LATER today, I’ll be participating in a webinar organized by TheCorporateCounsel.net on the SEC’s new e-proxy process, which companies will soon be allowed to start using for most of their shareholder meetings.
While preparing for the webinar, it struck me how important it is that companies make a good impression the first time they use the notice-and-access model.
That’s because there are often no second chances on the Web. You do it right the first time or you potentially lose people for good.
Questions we have no answers to
There are a few big question marks hanging over how the process will pan out. One unknown is what impact the “notice-and-access” model will have on annual meeting participation rates, especially among retail beneficial holders.
No one knows for sure how many shareholders will go online to vote their proxies when they receive the notice in the mail about the availability of a company’s proxy materials online. This could impact some companies being able to reach a quorum.
It’s also not clear how many shareholders will request printed materials to be mailed to them. I’ve seen or heard estimates ranging from 6% to 20%.
While I think the cost savings from reduced print and mailing costs will be substantial, it’s not clear yet just how much companies will save once you factor in the new costs of fulfillment, smaller print runs, and usable online documents.
And some have suggested there could be PR problems when shareholders realize they have to take the extra step of ordering printed materials if they haven’t already elected to continue receiving them, though I personally doubt this is much of an issue.
First impressions will count
But one thing I am certain about: the experience shareholders have the first time they use the process will influence their willingness to go online to vote at future meetings.
It could also influence their decisions to request that companies continue sending them printed mailings, which could diminish cost savings in the long run.
And that all-important first impression shareholders have with the notice-and-access system might not be within your control.
It could very well be set by the first companies to take advantage of the new model starting this August. If they screw up, all who follow could suffer the consequences.
How many shareholders will you lose touch with?
Related to first impressions is the question of what impact the process will have on those apathetic shareholders who typically don’t bother to vote. Does the new process provide an opportunity to engage these people, or will they become even less reachable than they are now?
Currently, these people, and that’s apparently most retail shareholders, are getting important information sent to them annually. Whether they read it or not isn’t really known, but they’re getting it.
However, as companies start using the e-proxy process these silent shareholders are predisposed to neither go online nor request printed materials. As such, they may well get no information from the companies whose stock they own.
I wonder what that means for companies’ long-term relationships with these shareholders. How loyal will these uninformed shareholders be in a proxy fight? Will they be more susceptible to raiders and special interests? Will they continue to hold or add to their holdings if they’re not getting information?
Early adopters will set the tone
We should all hope that the companies taking advantage of the e-proxy process early on are not doing it just to save money, but rather doing it to provide a more engaging and meaningful experience to their shareholders.
That means pulling out all the stops to drive people to their websites, and then giving shareholders a good reason to come back again in the future because they found it a worthwhile experience the first time.
If the early adopters handle the online user experience well enough, I’m sure companies could turn a lot of apathetic shareholders into active and interested ones.
But if the only reason companies are using the e-proxy process is to save money, then all companies will likely pay a higher price in the future.