Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

Cut Cost And Reduce Risks: Too Good To Be True?

Our Top-Two Mega-Money-Saving/Risk Reduction Tips For 2014… Both Of Them Easy To Implement To Boot!

Deflnitely sounds counter-intuitive, we know…since in our own long experience, cost cutting strategies tend to create a host of new risks - many of which can lead to actual losses short-term:

Fewer people to handle required tasks and get them right the flrst time; suppliers having a fleld day – quietly but quickly moving to ratchet up fees and expenses while undertrained and over-stretched newbies are still blissfully ignorant: Workers fretting about their futures – constantly looking over their shoulders, sharing worries at the water cooler – and taking their eyes and their minds off the tasks at hand.

And yes, in our long-experience, across-the-board staff cuts sometimes lead to subtle and not-so-subtle sabotage – and sometimes to outright thefts, both of tangible and intellectual corporate property.

But there’s nothing like that here: Our top two tips for 2014 are simple, easy to act on and yes; acting on them WILL reduce both the costs – and the risks associated with having shareholders.

And most companies will be astounded by the size of the potential savings that will be revealed…So here goes:

  1. Ask your transfer agent to produce a list of all your registered shareholders – with any and all dividend reinvestment plan positions consolidated for each holder on  the  list  –  beginning with the smallest holdings, please, right on down to the very end. Transfer agents should also be able to show the totals – and the cumulative totals – and the percentages and cumulative percentages of the shares outstanding that are held by all of the sub-groups; say in the less-than one share group, the 1-5 share group, 6-9 share and ten share group, etc., etc. Thus, you will see at a glance the percentage of your total spending budget that is spent on people with “immaterial investments” in your company.
  2. Make sure that “lost shareholders” – i.e. where any of their property has been, or might be deemed “abandoned”  will  be  prominently  indicated  on the list…so you can deal effectively with the “risk reduction” part.

HERE ’ S WHAT YOU ARE LIKELY TO DISCOVER: If you are like most of the many public companies whose shareholder lists your editor gets to review each year, up to 80% of all the money you spend on registered shareholders is spent on people who hold less than 4% of your shares! And guess what? Your street- name shareholder profile will often look exactly the same.

HOW DID THIS TOTALLY WACKY SCENARIO COME TO PASS? The most common cause is when long-term shareholders go to sell and can’t come up with some tiny portion of their position – usually a stock certificate issued as a stock dividend, way back when…Another common thing – especially in DRP and DSPP accounts – is when the holder sells all their shares – but Ooops – right after a record date. (Who knew??) So the dividend gets automatically reinvested by the TA – and often by brokers too, who offer “automatic dividend reinvestment” to their retail investor clients. And one last thing – a dirty little secret at some TAs – many of them quietly dropped – or simply fail to enforce the old-time clause in traditional DRPs and DSPPs – that when a participant sells all their full shares, the fractional shares will be automatically liquidated, so the account will be fully “off the corporate books.”

NOW FOR THE “RISK REDUCTION” PART: As we have been warning over and over, over the past 20 years, having “abandoned property” on your books is an inherently risky thing – in not just one but two important respects:

First, the label alone is like waving a welcome flag in front of thieves. Not only will all sorts of bad people (including some unscrupulous vendors, outside ‘heir-finders’ – and yes, maybe even your own employees) try to steal it away, many of them think they’re doing nothing wrong…since, after all, it was ‘abandoned.’ 

Second, and this risk is becoming bigger every day, state Treasurers have been ramping up their efforts to declare shareholdings “abandoned” – so they can seize them – and sell the underlying shares - to balance their budgets. At least 30 states are asserting that unless the issuer can prove there has been recent “contact” with a shareholder, the assets can be presumed “abandoned.” So all those folks who are in DRPs or DSPPS, which they think are running on  “automatic”  are  at  risk  of  losing  their  investments for lack of “contact” with your company. Same deal for shareholders at non-dividend paying companies – who have no reason at all to “contact” you. Same for non-US shareholders – many of them employees of yours – who don’t want to cash smallish checks and/or pay big fees to do so: Delaware, for example, asserts that these “abandoned funds” – plus the underlying shares – belong to THEM!

Worst of all, the vast majority of states will only return the sales proceeds – regardless of how many dividends may have accrued – and how much the stock may have appreciated if and when the rightful owners come forward.

This leaves your company, dear readers, ripe for lawsuits – since some fraction of these people – or their heirs – WILL come forward each year. And here, given the high costs of dealing with them, coupled with the fact that the issuer IS required to ‘do right’ by its shareholders, there is simply no way for an issuer to ‘win.’


First, deal quickly and elfectively with all those “cling-ons” who do not have a material investment in your company. Do it NOW – in time to book all of the savings that will arise in TA and related Annual Meeting fees and expenses.

For starters, go to our website, www.optimizeronline. com and look under “The Basics” for our discussion and top-ten tips on conducting successful small shareholder  buyback  offers.  Please  be  sure  that any deal you strike with any of the many potential suppliers out there represent a good deal for YOUR COMPANY – and for your shareholders.

Second, engage a truly excellent firm to find as many of the so-called “lost shareholders” as you possibly can. We used to say “don’t spend $10 to find someone with $.10” but NOW…we see that the dime’s worth can actually grow into a big number over time – especially when you consider the underlying value of the shares themselves – and who wants a lawsuit over it? Plus, it’s easier and cheaper than ever to FIND lost people, who will mostly sell their forgotten stakes and get off your books and records anyway.

But the biggest reason to ind lost people – instead of simply escheating the shares is to totally deprive those greedy states of the money – so that when they come in for one of their totally over-the-top, all-consuming and expensive “surprise audits”…Surprise! There will be nothing to audit, and thus, no reason for them to ever return!