January 18, 2006
Comments on File No. S7-10-05
Dear S.E.C. Commissioners:
Fund for Stockowners Rights is a nonprofit 501c(3) stockowner advocacy group.
We oppose the proposed rule Internet Availability of Proxy Materials. It would be a huge step backward in corporate governance. It would encourage even less participation by stockowners in monitoring and improving their corporations performances. We should be trying to find ways to marshal the attentions and talents of the millions of stockowners to improve, not ignore, the behavior of their corporations.
Here are particular comments:
1. Stockowners have the right to receive notices of meetings plus annual reports plus the proxy statement and forms of proxy. These are rights under state and federal laws. The key is actually to RECEIVE them. Not to be sent a postcard or letter saying that they have to take some additional, onerous, and costly method of actually RECEIVING the rightful materials.
2. The cost of printing the proxy statement and the annual report are easily under 1 per stockowner. Perhaps elaborate four-color annual reports may cost more. The point is that the cost of corporate governance is so minute per stockowner that any argument about cost savings is truly ingenuous. In dollar terms, corporate governance is truly inexpensive. The benefits to the corporation have much bang for the buck.
3. The cost of abrogating the right to RECEIVE proxy materials is huge. It explicitly implies that the board does not want to have the stockowners review anything about the corporations activities and prospects, let alone have any input in making informed decisions or proposing improvements.
4. The cost of printing out pages on a home computer printer ranges from 5 to 15 cents per page depending on whether black and white or 4-color. 100 pages equals 5 to 15. This personal cost to the stockowner is many times higher than the efficient printing by the corporation itself.
5. Internet access is not free to stockowners. For those with computers at home or work, there are the costs of acquisition, maintenance, ISP charges, and access charges, especially for dial-up services. For those without computers at home or work, there are the extra costs of finding one and then finding internet access. This is an unfair discriminatory process.
6. Demographic studies show that a large proportion of stockowners are over 50 years of age. This segment of the population is less likely to use the internet with agility than younger stockowners. There are other digital divides that would be exacerbated by depending on internet access for corporate governance.
7. State laws require giving notice of stockowners meeting, not giving notice of being able to get notice by some additional, onerous, and costly method. It is troubling that the federal government action would abrogate this.
8. An important point of stockowners RECEIVING notice of meetings is that it is not their responsibility constantly to monitor what the board of directors is doing, whether for annual or special meetings of the stockowners. Boards are often fickle in the scheduling of meetings and locations.
9. The proposed postcard/letter from the corporation to stockowners would unfortunately look like unrequested junk mail and be discarded without realizing the importance it has for corporate governance. Stockowners are not accustomed to a two-step process in getting corporate governance documents. We should not start up a new double standard of expections.
To summarize, the challenge of corporate governance is to encourage active participation by as many stockowners as possible. The more participation the better. The proposed rule would be retrograde and would cheapen the process even more. The cure for unsatisfactory corporate governance is more corporate governance, not less.
Fund for Stockowners Rights
P. O. Box 6102
Woodland Hills, California 91365