Subject: S7-25-97 (Proposed Amendments to Rule 14a-8) Date: 11/16/97 5:45 PM Jonathan Katz, Secretary: My name is Michael Mulroy and I am a former securities attorney currently working in the investment banking industry. As the views expressed herein are my own and have been neither reviewed nor approved by my employer, I choose not to mention its name. I have four comments with respect to Rule Proposal S7-25-97 relating to Rule 14a-8 (the "Proposed Rules"). While my comments surely lack the thoughtful and detailed analysis represented in other comment letters, and may thus be afforded less weight in the staff's review, I am nonetheless thankful to have the opportunity to submit this comment letter and excited about the prospect of submitting this letter over the internet. 1. The Q&A Format. Redrafting the rule in the form of questions and answers is neither necessary nor appropriate, but rather is a back-handed support for the Commission's "plain english" initiative. This initiative, while well intended, is problematic in that it exposes corporate issuers to conflicting standards: one espoused by the SEC, calling for plain under understandable language, and one mandated by the bespeaks caution doctrine and the plaintiff's bar, requiring an over-inclusive "kitchen sink" approach. Rather than deal with this dilemma head-on, I am fearful that the staff is merely attempting to advance it own position in a somewhat adversarial manner. Such a winner takes all mentality, I believe, serves neither the issuers nor the investors the SEC was chartered to represent. I would further note that the Chairman's call to remove "gobbleygook" is yet another example of this adversarial position. Hyperbole and rhetoric has never been the SEC's mantra and should not be so today. In an era of increasing institutional ownership, it is odd that the SEC feels a need for shorter words and awkward usage (aka simple rules). As the dumbening of America continues to accelerate, I call for the SEC to serve as beacon in its corner of the nation. Rules should be clear and understandable, carefully crafted and properly worded. These goals can be accomplished by a good draftsperson, without having to turn the Commision's rules to a flyer of frequently asked questions (FAQ). 2. Economic Significance Test. Throughout the Proposed Rules, it is clear that the SEC is uncomfortable with its position as "arbiter" with respect to the inclusion of proposal, especially those of a social nature. As our governors accept decreased responsibility for their actions (see, eg. Congress' recent lambasting of the IRS, or its "punt" to the FCC in the 1996 Telecommunications Act), it perhaps should not be surprise to see the SEC running for cover as well. Purely objective tests are great for those who have to administer them, but that's about it. Picking a number in the slippery slope of reason, not allowing any subjective judgment, is like recommending blind obedience to an odd rule - reminiscent of King Salomon's proposal to cutt the baby in half ("justice" through the terrorizing of two defensless women). Administrative agency or elected body regardless, you are our governors, so govern. Exercise your discretion as best you can, accept the kudos and the cat-calls. You were appointed or hired for your reason and perspective - so use them. Don't hide behind a number. On its own merits, the purely economic test seems to say that a small footwear company better be careful while Nike can pillage Indonesia. I do not understand that rationale. 3. The 3% Override. This is appealing should be fine tuned for the small investor. Specifically, if the small investor solicits more than 3%, the issuer should pay the cost of solicitation. Second, its use as a support for the purely objective economic test described above, while not misguided, shows that the staff is not altogether comfortable with the test in the first place. A good support to a weak foundation surely is not as good as a strong foundation. Finally, the reference to anti-takeover proposals is interesting, but not on the mark. I think proposals can split into two categories: social and corporate governance. Governance proposals should always be included regardless, thus obviating the need for an override. Social proposals should either be handled by the staff as in the past or, if the staff is too uncomfortable, through the mechanisms described in the Proposed Rules. 4. A New Fundamental Approach. Reiterating my prior comments, if not the SEC, then who? Shareholder proposals are difficult to deal with because the attack the very nature and purpose of the corporation (money makers or corporate "citizens" with special responsibilities). Stepping back, I would note that a corporation is a legal fiction to afford its owners limited liability. As such, we should ask whether the slight incremental expense represented by the inclusion of shareholder proposals in proxy materials is unfair given the benefit of limited liability. I think the answer is obviously no. Slight restrictions to avoid abuses are a worthy goal but should be extremely limited. I would recommend a "bad boy" provision and a limit of three proposals in any proxy. They could be chosen based on last year's or by random draw. Surely such a system would allow for clear and understandable rules, perhaps even without resorting to the Q&A format. Thank you. Michael H. Mulroy 429 1/2 North Gardner Street Los Angeles, CA 90036 ph 213-651-2517 e-mail mkmul@aol.com