1700 Montgomery Suite 300 San Francisco, CA 4111 415 438 5500 Telephone 415 438 5724 Facsimile December 17, 1997 Arthur Levitt, Chairman Securities and Exchange Commission 450 5th St., NW, Washington, DC 20549 Re: Proposed Revisions to SEC Rule 14a-8, File No. S7-25-97 Dear Chairman Levitt: Catholic Healthcare West (CHW) is writing to voice its strenuous objection to the Securities & Exchange Commission's (SEC) proposed Rule 14a-8 (S7-25-97) regarding shareholder resolutions. If adopted, this Rule would all but destroy the rights of shareholders such as CHW to successfully file shareholder resolutions. Today's shareholder process is a responsible, reasonable approach. It starts a process of dialogue between concerned shareholders and corporate management to find real solutions to real problems. The process as it stands today is a key tool for protecting CHW's financial interests as a stockowner. Shareholders such as CHW have an important financial interest in addressing the diverse issues raised through the shareholder process. When companies fail to address their governance, environmental or social impact problems, shareholders suffer. Corporate mismanagement of these issues can seriously effect a company's reputation and bottom line. CHW is particularly concerned with four aspects of the SEC's proposed rules. The language in the proposed Rule regarding resolutions relating to a "personal grievance" or "special interest" could well eliminate the right of religious institutions such as CHW to successfully file shareholder resolutions. Under current rules, the SEC decides whether companies can exclude a shareholder resolution on the grounds that it advances a "personal grievance" or "special interest." However, under the proposed Rule, corporate management would have the power to exclude any shareholder resolution by merely claiming that the resolution advanced a "personal grievance" or "special interest." This provision could result in corporations excluding legitimate shareholder resolutions filed by religious institutions on the spurious grounds that such resolutions merely promote religious concerns. In such cases, CHW would have to go to court to reinstate each resolution excluded by corporate management. This process would be very costly and would greatly curb the ability of religious shareholders to file resolutions. CHW is also concerned by the language in the proposed Rule regarding the exclusion of resolutions related to less than $10 million in revenue. The current rules allow the inclusion of resolutions that fail to meet the economic threshold but that raise an issue that is "otherwise significantly related to the company." However, the proposed Rule eliminates the ability of shareholders to bring resolutions on such "otherwise significantly related" issues. Instead, the proposed Rule sets an arbitrary and purely economic threshold of $10 million in revenue. CHW is concerned that this language could result in the exclusion of important resolutions on issues that cannot be easily quantified in cold, economic terms. If this provision had been in effect in recent years, it could have well caused the exclusion of resolutions pertaining to doing business in South Africa under apartheid. If this language is adopted, it could well result in the exclusion of important resolutions on hard-to-quantify issues such as child labor and corporate involvement in Burma. A key concern to CHW in the proposed Rule is the dramatic increase in the percentage thresholds to re-file resolutions. According to a recent report by the Social Investment Forum, even a modest increase in the percentage of the vote required for re-filing could result in the exclusion of a large proportion of resolutions after only one or two years. CHW believes that the current percentage thresholds for refiling resolutions are sufficient and should not be raised. Finally, CHW is concerned that the proposed Rule does not completely overturn the SEC's previous policy of excluding shareholder resolutions on employment-related matters. A careful reading of the proposed Rule indicates that resolutions on certain employment-related issues - such as wage levels - would still be excluded. CHW believes that the SEC has a duty to uphold the rights of shareholders. Since the proposed Rule would dramatically restrict the rights of shareholders to successfully file resolutions, CHW urges that the SEC abandon these new rules. Sincerely, CHW Investment Committee cc: Senator Dianne Feinstein Senator Barbara Boxer Representative Nancy Pelosi Tim Smith, ICCR Jack Bresch, CHA-US Bud Lee, CACH Mary Elizabeth Clark, NETWORK