Tag: Notice and Access Rule

Investor Relations 2.0 After This Proxy Season

Hopefully your annual meeting of investors or shareholders went better than the annual meeting for Fortis. Shareholders in Ghent, Belgium threw shoes, coins and ballot boxes. (There is even video.)

Broc Romanek put together his thoughts on Proxy Season Developments: Ten Signs that Things are Changing Online.

  1. First Use of Live Internet Voting
  2. Soliciting Shareholder Feedback on Compensation Practices
  3. Soliciting Shareholder Feedback on Disclosures
  4. Emergence of Proponent Sites Designed to Solicit Mutual Funds
  5. Easier Ability to Track Voting ResultsUse of “RSS Street” to Follow Developments
  6. Use of Corporate Blogs (and Third-Parties) to Solicit Questions
  7. Use of Twitter to Describe Live Events
  8. Investors Communicating Through Social Sites
  9. Much Easier Use of Video Changes Everything

There is also an opportunity to review the success of the online delivery of materials through the Notice and Access Rules. Dominic Jones of the IR Web Report pointed out some statistics on its effectiveness. According to the Broadridge Notice and Access Resource Center there is a big cost savings, but also a big drop in shareholder participation.

But 2.0 tools are giving more power for investors to voice their views as part of the annual meeting. Shareholder activist Robert A.G. Monks posted a transcript of his presentation of five proposals at the Exxon meeting. You can also hear the entire meeting.

References:

SEC’s Notice and Access Rules: What Do They Mean For Your Company?

noticeandaccessComputershare has put together a White Paper that they distributed through Compliance Week: An Explanation of the SEC Notice and Access Rules: What Do They Mean for Your Company? (.pdf)[For Compliance Week Subscribers]

Pamela Eng, Product Manager for Computershare Investor Services takes us through The SEC’s Shareholder Choice Regarding Proxy Materials rules in Release No. 34-56135 (.pdf) issued July 26, 2007.

[I mentioned some of my confusion about the Notice and Access Rules in SEC Requirements for Online Annual Reports and Proxy Statements. (Thankfully, the rule is not in my domain.)]

Pamela points out that there are now three ways to provide annual meeting materials to shareholders:

  • Notice Only. You can send just a notice with a link to materials on the website.
  • Full-Set. When you send the full set of printed materials.
  • Mixed Set.  When you send some and leave the rest online.

The idea behind the “notice only” delivery was to save printing and delivery costs. Theoretically, the information is more useful online because it searchable and linkable.

It seems even Pamela is not completely happy with the rule. She offers six recommendations to the SEC on how the rule could be improved.

  • Allow more flexible timing for posting online documents
    We requested that the SEC allow the online documents to be made available one or two days
    after the initial mailing has been sent, rather than on the mailing date. This would give extra
    time for companies to get their documents approved and programmed for the website.
  • Allow more time to fulfill holder requests
    The rule gives only three days to fulfill requests for registered holders, yet gives nine days
    to fulfill the requests of beneficial holders. Our recommendation was to allow six days for
    fulfillment on both sides.
  • Change the 40-calendar-day timeline
    A number of companies had problems meeting the 40-day deadline for notice-only mailings,
    which led us to request that the deadline be moved to 30 calendar days before the meeting.
    Shareholders will still have plenty of time to request materials before the meeting date.
  • Allow educational information to be included with the notice-only mailing
    Because of shareholder complaints about confusion and issuer concerns about holder
    education, we advocated the inclusion of educational information with the notice. This
    information could explain the regulations and why holders are receiving a notice.
  • Allow the voting telephone number to appear on the notice
    The SEC was concerned about possible uninformed or capricious voting by registered holders,
    who would vote without first viewing the proxy materials, so it did not allow the voting
    telephone number to appear on the notice. We believe that holders understand the issues, and
    that allowing the number to be placed on the notice will help holders better understand the
    overall process.
  • Issue an FAQ, Q&A or other written clarification of the rules
    The new notice and access rules are potentially confusing to both issuers and shareholders, and
    confusion may increase as many more companies begin the process in 2009. We asked that the
    SEC issue some written clarifications, possibly including a frequently asked questions document
    (FA Q); a question and answer bank; or, in some cases, a rewrite of the rules themselves.

SEC Requirements for Online Annual Reports and Proxy Statements

The SEC is trying to move investors further into the internet era with its new regulations on the ability to furnish proxy materials to shareholders by posting them on an Internet Web site and providing shareholders with notice of the electronic availability of the proxy materials. [SEC Release 34-56135] This is amendment to the original electronic delivery regulations in SEC Release 34-55146.

I am confused with a statement on page 11:

The materials must be presented on the Web site in a format, or formats, convenient for both reading online and printing on paper.[FN35]
footnote 35:
We believe that requiring readable and printable formats is important so that shareholders have meaningful access to the proxy materials. When determining the readability and printability of formats, issuers should consider the size of the files because many shareholders do not have broadband connections. Although some types of files may be suitable for persons with high-speed Internet access, the readability and printability of a document may be affected significantly by the time that it takes to download the document.

I expect that most people expected they post a .pdf version of their annual report and proxy statement on their website. This seems to indicate that you can’t if it would take a long time to download.  Personally, I though .pdf files would be the way to go. This leaves some doubt in my mind. Pdf files tend to be big which would result in a long time to download.

You can read more in this summary by John F. Olson, Partner, Gibson, Dunn & Crutcher LLP and Visiting Professor, Georgetown Law Center on The Harvard Law School Corporate Governance Blog: E-Proxy Rules Take Effect for All Public Companies.