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More On Notice And Access… And The Best Tip Ever On Maxing-Out On Savings While Minimizing “Lost Votes”

The Broadridge statistics on N&A are out for the period ending May 31, 2008 - the high season for annual meeting mailings - and the numbers are impressive.

  • 634 companies used N&A to some degree between July 1, 2007 and May 31, 2008 (just shy of 10% of the companies that had their meetings through this period). Some 468 of them had concluded their meetings by 5/31 so there’s a tiny bit more news still to come on how they did vote-wise, but no real surprises are expected.
  • As compared to our analysis of the last Broadridge report, many more companies in the “mega-shareholder range” of 150,000 or more holders have now tried N&A - 104 of them to be exact - compared to only 16 in the early going. And a whopping 435 of the 634 pioneers had shareholder populations of 10,000 or more, so we have a much better idea of the potential savings, as well as the potential drop-offs in individual investor voting.
  • Smaller issuers largely held back, much as we predicted inour last analysis, since the workload for them is proportionately much larger, the scheduling tends to be much tighter and the savings, if any, are relatively small ones. But, nonetheless, there were 99 pioneers in the less than 1000 shareholder range and 100 in the 1000-4999 range.
  • As the earlier Broadridge reports indicated, retail investor voting drops precipitously with N&A: While 34.30% of their shares are voted without N&A, only 16.44% are voted if the N&A “notice” is the only notice individual voters get…So issuers, please note well: you must be sure to have smart strategies – and smart stratification in place – and to do your math with special care if individual investor votes are needed to pass, or to defeat, a proposal you care about.
  • Thanks to the fact that most individual investor holdings are just a small percentage of the outstanding at many large companies - but also to “smart stratification” techniques on the part of most early adopters - average quorums dropped by only two percentage points. (American Express, for example, saved over $1 million by not mailing paper materials to investors with fewer than 750 shares, unless they asked, with barely a blip vs. last year’s quorum. But DO remember as you read this that averages shouldn’t cut much mustard with YOU: What you need to care about is your own quorum…so do your homework.)
  • A very important statistic to be aware of, the number of investors who have filed to always get paper materials is now up to 2.5 million (up from 1.7 million at the last report) – and will probably top out at around 3 million…as long as issuers don’t screw up and turn people off with bad websites, as some are doing already. (The important take-away here, is that if you are a large and well-known company, you will probably have a goodly share of paper-lovers to provide for…But no worries, Broadridge can tell you exactly how many of your holders have pre-filed to get paper - and your transfer agent, if you’re using them to distribute materials too, will be able to tell you in advance how many paper-huggers you are likely to have on the registered side.)
  • Only 1.02% of the people who got a Notice called or emailed to request paper materials! This is up from the earlier period, as we predicted, because the early returns were skewed by a large number of high-tech companies, with lots of investors who were web-savvy. We would be very surprised if this number were to go over 3% when all is said and done…unless, as noted above, too many issuers screw up their websites…and people actually go there to notice it. But DO REMEMBER our advice about averages: All you should care about is your company: If you have a lot of retail investor interest and appeal, you will have a higher-than average number of investors wanting paper.
  • The bottom line – and it’s an impressive one – is that on average, the N&A pioneers sent full sets of paper proxy materials to only 11.42% of their investors…And most of these sets were sent because the issuer decided to send them to their larger individual investors. This, according to Broadridge, resulted in savings of paper and postage - net of processing fees - of $140 million so far.

So far, and rather amazingly, we’ve only heard a few negative remarks about N&A:

  • The 40 day posting deadline pre-meeting - coupled with the fact that at least five extra days is required to be really comfortable - is a problem for very many companies. We’d been saying, “quit the whining and start earlier” and we still say so. But much to our surprise, the SEC seems willing to revisit this and to add some slack here, since people who ask for paper are getting it much earlier than the SEC ever expected they would.
  • Some small-cap companies have been complaining that the game ain’t worth the candle, and hoping to be excused from the mandatory deadline for posting proxy materials on the net in “readable, searchable and printable form”. But we say, suck it up…and recognize that having robust and easy to find and read materials on the web can give you a major competitive advantage – both in terms of your business strategies and if there are proxy “issues” of concern.
  • A few activist investors and other “proxy-nannies” have been whining that individual investors are being “disenfranchised” by N&A. This is just plain bunk…since anyone who wants paper can get it, and will get it pronto.
  • Our own big gripe is that the vast majority of the websites we’ve visited are really bad. The biggest gripe by far – and a potential deal-breaker for people who would like to be rid of paper but who still want to be informed – is that many companies are totally ignoring the advice of our good friend and E-Proxy pioneer Rhoda Anderson, and forcing investors to turn into financial printers. One big vendor, for example, sets the materials up as two side-by-side pages at a time – with no navigation tool. Then, to add insult to injury, the pages are too small to even skim, much less read. If you try to enlarge one of the pages, the whole site logs off! If you still want to read the darned stuff, you’ll have to re-boot it and print it out – and you’ll burn up $75 worth of ink cartridges if there are even a few full-color pages. So readers, be sure to do some careful comparison shopping before you chose a vendor, and/or a host for your proxy voting site…and be sure to “ try your own cooking” before you dish the stuff up to us stockholders.

NOW FOR THE BIGGEST AND BEST TIP EVER ABOUT USING N&A...which we heard from Kathy Gibson, the Corporate Secretary at Prudential, at the Society’s annual conference in June:

Do not mail proxy materials to people who haven’t voted their proxies in recent years. Wow! You get the best of all worlds, we’d say, without missing a single vote…simply by sending the required Notice, but no other paper, to the 60% or so of your investors who are (a) demonstrably not interested in getting your materials and (b) who never vote anyway! Broadridge says they can easily identify the perennial non-voters…and many transfer agents can do this too.