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Some Tips for Choosing a Proxy Solicitor/Advisor

  • Our Number-One Tip: While you can be your own tabulating agent - and a surprising number of companies do just that, when they use company employees to serve as Inspectors of Election and to collect and add-in votes at the meeting site - our best advice is this: “Do not try this at home” - even if you think you have a good safety net: You will almost certainly find yourself “in over your head” one day, you will likely leave a lot of votes ‘on the table’ as unvoted…and, worst of all, your tabulation will have virtually no credibility if challenged.
  • Tip-Two is to recognize that there are at least four sets of “tabulators” out there, serving different segments of a company’s investor base, or designed to be a sort of “one-stop-shop” for meeting services…so it IS smart to try to OPTIMIZE your mix of providers to best suit your own situation, as best you can: As most readers know, Broadridge Financial Solutions tabulates about 98%+ of the “street votes” - which, in a large-cap company often total 90%+ of the total vote. Most transfer agents still specialize in tabulating the votes of registered shareholders (although there are some that ‘farm some or all of this work out’ to others) and they will, typically, add in the votes reported by Broadridge, and other tabulating agents, and serve as the official tabulators and Inspectors at the meeting itself. There are several very fine entities that specialize in aggregating the files of various Employee-Ownership Plans - and in providing custom-built platforms to tabulate Plan votes - often on behalf of the various Plan Sponsors, who typically need to receive the reports and issue voting instructions directly to the main tabulator. Many of these agents also serve as “full-service tabulators.” Lastly, there are several smaller companies - including a few that compete with Broadridge on the “street-side” - that provide various “meeting management services” - including such things as site selection and meeting staff-support, printing and mailing services, tabulation and (not so ‘independent’ we must opine) Inspector of Election services. For many companies, the one-stop-shopping aspect has great appeal. Others place special emphasis on rounding up the retail vote - and an increasing number of savvy issuers that have 6% - 10% or more of the voting power in a variety of employee plans have been placing special emphasis on providing highly customized programs of late, to help them max out on this usually friendly voting segment. With more and more close and potentially contested votes each year, it is becoming increasingly important to have the right providers - and the right mix of providers - in order to achieve the margins a company needs and wants to have where its own proposals, and those of shareholder proponents are concerned,
  • Tip-Three, and the most important tip of all; Make sure that any and all of the service providers you select have highly rigorous quality-control standards - and have formal Q-C procedures in place - along with very strong cyber-security measures: Many of the ‘professional tabulators’ whose work we have reviewed in the course of our own Inspecting duties have serious weaknesses here. Some tabulators check only a small sample of the voted proxies - often at random, and without regard to the size of the vote! Others have weak and sometimes no documentation as to what, exactly, constitutes a “valid proxy” - or an invalid one. Other, mostly smaller providers, have dangerously weak internal control and cyber-security systems vs. the best-inclass providers.
  • Make sure that your “primary tabulator” will provide strong support at the meeting site - and that their representative will be well prepared if anything unusual should come up, or if the final report is questioned or, heaven forbid, formally challenged - in terms of (1) their overall know-how when it comes to proxy voting and (2) in terms of their ability to handle conflict in an expeditious, diplomatic and totally professional manner: These skill-sets are increasingly hard to find in this arcane and rapidly contracting field of work.

OUR BEST-PRACTICE TIPS ON REPORTING THE RESULTS AT THE MEETING ITSELF:

NEVER use your proxy solicitor as your main tabulating agent - if there is a shareholder proposal or other contested or likely “close” matter on the agenda…UNLESS you also have an Independent Inspector of Election who will closely inspect the tabulator’s procedures - and the tabulations themselves - and certify the Final Report: While it is “probably OK” to have your proxy solicitor serve as the main tabulating agent, to help you track the voting and to consolidate the reports from Broadridge, and maybe from your transfer agent and one or more employee-plan tabulators, let’s say, this is as far as one could get from a “best practice” if there are close or potentially contested items on the ballot. Using the same entity to solicit - and to tabulate proxies - and to certify the vote as well - creates a clear-cut conflict of interest. Aside from being a ‘bad governance practice’ it could invalidate the results if they were to be challenged and force an embarrassing and expensive do-over, which we have indeed seen and reported on in this space.

