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The Buzz with Proxy-Access

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The buzz within the investor relations world hit an all-time high this week following the “delay” of the highly anticipated proxy-access provision, a regulation that was set to become effective on November 15.

The provision, which allows shareholders owning at least three percent of a publicly traded company for three consecutive years to nominate board members on corporate ballots, is one of roughly 100 or so rules to be implemented under the Dodd-Frank Act, discussed earlier on this blog.

The delay in implementation was the result of a suit brought by The U.S. Chamber of Commerce and Business Roundtable, an association of U.S. CEOs, calling the provision a “giant step backwards for average investors.”

Others are still pushing for proxy-access reform. The American Stock Transfer & Trust Co. and other transfer agents recently launched a Web site called www.reformtheproxysystem.com to rally support.

Regardless of whether new proxy-access rules are enacted — it is currently under judicial review — companies should still take this time to review practices and prepare.

At minimum, companies should be actively monitoring and engaging with significant shareholders, a point that is echoed in a recent Harvard Law School Forum about engaging with shareholders. Among the recommendations include monitoring the company’s investor base and shareholder filings, updating changes to advance notice, director qualification by-laws and corporate governance policies as well as reviewing the size and makeup of the board.

The next big hot button issue on the SEC calendar is the provision for Say-on-Pay. If the delay in proxy-access is any indication on how the Say-on-Pay provision will proceed, it could be quite some time before all 100 provisions of the Dodd-Frank Act are complete.

— Matt Sheldon, msheldon@pondel.com

socIal netwoRking

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There is something about the word “Twitter” that makes my hair stand up. And then there’s the word “Tweet,” which really gets my goat. Why? Because I have this perception that all of these social networking activities are nothing more than digital pollutants, clogging up the arteries that feed the Internet.
 
From an investor relations perspective, many social networking tools are being utilized to promote stocks, whether justifiable or not. And therein lies the rub: How do you distinguish the good information from the bad?
 
Personally, I think it comes down to social responsibility. For example, if an IRO would like to Tweet about a company’s 20% increase in revenues, I say Tweet on, as long as the news has already been publicly disseminated. But how about the use of Twitter to spout off about unsubstantiated information? Ultimately, there is a certain social responsibility that Tweeters should abide by to ensure that important messages do not get lost amid the cacophony of superfluous Twits, I mean Tweets.
 
Instead of perceiving social media as another outlet to senselessly bombard audiences, they should be perceived as a privilege, a tool, an effective method that, when used judiciously, provide valuable information.

 

— Evan Pondel, epondel@pondel.com
 
 

Heard in the Corridor

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I recently spent a couple of days at a gathering that was attended by investor relations executives from some of America’s most loved and largest companies who listened intently to, and had the opportunity to converse with, former SEC chairmen, noted economists, authors of best-selling business books, the head of a large investment bank and astute peers.

Since the meeting was not open to the media and the executives paid big bucks to attend, I will not quote anyone directly or provide the color to which only paid attendees should be privy.  Nevertheless, here is a link to advice on legal harm and a few solid nuggets of advice and opinion that came forth—pragmatic, to save one from legal harm;  worrisome to keep us up at night when we are starting to sleep a little better; and, alas, some feel-good opinion.

— Roger Pondel, rpondel@pondel.com

The Right Stuff

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NIRI (the National Investor Relations Institute) recently reviewed the investor relations Web sites of the 100 largest publicly traded companies in an effort to develop a set of best-in-class practices.  The results were presented in a comprehensive Executive Alert distributed to members.
 
Some highlights to keep in mind when reviewing or building your own IR site:
 

  • Provide direct contact information for the IR team (include both internal and external contacts).
  • Use common names for standard pieces of information to make them more easily identifiable to users.
  • Don’t burry important company messages in your FAQ.  Create separate sections for key information such as shareholder services.
  • Avoid having the site launch new windows as a way of accessing content or functionality.

