Notice & Access – Our Initial “Take”
Much has already been written about Notice & Access as a proxy distribution and tabulation medium. We therefore won’t reiterate the rules and regulations surrounding this exciting – and by most accounts quite positive – new methodology for eliciting shareholder votes. But we thought our readers would like to see a few bullets representing some preliminary statistics we found, some caveats and some unintended consequences of “N&A,” as we all fully absorb this new concept…
- Broadridge Financial Solutions has said that in 2007 forty-five corporate issuers and five mutual funds adopted Notice and Access.
- Some of the 45 had non-routine proposals.
- Merrill Corporation recently stated that, so far, 36% of its N&A clients distributed “full-set” (hard-copy) materials to shareholders, 4% “notice only,” 5% a combination “stratified” by shareholder type, and 55% are still undecided on how to proceed.
- While only 45 companies have used N&A so far, this is a full 20% of those with 300,000 or more total shareholders who had meetings after 7/1/07.
- Use of traditional full-set is a powerful marketing tool, and the most effective way to obtain a quorum and maximize pro-management votes, many companies feel.
- Use of notice-only fits well with companies very confident in their vote return, and/or where upcoming proposals are totally routine.
- One company using a stratified approach to N&A sent all proxies domestically via N&A and all international proxies via hard-copy, on the theory they would not be able to fulfill hard-copy requests for such foreign holders “in time.”
- A “supplemental” (stratified) mailing could achieve many desired full-set results after an initial notice-only mailing.
- Use of N&A will clearly save companies many thousands of dollars in printing costs, but Broadridge Financial Solutions, and stock transfer agents also, will likely charge a little more to “facilitate” N&A — so check on this in advance.
- Many companies using N&A are still having 10%+ of last year’s hard-copy amount printed, “just in case,” although one large Silicon Valley company who used N&A for their November 2007 annual meeting saw less than 1% of their shareholders actually request hard-copy, and this, we believe, is common experience so far.
- Further to this prior point, Broadridge processed and managed more than 13 million shareowner records for issuers adopting N&A in 2007, and handled just 50,000 fulfillment requests for shareowners seeking full-set delivery of proxy materials upon receipt of the Notice; i.e., just 0.4%.
- Retail shareholder voting is greatly reduced when a company uses N&A (by as much as 75% we have heard!), so factor this into your vote projections and see if “retail proxy solicitation” should be sought from a professional solicitor.
- A corollary (and scary!) follow-on observation is it is believed 20% of companies would not have achieved quorum at their annual meeting in 2007 if it were not for broker discretionary (“10-day-rule”) voting!
- Given companies have to have their materials available and “action-able” by the time the N&A notice goes out to shareholders 40 days before meeting date, think more in terms of 45 days when doing your planning.
- The web site containing materials for viewing and voting must be cookie-free.
- “Large accelerated filers,” as defined by the SEC, must host their materials electronically on a web site whether they go with N&A or not!
These are our key initial observations about N&A as we begin 2008. If warranted, we will post additional developments here as they unfold.