BROADRIDGE Financial Solutions has released preliminary figures showing sharply lower participation rates by retail shareholders in annual meetings of companies using the new “notice-and-access” model.
“Notice-and-access” entails sending a notice to investors by mail asking them to go online for their annual meeting materials, or to request printed materials to be mailed to them. It is seen as a way to cut costs for public companies while creating more compelling online experiences for shareholders if companies reinvest part of their savings to improve their websites.
In a presentation (PDF 525KB, 17 pages) to the NIRI San Diego Chapter, IJ Feinman, SoCal territory manager for Broadridge’s Investor Communications Division, provided voting participation results from 12 companies that have used the new model since it went live July 1.
The results show sharply lower participation rates compared to the prior year when the notice-and-access model was not available. A paltry 3.4% of retail shareholder accounts voted in 2007 compared to 15.1% in the prior year. The total number of beneficial shares voted is also down dramatically to 15.3% from 22.6% a year earlier.
|Based on voting rates in 12 meetings, sharply lower numbers of shareholders are voting compared to last year, according to Broadridge.|
While they are early and based on a small group of companies, these dismal results confirm what I have been saying about current online practices being “a mess” and they explain why Microsoft recently had to resort to a follow-up mailing to its beneficial shareholders. They also underscore that the image-based online proxy statements and annual reports that Broadridge and transfer agents are using are not effective for retail investors.
Companies must take control of online experience
Any company that is planning to use the notice-and-access model for their next meeting, and even those which are holding off for a year, would do well to read our guidelines for Shareholder Meetings on the Web. Notice-and-access is not something that companies can offload entirely to outside suppliers.
It is unfair to lay blame for poor participation rates only on Broadridge or other providers. Companies must be actively involved early on because there are many things that only they can do to engage and encourage investors to go online. Hopefully, these early figures will be enough to get everyone reevaluating their practices and processes.
Regulators should follow through and review
From a regulator’s perspective, these early results should raise serious concerns. They suggest that the vast majority of retail shareholders are not engaged in their investments and that the notice-and-access model is only making matters worse. It didn’t have to be like this.
In my view, the bifurcated mailings clause is something that needs an urgent rethink. It’s being used to chase quorums. Companies are sending printed materials and proxy cards to small groups of their biggest shareholders, but sending notices only to their many smaller shareholders.
Is it really in keeping with an investor protection agenda to allow companies to send printed materials to their biggest, most informed and best resourced shareholders, while sending nothing to the retail investors who would benefit most from them?
If we are going to do this, then everyone should be treated the same. That’s the only way corporate secretaries and investor relations officers will pay attention to the online experience they are providing to their shareholders — big or small.
And regulators need to step in and enforce their rules for online proxy statements and annual reports. None of the reports I have seen meet the “convenient for online reading” standard. One firm is providing a big PDF blob as the only format. That’s clearly not acceptable. But it’s actually better than those image-based and Flash-based reports Broadridge and mobular are producing. At least you can copy content from a PDF document.
Finally, Broadridge’s notices are bad (actually, everything they’re doing is bad). The notice they are mailing out looks like junk mail or a trade confirmation.
Computershare’s notices are great. Nice big URL. Color. It’s obvious what they’re about. Why can’t Computershare do the mailings to beneficial shareholders?
It’s all a big mess quite frankly. Hey, but at least we’re saving the planet. Update: I’m told on good authority that we’re not really saving the planet either.
Update Jan. 15, 2008: Broc has posted new stats based on 69 companies using notice and access to the end of December 2007. Retail participation drops 75% from 17% to 4%. Pretty dismal.