Proxy Management – At Its Best

An Interview With Michael Mackey, Managing Partner, Alliance Advisors, LLC

Q: Michael, how is the proxy management business going?

Michael: Alliance Advisors is in our third full year of business and fortunately for us we are experiencing a steady growth pattern. The business model we created as a proxy management firm was a pioneering concept in this industry. Essentially, we are the proxy manager for the Corporate Secretary or CFO of mid-size and small-cap companies as it relates to the shareholder meeting process. Most companies of this size do not have the staff of their large-cap counterparts, so more often than not we are taking the workload off these executives who are wearing multiple hats especially during the proxy season. To date, Alliance Advisors has managed the entire shareholder meeting process or the Notice and Access procedures for 180 corporate clients.

Q: What services does Alliance Advisors, LLC offer corporations?

Michael: Since we provide a turnkey approach, Alliance Advisors offers a full suite of services to complete the requirements for a shareholder meeting. These include filings, financial printing, registered holder mailings, broker distribution, vote tabulation, the conversion and posting of shareholder documents, web hosting, fulfillment and invoice processing. However, a good part of our work involves planning and consultation, particularly for those companies who are not familiar with the process. This analytical work and consultation involves developing timelines, cost projections, confidential bidding as well as logistical recommendations and proxy consulting.

Q: What are some of the new changes going on in the proxy world?

Michael: From an industry perspective, we see financial printers dealing with XBRL and Notice and Access, the continuing consolidation of transfer agents, the expansion in the number of proxy solicitors and Broadridge experiencing competition for the first time this year. On the federal level, the Obama Administration and the SEC have an extensive to-do list as it relates to proxy reform. Their first move towards repairing a new parlance called “proxy plumbing” was eliminating the broker vote in the election of corporate directors starting next year. Their other initiatives include proxy access, say-on-pay proposals and a major expansion in executive compensation disclosure. All of these issues are making the shareholder meeting process much more complex which only enhances the value of our business model to corporations.

Q: Tell us more about the business model you created?

Michael:We look at the shareholder meeting process as one project even though there are 8 or 9 different functions to complete. While each function has different operational requirements and associated costs, Alliance Advisors knows the mechanics and fees for all of these services because we provided them to corporations for many years at our former proxy solicitation firm. Therefore, we are able to develop a proposal for the client consisting of a line item cost estimate for each item of work along with our management fee. Our role as proxy manager provides issuers with a single point of contact to cost effectively manage all the steps necessary to complete the shareholder meeting process.

Q: Have many of your clients utilized Notice and Access?

Michael: Surprisingly, the adoption rate among our client base is much higher than the industry average. This year, approximately one-third of our clients implemented the Notice Only option compared to an industry participation rate of 20% across all eligible public companies. Based on our recommendations, many clients utilized a blended approach where some shareholders received hard copy documents while others received only the notice. We keep the reduction in retail voting in mind when making our recommendations, however, there are many companies with high institutional ownership or internal corporate control that are not impacted by a loss in retail voting and can take advantage of the cost savings Notice and Access can produce.

Q: What are your views on the current business environment?

Michael: The financial crisis has impacted many public companies particularly in the financial services sector and the resulting regulations are making Corporate Secretaries feel they are under siege. Only a few years ago, there were hundreds of initial public offerings each year compared to 43 for all of last year. This is clearly the result of the economic conditions but many also believe companies are staying private because of all the regulatory requirements of being a public company. Also, in the world of public companies we see a dramatic pyramid effect when you look at their shareholder populations. Nearly 70% of public companies have less than 10,000 shareholders creating a pyramid with a very wide base. These companies are typically the ones who need the most assistance with compliance, proxy matters and their shareholder meeting.

Q: How do you reach out to such a wide audience of companies?

Michael: Besides contacting companies directly, Alliance Advisors has developed a working relationship with a number of transfer agents and law firms. Our focus has always been to work with other industry providers and not compete with them. So even if the transfer agent is doing the mailing and tabulation or the attorney is handling the filings, there are still many functions for Alliance Advisors to perform. Our business model has received a warm reception from the legal community who seem to like our one-stop-shopping approach for their clients. In fact, we have worked directly with 25 law firms who were representing their clients in the execution of a shareholder meeting or an information statement distribution.

Q: Describe the process utilized by Alliance Advisors, LLC for your proxymanagement service?

Michael: Alliance Advisors implements a three step program as part of our proxy management service. First, we review everything the company has done in the past as it relates to the shareholder meeting process. This can include looking at the number and size of documents, paper weight, print techniques, postal rates, transportation costs, mailing methods, Notice and Access and broker invoices. We then make a series of recommendations to the client on ways to improve the process. After receiving client approval, the second step is we request bids on a confidential basis from our industry partners for each item of work based on our recommendations. We will than develop a turnkey proposal for the companies’ consideration including all the “must do’s” to complete the logistics for a shareholder meeting.

The third and most important step is Alliance Advisors will manage the entire shareholder meeting process for the issuer. This includes interfacing with the client, their counsel and transfer agent, all suppliers and the proxy intermediaries. Our goal is to ensure that the shareholder meeting process is managed professionally and cost effectively whether the issuer selects the Notice Only or the Full Set Delivery option. As a proxy management firm, Alliance Advisors continues to produce positive results as well as a high level of client satisfaction.