April 3, 2014

U.S. Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549-2736

Via email to: chairmanoffice@sec.gov

Re: Shareholder Proposals Rule Change

Dear ladies and gentleman:

As a small shareholder having had about ten human rights proposals voted in recent years[1], I am writing you to express my grave concerns of the recent reports on shareholder proposals rule change attempts[2], especially of “Remarks at the 26th Annual Corporate Law Institute, Tulane University Law School: Federal Preemption of State Corporate Governance” by Commissioner Daniel M. Gallagher, New Orleans, LA, March 27, 2014[3]. As reported by New York Times, “S.E.C. Official Criticizes Proxy Proposals on Social Issues” (MARCH 27, 2014), these attempts want to kill the only democratic element in current American economy system for corporate governance and social responsibility.

In his remarks, Commissioner Gallagher starts “II. Shareholder Proposals” with: “One area where the SEC’s incursions into corporate governance have had a particularly negative effect is shareholder proposals.”  He then surprised readers: “Activist investors and corporate gadflies have used these loose rules to hijack the shareholder proposal system.”  Perhaps Commissioner Gallagher is right: Socrates “hijacked” the Athenian democratic system; Jesus “hijacked” human civilization.  I was accused so when I pushed my human rights proposal to News Corp. shareholders meeting in October 2010[4], just before News’ human rights scandals became known to the public.

Commissioner Gallagher states that “the vast majority of proposals are brought by individuals or institutions with idiosyncratic and often political agendas that are often unrelated to, or in conflict with, the interests of other shareholders.” He certainly has the right to say so, but he has no right to deprive shareholders of the right to vote on social issues, and we shareholders know better how to defend our long-term interests.    

Commissioner Gallagher continues: “The low level of hedge fund activism here implies that their concerns with corporate management are being addressed using avenues other than shareholder proposals—as most legitimate concerns can be.”  This clearly indicates whom Commissioner Gallagher represents because hedge fund activism never shoed interest in social issues.

Commissioner Gallagher further says, “of course, where management is breaching its fiduciary duties, investors can have recourse to the courts.”   This effectively excludes any possibility for small shareholders without million dollars, such as me, to participate, assist and help American corporate improving governance and social responsibility especially doing business outside of the U.S.

Commissioner Gallagher reveals his stance: “I’m not sure we need shareholder proposals at all.”  It is very alarming that such a commissioner seats inside the SEC.

Commissioner Gallagher further complains: “It is enormously expensive for companies to manage shareholder proposals.”   However, from my experience with Y company, it is the company management who abused the company resource to hire outside law firms to exclude my human rights proposals with materially false and misleading statement. And Commissioner Gallagher did not say one word about the “enormously expensive” CEO pay in the U.S. and the world.

Commissioner Gallagher raises the point of his remarks, “the holding requirement to submit proxies should be updated.  $2,000 is absurdly low, and was not subject to meaningful economic analysis when adopted.  The threshold should be substantially more, by orders of magnitude:  perhaps $200,000 or even better, $2 million.” “I would support banning proposal by proxy.” Again, this just indicates whom Commissioner Gallagher represents inside the SEC.  As a shareholder, I would like to suggest the threshold should be substantially less, say $1,000, to encourage more shareholders to participate economic democracy so we can prevent more corporate scandals, crimes, and financial crisis.

Commissioner Gallagher even attacks social issues proposals: “Making adjustments along these lines will go a long way towards ensuring that the proposals that make it onto the proxy are brought by shareholders concerned first and foremost about the company—and the value of their investments in that company—not their pet projects.” If Commissioner Gallagher considers social issues such as UN Global Compact “pet projects,” I have to doubt that the SEC is “hijacked.”

Near the end, Commissioner Gallagher proposes that “companies shouldn’t have to go through the time and expense of litigation to vindicate their substantive rights under our rules.  The burden to ensure that a submission is clear and factually accurate should be placed on the proponent, not the company.  I believe that the Staff should take a more aggressive posture toward proponents that fail to meet that burden.” If the SEC is hijacked to serve the economic oligarchy only, the only way to express our social concerns is to protest in front of corporate headquarters, as I actually was forced to plan hunger-strike in front of Y company for its policy and practice against Chinese human rights movement.

Let’s work together to stop the assault on American economic democracy.

Respectfully,

Jing Zhao, Ph. D

President of US-Japan-China Comparative Policy Research Institute

 zhao.cpri@gmail.com