US companies could save hundreds of millions of dollars under a plan by regulators to let them inform shareholders about issues for voting at annual meetings through via the internet rather than by mail.
The plan could also increase the number of contested US board elections by giving disgruntled shareholders more chance of nominating candidates to become directors.
The Securities and Exchange Commission is expected to on Tuesday propose that public companies should be able to choose to provide shareholders with proxy statements – which form the basis for voting at annual meetings – via their websites.
Currently, companies must mail the bulky proxy statements and annual reports to shareholders, although investors can agree to receive them electronically.
Most institutional shareholders receive their documents electronically but US companies spend an estimated $1bn a year on printing and mailing proxy statements and annual reports. Alan Beller, director of the SEC corporation finance division, told the Financial Times: “This proposal, if adopted, would potentially save American investors, and the companies they own, hundreds of millions of dollars.”
Cox embarks on first governance initiative
Amid a wave of renewed shareholder activism in the US, the SEC plan could increase the relatively small number of contested board elections each year.
Shareholders who are dissatisfied with directors have often been deterred from putting forward alternative candidates because of the cost of printing and mailing out proxy statements with rival slates of names.
But the SEC plan would give shareholders the same ability as companies to cut costs by placing their rival slates on websites.
Mr Beller said: “The proposal, by reducing cost and by providing the advantages of online communications, would make it cheaper and easier for everybody, including management and those soliciting against management, to reach investors.”
The SEC plan would require a company that chooses to put its proxy statement on the internet to first send shareholders written notices advising them of the website. The notices, which could be similar to postcards, would also contain a telephone number giving shareholders the option to tell the company they still want to have the proxy statement in the mail. Shareholders who want to nominate candidates for directors on the internet would also have to first send postcards to investors.
Companies are estimated to spend $5 on printing and mailing each package containing a proxy statement and annual report. The cost of postcards would be small by comparison.
As the SEC is expected to seek public comment on the plan, it is not expected to take effect instead in 2007.
The Business Roundtable, which represents US chief executives, welcomed the plan. Thomas Lehner, director of public policy, said: “We are encouraged by any proposal designed to make the proxy process more efficient and cost effective.”
