Have You Carelessly “Stratified-Out” Your Most Loyal Voters?

Long-term readers will recall, we hope, our many articles on “The Best and Worst Annual Meeting Materials to Cross Our Desk” each year – many of which inspired readers to do better, we were told – many of which engendered hearty belly-laughs – and some of which inspired pure pity, for the poor fools who’d fouled up badly.

But of late, our mailbox has been seriously emptied of serious content – even though your editor continues to manage most of his own pension funds via a Sep-IRA that’s mostly (still) in 70 – 100 stocks at any given time – and where he tries to follow his holdings carefully.

So far this season, those green-imprinted envelopes that hold only “Notices” – which your editor automatically rips in half, and tosses in the round file – have been outnumbering actual proxy materials by about two or three-to-one. Do you really think that the receipt of the “Notice’ will impel people to go to a website, download and try to review the typically awful stuff that most companies put up there – and vote on your proposals? Current statistics tell you the answer is mostly NO…

Actually, we don’t mind being “stratified out” of getting hard copy materials from companies where our investment is “immaterial” – either because the stock arose from a spin-off – or, in at least 10 cases are “vestiges” of old DRPs that we tried to cash out, or move to our brokerage account, but where the totally un-portable fractional share still remains - too small to warrant our own time and attention to clean up. And yes, we have more than a few holdings where the stock has dropped so much that the portfolio manager (me) has mentally written it off…even while hoping for a miraculous return from the dead. And guess what? If yours is one of those companies, maybe it is more important than ever to get your story out there!

But people…Some of you are “stratifying” your mailings of hard copy to holders of 5,000 shares or more! So for a $30 stock, you have to hold $150,000 worth to get a hard-copy annual report, proxy statement, proxy card or VIF. For the many otherwise outstanding companies that are in the $65 - $85 per share range, in these lamentably  stock-split-less days – you’d have to have an investment of $325,00 to $425,000 in order to “qualify” for hard copies of all that stuff you corporate folks, and your pricey lawyers and “creative teams” work so hard to produce!

Let’s look at stratification in a simpler and better way: We say, any investor with $20,000 worth of your stock – which really isn’t chump change – is a valuable investor. That’s 667 shares of a $30 stock. For those of you with math issues – a one-thousand share investment in a $30 stock – which many companies seem to be “stratifying out” – is worth $30,000 – as is a 500 share investment in a $60 stock, or a 250 share investment in an $80 stock - which really isn’t chump-change, but which many companies seem to be mindlessly stratifying out these days.

As the headline is trying to remind you, “ordinary investors” - in the $20k - $30k range - are among your most loyal stockholders. And, until recently, they have been among your most loyal voters – and among your most faithful voters – since such investments are “meaningful ones” – to them…

And as we have been reminding in nearly every issue, when so many important proxy issues are decided by a majority of the votes actually cast – by actual people – and not counting in the “broker non-votes” as one can not do – except on totally routine matters – every real vote really counts in a close race.

The votes of “ordinary people” – who have what they think is a meaningful investment in your company – really count big-time when there are a lot of “professional investors” looking to Vote No on certain directors, just to ‘send a message.’

But there is another important takeaway here: By not sending printed matter to your most loyal fans, you are not just effectively disenfranchising them, you are cutting most of them out of the communications loop altogether: Your company will soon fall off their radar screens – and, as voting statistics clearly show, ordinary people will totally lose the habit of voting. And if, some fine year, like maybe this one, you may really need their vote - it will cost you plenty to try to get them to make an exception – just for you – after you have been off their radar screen a few years.

So please readers, do your own math – with care. At most companies we look at, 80% or more of the savings can be realized by “stratifying out” folks with fewer than100 shares. So why diss investors whose investments may be in the mid-teens, or low-ish tens of thousands of dollars – but who, in the aggregate, often have 30% - 50% of your entire voting stock… and lose their loyalty as well as their votes?

THREE MORE TIPS TO MAXIMIZE YOUR RETAIL VOTE:

1. Be sure to mail hard-copy materials to every retail holder who has voted a proxy in the past three years: These are the most faithful voters out there.
2. Bird-dog your Employee Plan Votes: Send voting reminders via email, with a link to the voting site. Employee Plan participants often have six percentage points of your outstanding shares - or more
3. Bird-dog your Officer and Director votes - which often amount to a big double-digit percentage of your overall ownership. Many times, your Os & Ds will have shares both in registered and street-name positions - And some use more than one broker - and have shares in various “Plans” as well. Sometimes they seem to think that voting one position does the trick for all…or are just too busy to round up and cast their votes. Sadly, and every year, we see companies lose on items that would have gone just fine, had officer and directors cast their own votes.