Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20509

Re: New York Stock Exchange Proposal - "Broad-Based" Option Plans
Release No. 34-40679; SR-NYSE-98-32

Dear Mr. Katz:

On behalf of the Board of Administration of the California Public Employees' Retirement System ("CalPERS"), I am pleased to submit this letter in response to the Commission's request for comments on the New York Stock Exchange's ("the Exchange's") proposed amendments ("the Amendments") to its listing standards. The Amendments relate to shareholder approval of stock option and similar plans ("Plans"). The Amendments are set forth in Release No. 34-40679 (November 19, 1998) ("the Release").

As you know, prior to the October 13, 1998 submission to the Commission, the Exchange sought comments on its earlier proposal on this same subject (which had been filed with the Commission in December 1997). CalPERS participated on the Exchange's Special Task Force on Stockholder Approval Policy, charged with reviewing those comments and providing the Exchange with recommendations. CalPERS' participation on this Task Force re-enforced our view that the shareholder franchise is not an issue that should be determined at an exchange level. It is fundamentally a national issue impacting both the capital structure and integrity of the U.S. equity market. We strongly urge the Commission to take the steps necessary to ensure that - regardless of the exchange on which a registrant is listed - a uniform standard is applied to safeguard shareholder interests in this area. Protection of the market and shareholder interests is the Commission's statutory charge; although the Exchange has taken commendable effort to consider and balance shareholder interests, it is unfair to expect the Exchange to act in a way that may be to its commercial detriment. Different listing standards among the exchanges, in an area that has proven to be so controversial and divisive, does not serve to promote a fully efficient market.

Beyond this overriding recommendation, CalPERS offers two additional comments:

1. Dilution: Shareholders are concerned with these Plans for two reasons. First, to the extent those who participate in the decision to approve a plan also may personally benefit from it, an obvious and inherent conflict of interest exists. Where company managers have divided loyalties, it is clear that shareholders deserve the right approve their actions. Second and even more significantly, these Plans often impact the value of our investments. Thus, even if the conflict of interest issues are wholly resolved, shareholders would still be concerned with - and in our view should have the right to approve - Plans that materially dilute the value of existing shares. The "broad-based" exception attempts to carve out certain types of Plans where, because of their coverage, the conflicting interests of key company decision-makers are at least less obvious. But neither the current rule nor the Amendments adequately consider the shareholders' interests in dilution. As the Task Force Report described:

"[A] view of a substantial majority of the members of the Task Force (and the view of all of the representatives of the institutional investor community) was that an overall anti-dilution maximum for all non-tax-qualified Plans, should also be studied by the Exchange for future consideration."

This comment was re-enforced by the recommendation that consideration of an anti-dilution standard (instead of the "broad-based" exception) be promptly begun so that a new rule may be in place in time for the year 2000 proxy season. Accordingly, CalPERS strongly urges that any Commission approval of the Amendments be limited to a one-year period only.

2. Heightened Disclosure: The nearly yearlong review of this issue, by CalPERS and by many others, has demonstrated that shareholders lack access to the information necessary to adequately and fully evaluate the impact of these Plans. Apparently, neither accounting standards nor Commission rules require any disclosure of Plans that have been adopted without shareholder approval. We strongly urge the Commission to correct this void and require at least annual disclosure of the material terms of any Plan adopted or amended without shareholder approval.

Thank you again for the opportunity to comment on these Amendments. If you or any of the Commission's staff would like to discuss these comments in greater depth, please feel free to contact me.

Sincerely,

KAYLA J. GILLAN
former General Counsel

KJG:cl