Due for a Stock Transfer Check-Up?

More and more corporations are looking at their stock transfer contract situation today – terms and conditions, pricing, service package – for reasons we thought our readers would want to know.   Chief among these is the challenging economy companies are facing, and will likely continue to face for some time.  If the corporate secretary or director of investor relations is not calling for a “check-up” on what the company is paying for stock transfer and related services, the CFO or Treasurer soon will be.

A related reason is the due diligence attendant to corporate governance “best practices.”  Every vendor, every employee, every benefit – everything – is subject to close scrutiny in the current market  environment.

Substantial change has recently occurred in the stock transfer/shareholder services industry.  For example, America’s four largest transfer agents have all undergone a substantial reorganization, or game-changing “growth  spurt,” in the last seven years.  Much of the proxy solicitation business done in the U.S. today is by companies that did not even exist seven years ago.  And, similar stories can be told about lost shareholder search firms, shareholder meeting logistics advisors and financial printers.  Thus, with so much having changed since the last time these services were looked at, companies want a fresh look to make sure they are truly up-to-date.

Another reason is the heightened level of competition among vendors offering these services.  There is an almost rabid pursuit of new business by service providers these days, spurred on by the tough economy and the need to find new revenue sources.  So, corporate stock issuers know that a better deal than they are currently getting is likely available on multiple fronts, if they only look.

This is linked to an ironic counter-reason:  price hikes.   While salespeople at vendor competitors are willing and able to deal like never before, companies’ current vendors seem to be setting higher and higher prices – and appear to be finding more and more ways to invoice clients.  This warrants appropriate, informed “push-back” by corporate issuers.

The check-up process can happen as just that – an expert analysis of what is in place, validating the good and correcting the bad – or, as a more extensive request for proposal (RFP) exercise.  We at Shareholder Service Solutions usually do the current agent analysis by itself, although we regularly perform RFP facilitations also if that is the corporation’s chosen path.

Bottom line:  if you sensed greater scrutiny of shareholder service arrangements is happening at American corporations you are absolutely right, and there is help available if needed.