Protests, Market Dips, Unemployment And Uncertainty In European Banks—Oh My!

Rhoda Anderson, founder of Rhoda Anderson Associates and EZOnline Documents

As if the volatile worldwide financial markets and high unemployment rates aren’t enough of a roller coaster ride, add to that the recent protests on Wall Street and around the world. It’s enough to make an issuer dizzy.

What does this suggest as we gear up for the 2012 Annual Meeting Season?

First, regardless of what one might think about the Occupy Wall Street movement, and the so-called ninetynine-percenters there is certain to be intensified focus on executive pay this season, and, we bet, a much bumpier ride for say-on-pay approvals than in 2011. The Presidential debates, and a global economy that seems to be stuck in the mud are already adding more fuel to the debate over “pay equity” and whether the gap between the top 1% and the remaining 99% of income earners has grown unacceptably large. And even without these factors, many people in the investor community think that last year’s say-on-pay proposals were too much like a rubber-stamping exercise, and that much more discussion and much closer scrutiny is warranted going forward.

Another change we saw in 2011 was the big decline in voting by normally issuer-friendly individual investors – coupled with a noticeable increase at many companies in “unfriendly votes” from this previously friendly constituency.

The one common denominator on the investor scene is the call for far greater “transparency” where corporate communications are concerned; for a lot less boilerplate, and for a lot more “management discussion and analysis” – in plain and understandable English.

The Notice and Access Quandary:

About four years ago, Notice and Access allowed public companies to issue hard copy notice of internet access to proxy material and present all the proxy and voting documents electronically – in lieu of mailing paper ones – unless investors specifically ask to have paper documents sent. After a disasterous year the SEC allowed the issuers to include a tutorial with the notice which helped shareowners understand what was going on. The good news is that electronic investor communication is far less expensive than traditional printing and mailing of paper materials, and that more and more shareowners are opting for electronic delivery each year. The bad news is that many people attribute the decline in individual voting directly to Notice and Access, which we think is simply not the case.

Why have individual investors been voting less and less often – even when the numbers of “hot issues” on the proxy ballot seem to be increasing, rather than decreasing?

Lots of reasons have been offered: We’re way over-busy; proxy voting is not a top priority for most people these days…and, my own top pick, most proxy packages are far too difficult to access and hard to understand.

My Top-five tips for designing and delivering proxy materials that will have a chance of being read – and acted upon…plus one to grow on…

1. Put the matters to be voted on – along with the management recommendation and the proponent’s statement if there’s a shareholder proposal right up front in your “proxy package”.
2. Use plain English – and keep a “conversational tone”: “Test drive” your paper and electronic documents with ordinary readers for “readability”.
3. Make sure that your documents are easily “navigable” – whether they are to be read electronically or on paper. An up-front index, index “tabs” on both your paper and electronic versions, prominent headlines and subheads that help people find what they want quickly – and intuitively – and footnotes way at the end, wherever possible are all things that will help the reader along and keep them reading.
4. Make sure that your electronic documents will open quickly and easily – for average people with average computer skills and systems capacity.
5. Do your math, and use a smart “stratification” system: Send paper packages to all your “larger” individual investors and to all your “paper voters” who voted last year, regardless of their size. Send reminders to electronic recipients – and to larger paper recipients who have not voted whenever you have important issues on the ballot and where you want all the favorable votes you can get.

And here’s a tip to grow on: use experts to help you with all of the above. Find the suppliers who keep abreast of SEC regulation and industry changes. They work on the proxy process all year while you, hopefully, you do it only once a year…