Right now, most of our readers are up to their eyeballs in Annual Meeting-related activities…So it might seem weird to run this article right now.
But we say NO: This is actually a great time to reflect on what’s really important in your day-to-day corporate activities - and on what is NOT…And to resolve to dig deeper as soon as your Annual Meeting is over.
Here’s our checklist of things to check. Doing so can result in big savings - up to six and even seven-figure numbers at larger companies in our experience as consultants in such efforts:
- Step-one is to see exactly how many of your registered shareholders have a truly negligible interest in your company. The numbers are almost certain to shock you - especially if you offer a Dividend Reinvestment Plan. Here’s a note we got in March from our long-term colleague - and former STA President - Ray Riley: “I just received a proxy package from Bristol-Myers [one of many that he would ultimately get] that included a big, thick merger document and a proxy card and return envelope. The account has a total of .12300 shares. A complete waste of shareholders money!” Ray observed. And we agree: That’s just over six dollars-worth (that was left when Ray transferred all his full shares to a brokerage account) for a package that cost well over $6 to print, enclose, add postage to and mail out! The big takeaway here; If you haven’t already done so, insist that your Transfer Agent/DRP Agent amend the Plan to automatically close any and all accounts that drop below some predetermined amount and send a check to the owners - perhaps after issuing a fair warning to them, but certainly where only “fractional interest” is left.
- If your Transfer Agent is offering or wants to offer an “Agent-Sponsored DRP” - check to be sure that all expenses related to Plan holders will be completely absorbed by the Agent: Arguably, they should be allowed to collect the same fees and out-of-pocket expenses that banks and brokers charge to distribute proxy materials - but here is where you need to impose reasonable ownership thresholds for remaining IN such plans. And, of course, YOU should not be charged for any “account maintenance” fees or expenses for telephone calls or other “miscellaneous expenses” that arise from servicing Agent-Sponsored plans.
- Find out exactly how many “closed accounts” are being maintained, how much you are paying to maintain them - and when exactly they will roll-off the “live records”: It does make sense to keep closed account information available online to shareholder service personnel…for a full calendar year or so after they close. After that, “off to cold storage” we say. A few years ago, a very large company we worked with - with a once huge registered shareholder base - and with an admittedly complex history - was able to save a seven-figure number this way, when they realized that the number of inquiries per year from former owners had dropped nearly to zero!
- Right after your Annual Meeting is over is exactly the right time to benchmark any and all of the out-of-pocket expenses you are paying to maintain your registered holder accounts, such as postage, stationery, handling, storage and telephone charges. It isn’t that hard to do. And at most companies, the out-of-pocket expenses are many times larger than the annual service fees. Remember too that your Agent is, arguably, entitled to a bit of a markup for ordering or sometimes manufacturing and storing printed matter, envelopes, etc. But we call them the “OOPS” for good reason…Often, you will find direct charges, surcharges and “allocated expenses” that are not in line with those of more prudent shoppers - much less in line with the “value received.”
- Read our article on “RFP-Lite” - and, if you have not done so in three years or more, resolve to formally benchmark all of your fees and expenses against the small group of “best-in-class” Transfer Agents. As our sub-head indicates, they are operating in a very different world today - one with far fewer people to serve, much lower VOLUMES of work to do (if they do a good job in the first place, that is) and with far-more automated “self-service ways” to serve them. Very important to note, Transfer Agents are operating in an intensely competitive environment these days - and many of them have done an excellent job of “transforming” their operations - and their pricing models - and where “the price of bacon” has gone down a LOT over the past 3-5 years.
- Last but far from least - be sure to solicit competitive bids from the top-TAs if a “Reorg transaction” is on the horizon. While there is something to be said for allowing your TA to handle it - especially if your company will be the surviving one - you will likely be astonished at how many dollars can be saved by doing some smart comparison shopping, and some well-informed negotiating.
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