from thirty universities around
the country.1 We all teach and/or write about corporate law and securities law. We are
writing (in our individual rather than institutional capacities) to urge the Securities and
Exchange Commission to express its opposition to company exclusion from proxy statements
of shareholder-initiated bylaws concerning corporate elections.

        We are writing in connection with a case now pending at the Second Circuit,
American Federation of State, County & Municipal Employees Pension Plan v. American
International Group, Docket No. 05-2825-cv. The case concerns whether a company may
exclude under SEC Rule 14 a-8 ("the Rule") a shareholder proposal that, if adopted, would
amend the company's bylaws to require the company to place candidates nominated by
shareholders on the company's ballot in certain circumstances. We understand that the Court
recently requested that the Securities and Exchange Commission submit an amicus curiae
expressing the Commission's position on this question.

        In our view, allowing companies to exclude the considered bylaw amendment and
other similar bylaw amendments would greatly undermine the Rule's policy goals and would

1
  The universities with which one or more of us are associated are Berkeley, Boston University,
Brooklyn, Case Western Reserve, Chicago, Columbia, Duke, Emory, Fordham, George Washington,
Georgetown, Hastings, Harvard, Indiana, Maryland, Michigan, Minnesota, NYU, Ohio State, Penn,
San Diego, Stanford, Temple, Texas, UCLA, USC, University of Arizona, Virginia, Wisconsin, and
Yale. Our university affiliations are listed below for identification purposes; we do not represent or
speak for our institutions.
                                                  1
adversely affect our corporate governance system. We also believe that a reasonable
interpretation of the Rule should not allow the exclusion of such proposals. We therefore
urge the Commission to communicate to the Second Circuit its opposition to excluding the
considered shareholder proposal.

       There is substantial disagreement among us concerning the substantive merits of the
considered bylaw amendment and shareholder access to the proxy in general. We are
unanimous, however, in our strong belief that shareholders should be allowed to make a
decision on this subject by themselves, and that companies should not be allowed to make the
decision for them by excluding proposed bylaw amendments.

        One of the basic elements of the corporate structure created by state law is
shareholders' power to adopt bylaw amendments including amendments concerning director
elections. Forcing shareholders who consider initiating such a bylaw amendment to bear the
costs of obtaining proxies from other shareholders would greatly impede the initiation of
such proposals. Thus, if companies would be permitted to exclude bylaw amendments
concerning election procedures that are valid under state law, shareholders' power under
state law to initiate such amendments would become largely irrelevant. Permitting such
exclusion thus would undermine the Rule's goal of ensuring that shareholders are able to
communicate with other shareholders on matters of significant importance.

        Furthermore, there is a widely held view that "one size does not fit all" and that
companies should be allowed to tailor some governance arrangements to their particular
needs and circumstances. Blocking shareholder-initiated bylaw amendments concerning
election procedures would greatly undermine private ordering in this important area.

        Exclusion of the considered proposal is not required by a reasonable interpretation of
the provision that permits exclusion of a proposal that "relates to an election" for board
membership. This provision should be understood as permitting the exclusion of proposals
that relate to a particular election over particular candidates, which are proposals for which it
might be necessary to have detailed disclosures in a separate proxy statement. This provision
should not be understood as permitting the exclusion of governance provisions that do not
relate to any particular election but rather to the procedural rules to which all future elections
would be subject. Such proposals do not require a different type of disclosure from those
accompanying proposed bylaw amendments that relate to other aspects of the company's
governance.

        Interpreting the Rule to allow exclusion of proposals that "may result in contested
elections," as was suggested in some no-action letters, would impose an outside preference
against some governance arrangements permitted under state law. Such an interpretation also
                                                2
  would be inconsistent with the long-standing practice of allowing shareholders to include in
  companies' proxy materials various proposals that may make contested elections more likely.
  For example, shareholders have long been permitted to include proposals to de-stagger the
  board or introduce cumulative voting. There is no reason to exclude proposals that make
  contested elections more likely by providing proxy access while permitting proposals that
  make such elections more likely by introducing annual elections or cumulative voting.

          Indeed, an interpretation that would exclude proposals that would make contested
  elections more likely would have the following problematic consequence. While such
  interpretation would not permit shareholders to include in companies' proxy materials a
  proposal to provide proxy access, it would permit shareholders to include a proposal to
  eliminate proxy access in the event a company already has a bylaw providing proxy access;
  the latter would make contested elections less, rather than more, likely. This consequence
  highlights that excluding the considered bylaw amendment would not advance the goals of
  the proxy rules; instead, it would serve a policy, which the proxy rules are not intended to
  advance, of preventing governance structures that facilitate contested elections.2

         In case we could be useful in any way to the deliberations of the staff or the
  Commission on this question, please contact Lucian Bebchuk at (617)-876-6071 or by writing
  to bebchuk@law.harvard.edu or 1545 Mass. Ave., Cambridge, MA 02138.


