Still Crazy After All These Years…

An interview with Rich Scotti of Scotti Graphics

Rich Scotti: This is the twelfth year that you and I have been talking about and writing about PROXIES…So I’d like to turn the tables, and start the interview for a change…and to say straight out that I think the headline should be “Still Crazy After All These Years”

The Optimizer: OK…but just so our readers know, who or what is crazy here?

Rich: Well first off, it probably is me, at least a little bit. The creation – and specifically the designing, laying out, proofreading, correcting, tweaking, printing and delivery of what I’ve often called “the humble proxy card” is a huge part of our business at Scotti Graphics. We are still the largest printer of proxy cards in the country – as we’ve been for very many years. And, beginning with my Dad, who founded the business 33 years ago - in 1975 – we have been consistent innovators here. So yes, to say that I’m crazy about proxy cards is really correct.

Also, as everyone who’s associated with the proxy season knows, it is a crazy business - and a business that has a way of making issuers, and all the annual meeting- related suppliers they need to have, kind of crazy too.

But the thing that drives me really crazy is how little most people seem to have learned from history – about the many perils of proxy cards, about how to avoid them, and about the wide variety of best practices that can keep us all from going crazy during the annual meeting season.

The Optimizer: We’ve been telling readers that the 2009 proxy season seems certain to be the craziest ever – initially because of the mass-migration to the Notice and Access model we expect. But now it seems certain that 2009 will be crazier yet - because of the credit crisis, the meltdown in stock prices – and to the fact that a lot of investors are crazy-mad at companies and corporate officials. What do you think?

Rich: Crazier than ever? Absolutely! Let’s start with Notice and Access, because it is something new to the majority of issuers, but also because issuers are going to need proxy votes from their “friendly” or basically “understanding” investors than more ever before.

Historically, the proxy card itself has been a key element in motivating people to vote. And it has been a key vehicle that lets people vote, and/or tells them how they can go about casting their vote. This is still true, I believe. But now we have the “Notice” that goes with N&A. And I believe that the design of this document is at least as critical, and maybe more critical than the design of the proxy card itself. Many people reportedly think that the Notice IS the proxy…But many others are clearly put off by all the information the Notice contains, and how complicated it seems to cast a vote ‘the new way’. The numbers speak for themselves here.

The Optimizer: So what kind of advice do you have for our readers? Rich: Design, layout, overall readability, reader-friendliness - and clarity - are the key words here. Plus, the document needs to look important…and make you want to read it. It also needs to leave you with a clear understanding of what you need to do to cast your vote - and in some cases, to understand ‘what comes next’ - since many companies will want to – or will discover they have to send an actual proxy card if they want the average shareholder to cast a vote.

The Optimizer: Got it; but what does this mean in practical terms?

Rich: Start with the envelope this year. Make sure shareholders will actually “Notice” - and will actually open it and look at what’s inside. Here’s where the layout, the wording, maybe your company “branding” - like the use of your logo and your company colors - can make a world of difference, on the envelope alone.

As to the actual Notice, the same concepts apply. But here, the layout itself – the choice of typefaces and type sizes – and the use of color to separate, or join, and especially to highlight key sections of important information can be critical elements of success, or failure. The same is true, of course, when it comes to the proxy card itself.

There are four other issues that are likely to be very big, and very important ones in 2009: First, many companies will need a lot more space than ever before - just to cover the election of directors - thanks to the big move to majority voting. To make us crazier yet, there are likely to be more shareholder proposals than ever – many of them at companies that have never even had a shareholder proposal before.

Especially important to note - it will be more important than ever before to layout all the proposals in a way that makes it crystal clear to stockholders whether checking a box is voting “for” or “against” the company’s recommended position on each issue. There is absolutely no room for confusion here. So having real design and lay-out experts on your team - and having people who really understand the proxy process on your team - is more critical than ever.

Last, but far from least; time will be particularly “of the essence” in 2009. This is partly due to the very tight filing, web posting, mailing and fulfillment deadlines that come with N&A. But let me also point out; there’s absolutely no room for mistakes…And sadly, rushing around at the last minute – and especially if you have a lot of “neophytes” on your team – is the root-cause of most of the costly mistakes we see people make – year after year – in the crazy world of proxies.

The Optimizer: Do you have some other practical tips to offer readers here?

Rich: You bet…And this takes me back to something that makes me really crazy – the fact that most of my tips on “best practices” go back a very long time. My number-one tip - I call it the first commandment of proxy printing - is to have only one captain. Oddly, more and more companies seem to forget this rule with every passing year. I think it’s because more and more people – from more and more places - seem to be involved in the process than ever before. So maybe it’s harder than ever to decide who “the captain” is or should be. But break this rule and you risk being dead in the water.

My second, and related tip, is to make sure that everyone is literally “on the same page” – by using a common “tool”; one that is shared by everyone on the team, but where only the captain can approve the “final version” of your document.

Last - and another interrelated tip - is to make sure that what your captain is approving is exactly what will print out. Amazingly, thanks to all the new participants that seem to be involved in the process these days, coupled with all the versions of and variations on the kinds of software they’re using, many people have been going backwards instead of forward here: What you see on your screen - and even on a pdf - is not necessarily what will print out anymore.

The Optimizer: You began by saying you’re an innovator: Anything new this year?

Rich: Yes, indeed. We’re working on a new tool – which will be ready well in advance of the 2009 season – that will allow everyone on the proxy team to review the schedule, the progress to date and the documents themselves from anywhere – and to propose changes and edits - as long as they have a BlackBerry. This will take a huge amount of craziness right out of the system – not just for issuers and their advisors but for their transfer agents, web-hosts and the printers and mailers too. Currently, for example, we have daily conference calls with most of our key clients and partners… where maybe a dozen people are on the call, most of them waiting for ‘their meeting’ or ‘their issue’ or ‘their important change or correction” to come up for discussion…or maybe just for a status report. You tell me: Is this crazy, or what? So here’s to a safer - and saner 2009.

Let me also mention that the new document tracking system we’re developing is not just for proxies. It will track, and will contain “alert” features, and “live” status updates on the production of any document, and it will also incorporate state of- the-art security features.

Separately, we are working on a new process to produce booklets, statements, multi-color letters and other items containing variable, account-specific data – on demand. I should also mention that we now have the capability to produce up to 200,000 forms or letters with account-specific data imprinted on them, and we can mail up to 150,000 pieces per day. Now more than ever we are ready to handle your design and printing programs, as well as your mailing needs.