  • Our Number-One Tip: While you can be your own tabulating agent - and a surprising number of companies do just that, when they use company employees to serve as Inspectors of Election and to collect and add-in votes at the meeting site - our best advice is this: “Do not try this at home” - even if you think you have a good safety net: You will almost certainly find yourself “in over your head” one day, you will likely leave a lot of votes ‘on the table’ as unvoted…and, worst of all, your tabulation will have virtually no credibility if challenged.
  • Tip-Two is to recognize that there are at least four sets of “tabulators” out there, serving different segments of a company’s investor base, or designed to be a sort of “one-stop-shop” for meeting services…so it IS smart to try to OPTIMIZE your mix of providers to best suit your own situation, as best you can: As most readers know, Broadridge Financial Solutions tabulates about 98%+ of the “street votes” - which, in a large-cap company often total 90%+ of the total vote. Most transfer agents still specialize in tabulating the votes of registered shareholders (although there are some that ‘farm some or all of this work out’ to others) and they will, typically, add in the votes reported by Broadridge, and other tabulating agents, and serve as the official tabulators and Inspectors at the meeting itself. There are several very fine entities that specialize in aggregating the files of various Employee-Ownership Plans - and in providing custom-built platforms to tabulate Plan votes - often on behalf of the various Plan Sponsors, who typically need to receive the reports and issue voting instructions directly to the main tabulator. Many of these agents also serve as “full-service tabulators.” Lastly, there are several smaller companies - including a few that compete with Broadridge on the “street-side” - that provide various “meeting management services” - including such things as site selection and meeting staff-support, printing and mailing services, tabulation and (not so ‘independent’ we must opine) Inspector of Election services. For many companies, the one-stop-shopping aspect has great appeal. Others place special emphasis on rounding up the retail vote - and an increasing number of savvy issuers that have 6% - 10% or more of the voting power in a variety of employee plans have been placing special emphasis on providing highly customized programs of late, to help them max out on this usually friendly voting segment. With more and more close and potentially contested votes each year, it is becoming increasingly important to have the right providers - and the right mix of providers - in order to achieve the margins a company needs and wants to have where its own proposals, and those of shareholder proponents are concerned,
  • Tip-Three, and the most important tip of all; Make sure that any and all of the service providers you select have highly rigorous quality-control standards - and have formal Q-C procedures in place - along with very strong cyber-security measures: Many of the ‘professional tabulators’ whose work we have reviewed in the course of our own Inspecting duties have serious weaknesses here. Some tabulators check only a small sample of the voted proxies - often at random, and without regard to the size of the vote! Others have weak and sometimes no documentation as to what, exactly, constitutes a “valid proxy” - or an invalid one. Other, mostly smaller providers, have dangerously weak internal control and cyber-security systems vs. the best-inclass providers.
  • Make sure that your “primary tabulator” will provide strong support at the meeting site - and that their representative will be well prepared if anything unusual should come up, or if the final report is questioned or, heaven forbid, formally challenged - in terms of (1) their overall know-how when it comes to proxy voting and (2) in terms of their ability to handle conflict in an expeditious, diplomatic and totally professional manner: These skill-sets are increasingly hard to find in this arcane and rapidly contracting field of work.

OUR BEST-PRACTICE TIPS ON REPORTING THE RESULTS AT THE MEETING ITSELF:

NEVER use your proxy solicitor as your main tabulating agent - if there is a shareholder proposal or other contested or likely “close” matter on the agenda…UNLESS you also have an Independent Inspector of Election who will closely inspect the tabulator’s procedures - and the tabulations themselves - and certify the Final Report: While it is “probably OK” to have your proxy solicitor serve as the main tabulating agent, to help you track the voting and to consolidate the reports from Broadridge, and maybe from your transfer agent and one or more employee-plan tabulators, let’s say, this is as far as one could get from a “best practice” if there are close or potentially contested items on the ballot. Using the same entity to solicit - and to tabulate proxies - and to certify the vote as well - creates a clear-cut conflict of interest. Aside from being a ‘bad governance practice’ it could invalidate the results if they were to be challenged and force an embarrassing and expensive do-over, which we have indeed seen and reported on in this space.

Here are the Optimizer’s Top Five Tips for Selecting a Proxy Solicitor or Advisor

  1. Determine “Who’s at “the top of the house?” and “What is the ‘tone at the top’ really like?” These, we think, are the top issues to explore when evaluating any business before ‘investing’. And in our book, hiring a proxy advisory firm should be looked at as making a very important, long-term investment.
  1. Meet, and spend some quality time with the top-two or three officers, who, typically, are not just the leaders, but founders of the business. They really do set the tone at the top, for better or sometimes, though rarely, for worse. The best of them will have deep contacts and deep insights into the kinds of people who follow your particular industry and lots of personal – and successful experience “in the trenches”. They will inspire strong loyalties among their first lieutenants – and in all the staff. The presence of these qualities – or the lack thereof – is usually quite discoverable by careful observers, so visit them at their headquarters if possible, listen closely to what they say about what makes them a good fit for your company - and observe them, and their workers, and their workplace, with care.
  1. Carefully evaluate the “chemistry” that exists - not just between you and your selection team and them - but how well you think it will mesh with the chemistry of your senior management and the board as a whole if a tough issue or a major crisis were to arise. Our own preference is usually for very thoughtful, statesmanlike people, who try hard to avert, and then to quickly resolve a crisis should there be one, and who always stay cool, calm and collected. But sometimes, you and your board may prefer – and may actually need a tough fighter - who will out-think and out-maneuver the opposition, and fight like hell to the finish. Ideally, the firm you pick will have top people who can act and pivot comfortably in both kinds of roles.
  1. Be sure that you, and your potential advisors, are crystal clear about who will really be “on your account” – and exactly what you can count on each of them to do for you, both on a day-to-day level, but also in a crisis. Does your lead contact have the required clout with the top-two or three? Do they have adequate backup behind them? Most important perhaps, will the top-three be “on your account” and fully available to you if circumstances warrant?
  1. Apply our “lifeboat test”: As we’ve reminded time and again, most every firm you will look at is capable of doing the job, but the “lifeboat analogy” is a perfect one, and is usually an amazingly quick and easy way to finalize your choice: In a crisis - where there is often chaos on every front - everyone needs to work perfectly as a team and to fully pull their weight toward a common goal… and to add something indispensable to the team effort in order to be ON the boat.