KB HOME BOARD'S RECOMMENDATION ON THE PROXY ADVISOR PROPOSAL IN 2001 PROXY STATEMENT
RECOMMENDATION OF THE BOARD OF DIRECTORS AGAINST THE PROPOSAL
Your Board of Directors recommends that you vote AGAINST the stockholder proposal for the following reasons:
- The Board of Directors, which includes eight outside directors and only two members of management, is in the best position to make informed recommendations to the Company's stockholders with respect to the matters voted upon.
- There already is a significant amount of research and information readily available on the Internet and elsewhere regarding the Company and issues important to the Company's stockholders.
- The stockholder proposal would require the Company to spend corporate funds for the hiring of a proxy advisory firm and for the distribution of the firm's advice to stockholders.
- The stockholder proposal would preclude management of the Company from evaluating the quality of the proxy advisory firm's work, its recommendations or the process by which recommendations are made.
ACCORDINGLY, YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL
PROPONENT'S RESPONSE TO THE ABOVE:
1. The independent advisor's recommendation would add to, not replace, the Board's recommendation on which way to vote. So KB Home shareowners could benefit from both sources of advice.
2. While large amounts of information are available on the Internet, they are not conveniently summarized into an independent recommendation on how to vote specific proxy issues, which the proposal would provide.
3. While the proposal would involve spending corporate funds, the costs are very small relative to the potential benefits of more informed voting. Also, many of KB Home's institutional shareowners are already paying for proxy advice, and those fees are likely to decline if this proposal spreads to many companies.
4. We agree with the Board's implication that the quality of the advisory firm is crucial, but not with the implication that supervision by the Board is necessary to assure that quality. Gillette shareowners would vote to choose the advisory firm based on its reputation in their eyes. Advisors would compete to build reputations for giving advice that benefits shareowners. Those reputations would be assessed and discussed by the financial community in much the same way that personal computer makers' reputations are determined in the technology community, so that even a non-expert could make an informed choice by reading, for example, the Wall Street Journal.
Response written by Mark Latham on behalf of the proponent; March 11, 2001. This response was not in the proxy statement, but was posted on the web.