 
Additionally, certain core elements were found among the Web sites that were reviewed:
 

  • 92% contained earnings press releases;
  • 92% contained stock quotes/charts;
  • 89% provided transfer agent information;
  • 87% offered webcasts;
  • 82% offered e-mail alerts;
  • 80% gave dividend information;
  • 77% included a historical stock price lookup feature and a history of stock splits; and
  • 62% included an investment calculator.

 
If you haven’t looked at the content on your investor relations Web site recently, now is a good time for a check-up.  As we reported here on August 5, 2008, the SEC recently released new interpretive guidance that could give companies the ability to use their Web sites as an appropriate full disclosure outlet.  The more up-to-date and feature rich your site, the better chance you’ll have of meeting the SEC’s Web site disclosure guidelines.

 

— Laurie Berman, Senior Vice President, lberman@pondel.com
 
 

E-Proxy Solicitations – Navigating the Rules

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What’s all the fuss about? After all, the SEC is only trying to provide shareholders with more options to access proxy materials, leverage technology and reduce costs for corporate issuers. While the SEC’s motivation to revise and modernize proxy solicitation procedures is commendable, navigating through the rules and how they apply to corporate issuers takes time.
 
In January 2007, the SEC adopted the Internet Availability of Proxy Materials rule, better known as the “Notice and Access Model,” which became effective March 30, 2007. This was a voluntary rule that leaves it up to the corporate issuer to decide whether or not to adopt e-proxy solicitations.
 
The rule incorporates guidance on a myriad of issues including but not limited to, householding, security and privacy issues, State Law Notices, the role of intermediaries, the mechanics of proxy solicitations, etc. Up to this point, the rule was voluntary
 
Then in June 2007 the SEC adopted additional amendments to the proxy rules under the Exchange Act, as well as approved the Shareholder Choice Regarding Proxy Materials rule. This is a mandatory rule that goes into effect January 1, 2008 for large accelerated filers (LAF) and January 1, 2009 for second tier filers and registered investment companies.
 
The SEC noted that it chose to adopt the proposal to “provide shareholders with enhanced choices without changing significantly the obligations of an issuer or other soliciting person.” In other words, the new rules should be no big deal to implement.
 
So what are a company’s obligations under the Shareholder Choice Regarding Proxy Materials rule? In simple terms, they are:
 

  1. If an issuer is required to furnish proxy materials to shareholders, then the issuer must also post its proxy materials on a specified, publicly-accessible Internet Web site (EDGAR does not apply here) and provide shareholders with a notice informing them that the materials are available as well as explain how to access those materials.NOTE: This rule does not apply to a proxy solicitation related to a business combination transaction.
     
  2. An issuer has two options to make proxy materials available to shareholder:
     

      A – The “notice only option” – requires an issuer to post its proxy materials on an Internet Web site and send a Notice to shareholders to inform them of electronic availability of the proxy materials at least 40 days before the shareholders meeting. If an issuer opts to use this option, it must respond to shareholder requests for paper copies and must offer shareholders the option to permanently request paper or email copies of proxy materials for all shareholder meetings

     

      B – The “full set delivery option” – an issuer can deliver a full set of proxy materials to shareholders, along with the notice. A separate notice does not need to be prepared if an issuer incorporates all of the information required to appear in the Notice into its proxy statement and proxy card. And the issuer does not need to respond to requests for copies as required under the notice only option.

     

  3. Within the “notice only option” and “full set delivery option,” the SEC provides issuers with details related to the timing of when notices need to be sent, what information needs to be included in the notice, the use of plain English, the design of the publicly accessible Web site, the means to vote, how to handle requests for paper or email copies of the proxy, Web site confidentiality, and other details.

 
The SEC should be commended for its work in crafting the new rule, providing corporate counsel with a level of detail to help ensure that issuers understand the new requirements. But conceptually understanding the new rules does not equate to knowing which e-proxy option to follow. While your corporate counsel will be able to navigate you, the issuer, through the legal framework, PondelWilkinson stands ready to guide you through the strategic decision-making that will lead to the right solution for your company.

 

— PondelWilkinson, investor@pondel.com