October 31, 1997 Mr. Jonathan Katz Secretary, SEC 450 5th Street NW, Washington DC 20549 Dear Mr. Katz: We are writing to comment on the proposed Amendments to Rules on Shareholder Proposals under File No. S7-25-97. We are writing on behalf of Neuberger&Berman, LLC's (Neuberger&Berman) Socially Responsive investors. Currently Neuberger & Berman Socially Responsive Investment Group manages over $400 million of socially responsive funds. We are writing as investors who value strong financial returns as well as corporate responsiveness to environmental and social concerns and forward looking corporate governance policies. Rule 14-(a)(8) has been a rule that protects the rights and votes of corporate shareholders. The Rule has been a critical tool for shareholders to raise corporate policy issues of broad public concern and to hold corporate managers accountable to shareholders-a process that benefits everyone. On behalf of our clients, we are deeply concerned about any Rule change that unfairly penalizes shareholder initiatives. The package of proposed Rules is a serious setback for shareholder democracy and unnecessarily restricts the ability of individual or institutional investors to file resolutions. Usually shareholders first attempt to communicate or dialogue with a company and only if the company is unresponsive do they file a resolution. The shareholder resolution has been an important tool pressing corporations to be responsive to their investor and the larger public. The SEC's new rules should protect shareholder rights and this avenue for democratic expression to management. On behalf of our clients, we oppose a number of the proposed Rules and urge the SEC to consider changing the final Rule accordingly. 1. The resubmission threshold- the proposed jump to 6%, 15%, and 30% is an unfair increase that particularly penalizes shareholders working on social and environmental issues. This increase would further insulate management by making it more difficult for investors. Most thoughtful corporations are well aware that a 10% vote is significant indication of concern about an issue especially when many institutional investors follow the tradition of automatically voting for management. Management already has the proxy voting process in their favor. For example, unmarked votes are automatically registered in management's favor. In addition all resolutions are advisory not binding on a company whatever the vote total should be. The 6%, 15%, 30% note level is unfair to investors. 2. Personal Grievance - The new rule would allow a company to argue that a resolution sponsor was motivated by a "personal grievance" or some other hidden motive and the SEC could then simply issue "no opinion". We believe the SEC is abdicating its responsibility and should allow any resolution that was acceptable on its own merits to be included on a proxy. 3. The Override Provision - The proposal that a shareholder can file a resolution by gathering 3% of the votes to support its filing is a proposal that will be virtually impossible for most individual and institutional investors. This proposal is only viable for huge pension funds. Since the vast majority of corporate governance resolutions usually get on a proxy automatically, this provision primarily affects social and environmental resolutions like resolutions on Northern Ireland. The proposed 3% override would become a rule with no practical application. If the SEC supports an override plan the percent of shares backing a proposal needs to be much less. 4. An issue must deal with $10 million of a company's business ' This proposal leaves a number of unanswered questions opened. Ironically, no corporate governance resolution has to meet this test. How does a company, the SEC or a sponsor decide if an issue like child labor or a pattern of discrimination in employment relates to $10 million of a company's business? What if a plant in Northern Ireland generated $9 million in revenues (and how is a sponsor to discover this?). The Rule would prevent the resolution. 5. Discretionary voting by management - Under Rule 14 (a) (4) a shareholder can present a resolution at the company's stockholder meeting for a vote and solicit votes independently but not put it in the company proxy. However the proposed rule allows management to seek discretionary authority to vote against such a resolution and any other business brought up at the stockholders meeting without giving the shareholder the right to vote for the resolution on the proxy. 6. Right to review Management's statement against a resolution - the new rule would cancel shareholders' right to review a proposed management statement opposing a resolution to see if there was any false or misleading statements. This means that a company has no accountability for the veracity of the statements in the proxy while shareholders have to defend the accuracy of every word in their resolutions. The Rule should be even handed and balanced providing for checks and balances for investors and companies. We believe the voice of investors needs to be heard clearly by the SEC as you finalize the Rules. We urge you to take these issues into account Sincerely, Janet Prindle Ingrid Saukaitis Principal Manager, Social Research Ingrid Saukaitis Neuberger & Berman, LLC sri@nb.com