                                 Sincerely yours,

Jennifer H. Arlen                                          Ehud Kamar
Norma Z. Paige Professor of Law                            Associate Professor of Law
New York University School of Law                          Southern California Law Center

Ian Ayres                                                  Vikramaditya S. Khanna
William K. Townsend Professor of Law                       Professor of Law
Yale Law School                                            University of Michigan Law School

Michal Barzuza                                             Reinier H. Kraakman
Associate Professor of Law                                 Ezra Ripley Thayer Professor of Law
University of Virginia School of Law                       Harvard Law School

Lucian Arye Bebchuk                                        Donald C. Langevoort
William J. Friedman and Alicia Townsend                    Thomas Aquinas Reynolds Professor of Law
Friedman Professor of Law, Economics & Finance             Georgetown University
Harvard Law School


  2
    Further elaboration of some of the points discussed in this letter can be found in the Harvard Law
  School Professors' brief, submitted by several of us, which was attached to the Second Circuit's
  letter.
                                                   3
Laura N. Beny                                   Louis Lowenstein
Assistant Professor of Law                      Simon H. Rifkind Professor Emeritus of
University of Michigan Law School               Finance & Law
                                                Columbia Law School
Lisa E. Bernstein
Wilson-Dickson Professor of Law                 Paul G. Mahoney
University of Chicago Law School                Brokaw Professor of Corporate Law &
                                                Albert C. BeVier Research Professor
Bernard S. Black                                University of Virginia School of Law
Professor of Law
Hayden W. Head Regents Chair for                Steven G. Marks
Faculty Excellence                              Professor of Law
University of Texas Law School                  Boston University School of Law

Richard A. Booth                                Brett McDonnell
Marbury Research Professor of Law               Associate Professor of Law
University of Maryland School of Law            University of Minnesota Law School

Victor Brudney                                  Curtis J. Milhaupt
Haas Professor Emeritus in                      Fuyo Professor of Law
Corporate Finance Law                           Columbia Law School
Harvard Law School
                                                Lawrence E. Mitchell
Stephen Choi                                    Professor of Law
William T. Comfort, III Professor of Law        George Washington University
New York University School of Law
                                                Dale Arthur Oesterle
John C. Coffee                                  J. Gilbert Reese Professor of Law
Adolf A. Berle Professor of Law                 The Ohio State University Moritz College of Law
Columbia Law School
                                                Eric W. Orts
James D. Cox                                    Guardsmark Professor
Brainerd Currie Professor of Law                Legal Studies & Business Ethics Department
Duke University School of Law                   The Wharton School, University of Pennsylvania

Deborah A. DeMott                               Frank Partnoy
David F. Cavers Professor of Law                Professor of Law
Duke University School of Law                   University of San Diego School of Law

George W. Dent, Jr.                             Edward B. Rock
Schott-van den Eynden Professor of              Saul A. Fox Distinguished Professor of
Business Organizations Law                      Business Law
Case Western Reserve University School of Law   University of Pennsylvania

Melvin A. Eisenberg                             Mark J. Roe
Koret Professor of Law                          David Berg Professor of Law
University of California at Berkeley            Harvard Law School

                                            4
Einer R. Elhauge                                      Kenneth E. Scott
Carroll and Milton Petrie Professor of Law            Ralph M. Parsons Professor Emeritus of
Harvard Law School                                    Law & Business
                                                      Stanford Law School
James A. Fanto
Professor of Law                                      Gordon Smith
Brooklyn Law School                                   Professor of Law
                                                      University of Wisconsin Law School
Allen Ferrell
Harvey Greenfield Professor of Securities Law         Guhan Subramanian
Harvard Law School                                    Joseph Flom Professor of Law & Business
                                                      Harvard Law School
Jill E. Fisch
Alpin J. Cameron Professor of Law                     Eric L. Talley
Fordham Law School                                    Professor of Law & Business
                                                      Southern California Law Center
Tamar Frankel
Professor of Law                                      Samuel C. Thompson, Jr.
Boston University School of Law                       Professor of Law
                                                      UCLA School of Law
Jesse M. Fried
Professor of Law                                      Frederick Tung
University of California at Berkeley                  Professor of Law
                                                      Emory University School of Law
Nicholas L. Georgakopoulos
Professor of Law                                      David I. Walker
Indiana University School of Law                      Associate Professor of Law
                                                      Boston University School of Law
Jeffrey N. Gordon
Alfred W. Bressler Professor of Law                   William K.S. Wang
Columbia Law School                                   Professor of Law
                                                      UC Hastings College of The Law
Peter H. Huang
Harold E. Kohn Chair Professor of Law                 Elliott Weiss
Temple University James Beasley School of Law         Charles E. Ares Professor of Law
                                                      University of Arizona College of Law


  Cc:     Chairman Christopher Cox
          Commissioner Paul S. Atkins
          Commissioner Roel C. Campos
          Commissioner Cynthia A. Glassman
          Commissioner Commission Annette L. Nazareth
          Division of Corporation Finance Director Allen Beller




                                                5