The Return Of The Telephone
An Interview with Ellen Philip & Cal Donly Of Ellen Philip Associates
Adding flexibility to increase shareholder participation
Optimizer: Word on the grapevine is that you’ve made a very hefty investment to enhance the telephone system you use in proxy voting, corporate reorg and other shareholder-related applications. I’ve wondered what induced you to make an outsized bet at such a place right now. Telephony as an activity seems pretty mature, maybe even humdrum. It doesn’t pop out as something to get overly excited about. Would you mind sharing some of the thinking that went into your decision?
Ellen: I’d be happy to. Our goal is to develop the most sophisticated, versatile and flexible telephone system in the shareholder services community. This has nothing to do with call-centers, automated messaging or activities that are commonly lumped under the IVR heading. What we’re focused on is the use of the telephone as a data-collection tool. This isn’t a new idea, as you know. You ask questions and you collect answers. For some time the telephone has taken a place alongside the Internet and paper in a triumvirate of commonly used data-capture options. And the role of paper has shrunk dramatically.
Optimizer: Telephony has been around for some time, and one could argue that its share has peaked out in proxy tabulation and other shareholder applications. What led you to believe there’s still a significant business opportunity here?
Ellen: First of all, I feel strongly that now is not the time for any company, especially one with a vital issue at stake, to neglect such a powerful vote delivery mechanism as the telephone. We’re in an era of supercharged shareholder activism, and, time and again, you learn of corporate issues that were either carried or lost on the basis of a paper-thin vote margin.
Along with increased shareholder activism, shareholder apathy is on the rise. Shareholder participation in the governance process in declining. Every vote has always counted, but nowadays every vote counts more than ever before. It’s not the sort of atmosphere in which any reduction in voting options make sense. It’s penny wise and pound foolish.
We’re fully aware of the Internet’s emergence as the dominant channel for corporate voting, and from a costreduction and effort-reduction point of view we’d be very happy to have it take over completely. Internet sites are easier to build than telephone sites, and they cost less to operate. The telephone has a popular niche, though. It’s so easy to pick up, especially in a pinch. Practical experience shows us that the time for exclusive reliance on the Internet has not yet arrived – not unless you’re in a position in which it’s safe to say: Who cares?
There’s something else that influenced our renewed commitment to telephony. Over the years, as you know, we’ve made our mark by stepping in to fill gaps in shareholder-related processes under way around us. We discovered, through some deep digging, that none of the major players in the shareholder services space is prepared to tailor its telephonic data-capture system to cope with new situations that present themselves from time to time. Their telephony systems are essentially static. Despite a certain lip service to flexibility they don’t readily adapt to changing situations or to an unusual set of client preferences. They say, in effect: ” If what we’ve got will work for you, fine. Otherwise you’re out of luck.
This inflexibility is music to our ears. For us It represents a greatly enhanced business opportunity.
Optimizer: And what’s your approach?
Cal: We accept custom programming as part of the process and put it at the disposal of clients. We tailor our telephone system to meet the specific requirements of a given task or to accommodate client preferences naming director nominees instead of assigning a number to them, for example. Clients are not locked in to anything we might have done in the past. We’re a highly specialized job shop, in effect, and since we work under a completely different business model we can make economic sense out of many situations that others feel obliged to avoid. And if we do something for one client we don’t have to worry about the impact it might have on hundreds of others.
Optimizer: Tell me about some special situations you handle by telephone.
Ellen: There’s cumulative voting, for example. As far as we’re aware nobody else does it by telephone.
Optimizer: How does your system work?
Ellen: Say you have a holder with five shares who’s entitled to vote for a slate of 10 directors. Usually, although not always, he or she must vote a total of 50 shares (5 times 10) in whatever combination. It could be 50 for one nominee and nothing for any of the other nominees, or 25 shares each for two nominees, or 10 shares for one nominee and 40 shares for another nominee, and so on. The underlying program checks that no more and no fewer than 50 shares have been voted. If so, an error message is delivered and the shareholder is called upon to make new choices.
The logic for the program underlying the telephone voting site is no different from the logic underlying a corresponding Internet voting site. It shepherds the voter through the process, and refuses to accept anything that is incomplete or which violates established rules. What makes this situation significantly different, though, is that the programmer must deal not only with the voter but with the instrument in use – the telephone. It’s a much more complex task.
Optimizer: What about short slates, in proxy contests, where the dissident card allows the shareholder to vote for or against nominees on the dissident slate and to “write in” other nominees from the management slate?
Ellen: Yes, we handle short slates by phone. And also majority voting, where For All is not allowed and each nominee must be specifically voted on. We also do Dutch auctions and regular tender offers, and multi-language scripts are an option with everything.
Optimizer: You have a reputation for being able to do special things – for being able to pull rabbits out of the hat. What do you think has enabled you to do this consistently?
Ellen: Without doubt it’s our people the know-how, skills and, above all, the combined experience in the production team we’ve built in something like 40 years, and held together through thick and thin. The other day, for fun, we added it up. It totals 130 years, not including Cal or me.