“Say on Pay” — To Your Transfer Agent

It has been interesting to watch “Say on Pay” proposals capture the attention of investors, and investor support groups, in the United States.   Executive compensation and golden parachutes “run amok” are finally receiving the attention they deserve, most people would agree.

From our perspective at Shareholder Service Solutions®, there is another less expensive, less visible, less sexy (but still important!) activity receiving insufficient attention as to the amount paid for it by corporations:  stock transfer service.   It is one of those lower profile functions that many people improperly label a “commodity.”   When pressed, though, most corporate secretaries or investor relations directors confess that the “commodity” has become surprisingly expensive; and, ironically, given its stodgy reputation, more inscrutable as to what fees and expenses are actually being paid, for what specific services.

Unlike proxy solicitation, financial printing, a corporate action – where there is a specific goal in sight and straight-forward steps to get there – stock transfer is a somewhat thankless, never-ending journey to nowhere…other than avoiding shareholder complaints.   It is a function that encompasses numerous activities…

  • Shareholder recordkeeping
  • Shareholder inquiry – via telephone, letter, e-mail and fax
  • Transfer processing and related documentation review
  • Dividend payment and reconciliation
  • Dividend reinvestment
  • Proxy distribution and tabulation
  • Tracing and esheatment of lost property
  • Stock option and related plan liaison

…in agreements that we often see dating back 5, 10, 15 years – written with agents who in the interim sold their stock transfer business to the current provider, or to a version of the current provider who after several acquisitions is completely different from the one originally engaged.   If you signed up with Manufacturers Hanover as your transfer agent in 1992 and you, and they, left your contract alone – a fairly common practice – your agent’s actual name in the last 15 years would have changed from Manufacturers Hanover to Chemical to ChemicalMellon to ChaseMellon to Mellon.   And it is also highly possible that fees and expenses would have been added in that time period relating, for example, to report production and delivery; electronic self-service tools developed by the agent; or as a result of built-in, inflation-based annual increases in the contract’s pricing.

The bottom line is: changes have been rampant in the stock transfer industry, and while responsible corporate officers are somewhat aware of them, by and large they have not had the time or inclination to focus on them.   As a result, corporations have exercised insufficient “Say on Pay” on their stock transfer contracts and invoices.

This can be remedied by…

  • Sitting down with your transfer agent and going over every line item in your last 12 monthly invoices (to capture all “cyclical” fees and expenses)
  • Looking with your transfer agent at every page of your current contract, and verifying that they reconcile exactly with your invoices
  • Conducting a “request for proposal” exercise, eliciting bids from selected transfer agent competitors to ensure your pricing (and contract) are “best-practices”
  • If you are strapped for time, and by extension money, then engage the services of a company like Shareholder Service Solutions®, who can promptly perform an analysis of what you have, cost-effectively, and equip you with the ability to “Say on Pay” to  your transfer agent, like you really should