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Follow on Google News | Grow your NOBO list with Positive Stocks Investor RelationsRetail communications key for 2010 proxy season as Rule 452 and notice and access threaten turnout
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Become a Client Contact us Today Positive Revolution Inc. info@positivestocks.com www.positivestocks.com Retail communications key for 2010 proxy season as Rule 452 and notice and access threaten turnout For several years, IROs have paid lip service to retail investors, expressing an interest in attracting them without necessarily backing up their words with actions. This is changing: recent regulatory reforms have made the retail vote more vital than ever this proxy season. Notice and access (N&A), which many US companies have eagerly embraced, has led to lower retail voting levels. At the same time, changes to Rule 452, eliminating the broker vote for director elections, have boosted the importance of the retail vote, and it’s no exaggeration to say individual investors could make or break a director’s bid for reelection now that brokers aren’t casting their clients’ votes. Other experts point out that efforts to communicate with retail shareholders are ultimately worthwhile because individuals tend to stick by a company in bad times as well as good. ‘Typically, retail investors love issuers,’ explains Charles Rossi, executive vice president at Computershare and president of the Securities Transfer Association. ‘There is a huge loyalty factor there.’ So what can issuers do to appeal to retail shareholders and make the most of that loyalty factor? Appealing to the voters 1: Make sure your notice gets noticed. ‘Companies that sent out only a notice saw a significant decrease in the number of retail investors who actually voted,’ explains Rossi. He says this proxy season the SEC will almost certainly allow more latitude in how public companies can present information to investors. Issuers will be able to include educational materials, explaining why N&A is a good idea and why they want retail investors to vote. Until now, everything about the e-delivery notice that public companies sent out, from its font size to its wording, was strictly regulated, Rossi adds. He predicts that the notices of the future ‘should be a little more eye-appealing.’ 2: Make the case for e-delivery and electronic voting. In Canada, public companies can ask investors to consent to e-delivery but can’t simply send a notice with the assumption that it equals access. Therefore, Canadian IROs must persuade investors of the advantages of e-delivery. Rossi points out that the uptake of e-delivery for investors at companies that use Computershare’ Karen Danielson, shareowner services manager at the Coca-Cola Company, calls this ‘a win-win situation’ because e-delivery saves the beverage giant money while helping the environment. She notes that since 2005, when Coca-Cola first signed up to the eTree initiative, 350,000 trees have been planted through this program. Johnson & Johnson uses its IR site to argue that its dedication to improving the health and well-being of people extends to protecting the environment by offering electronic versions of the company’s publications. The site then tells investors, ‘You can do your part as well,’ and provides a link for them to sign up for e-delivery. 3: Pave the way for the notice card with a pre-announcement. Some issuers notify investors that proxy materials will arrive soon. A few send this message by traditional mail, while others prefer email. ‘Sending out an announcement ahead of time can help investors understand what they’re going to receive,’ says Sevcik. 4: Consider a hybrid approach to N&A. Issuers can choose to send certain retail shareholders paper packages while communicating with others electronically. . Sevcik recommends that companies decide upon a hybridization strategy only after they have studied voting patterns. For instance, she points out that it makes sense to use e-delivery for investors who previously used the internet or phone to vote. ‘Companies have an ongoing dialogue with their employees, so they’re easily able to use that by prepping employees on when and how they’re going to receive notice of the proxy materials, as well as the ease of various means of voting,’ says Schneider, adding that the response can be ‘quite significant’ Technical assistance 6: Phone up retail investors and help them vote. McGregor has heard of public companies using call centers to elicit a response from retail investors, but he believes the practice is still the exception rather than the rule. ‘Companies can look at their top registered holders and see whether they vote,’ says Schneider. ‘You can follow up with phone calls to make sure they saw the materials and give them assistance with the mechanics of voting. Phone calls traditionally help boost the retail voting returns, although calling everybody is cost-prohibitive.’ 7: Simplify your voting process. Sevcik points out that phone or internet voting should be simple and easy to use. She says some companies detail every proposal on their phone-voting systems, alienating the precise audience they’re hoping to attract. ‘Investors have generally decided how they want to vote,’ she warns. ‘Lengthy explanations can make them frustrated and they may hang up.’ 8: Promote direct investment. Direct stock purchase plans and dividend reinvestment plans ‘really encourage loyalty,’ says Rossi. ‘When there is a plan, you’d be amazed by how many shareholders take advantage of it. It’s a wonderful opportunity for individuals to get capital appreciation and low-cost investing using just their dividends.’ 9: Meet with retail investors and intermediaries face to face. In the past year, CGI Group, a Montreal-based IT and business processes company, has hosted three separate luncheons and breakfasts for brokers and bank salespeople so they can convey the latest information about CGI to their retail investor clients, says Lorne Gorber, vice president of global communications and investor relations at the firm. ‘If you get 50 brokers in a room, maybe a quarter of them are there for the free sandwich, but the others might like to hear something and share it with their clients,’ Gorber says. He notes that this retail tool can also prove a boon for cultivating institutional interest: ‘One thing that can motivate an analyst to start coverage is having the sales people ask questions about a name their firm is not currently covering.’ http://www.positiverevolution.org http://www.apositiverevolution.com http://www.positivestocks.com # # # Positive Stocks content is distributed to millions of individuals online and over 70,000 financial professionals, including U.S. and international buy-side analysts, investment research professionals and portfolio managers. www.positivestocks.com End
Page Updated Last on: Dec 08, 2010
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