Approved by the SEC in 2007 the amended proxy rules allow companies to provide proxy materials to most of its shareholders over the Internet. (Please note that some employee-plan trustees insist that some kinds of plan participants still need to receive paper documents, but most plans are OK with N&A.)
Instead of automatically sending shareholders a hard copy set of proxy materials by mail (typically consisting of an Annual Report, Notice of Meeting, Proxy Statement and Proxy Card or Voting Instruction Form (VIF)), companies may choose instead to mail a “Notice of Internet Availability of Proxy Materials” (the “Notice”).
Information that must appear on the Notice includes the Internet website address where shareholders can access proxy materials online, instructions for requesting hard copy proxy materials by mail, telephone or email if they prefer to stick with paper, and the option to permanently elect to receive hard-copy materials for future shareholder meetings of all companies where they are shareholders.
Companies that choose the Notice and Access option are required to post meeting materials on a publicly accessible Internet web site - other than the SEC’s EDGAR Database – a rule that many companies currently flout, with impunity – which is bad, as we will see in a second. The materials should also be essentially have the same format and content of the hard-copy materials – and they should be readily “searchable” – two other rules that many public companies also flout these days…which is too bad – because a bad shareholder experience creates a risk of “killing the golden goose” that generates such huge savings when shareholders willingly give up their paper copies.
There is another bad side-effect of Notice and Access, namely the fact that many individual investors fail to vote their proxies when all the needed materials are not “pushed to them” and placed under their noses, where they can be handled as part of their normal mail-processing drill – and individual investors still vote overwhelmingly with management recommendations, which, increasingly, can make a critical difference in the outcomes.
Here’s our advice on how to max-out on the N&A savings – while also maxing-out on your individual investor vote:
First, recognize that shareholder demographics – and the related voting preferences – vary widely from company to company. At high-tech companies, voters overwhelmingly prefer the internet-only model. At older companies – which tend to have older and more old-fashioned shareholders – expect many of them to sign up to always get paper materials – or, a very bad thing, to ignore the Notice altogether.
Ask a variety of trusted providers for their advice on how best to “stratify” your mailings. Many companies still “push” paper materials to all individual shareholders, to max out on their votes. But most companies can reap big savings with minimal impact on the total vote by mailing only to shareholders with a “meaningful investment” (we say it’s a $20,000 one, but do some modeling to find a cut-off point that works best for your company) while mailing the Notice to all the really small holders. Many of these companies automatically send “full sets” to every shareholder who typically votes their proxy, regardless of size, to keep them in the fold.
Make sure that the materials you place on the website are truly “user-friendly” if you want shareholders to take the time and trouble to actually vote. Ever try to read an “Edgarized” document? Or try to scroll-through a lengthy PDF document that has no indexing features, or that is poorly or non-intuitively organized?
Make sure that your documents can be easily read on tablets and mobile devices. Many we see are NOT compatible here: Believe it or not, voting via mobile devices has been increasing dramatically every year.
We have lots of articles, with loads of practical tips on designing and delivering shareholder-friendly materials – both on paper and on the web. There are also many highly-skilled providers in this issue who can help you to “optimize” your big spending on shareholder materials… in a wide variety of ways.