February 13, 2006
The ultimate objective of proxy procedures is to produce shareholder participation in the vote. This is desirable both from a moral and theoretical point of view (because the shareholders own the company), and from a practical point of view (because failure to meet a quorum requirement results in the unecessary costs of another election.)
This proposal should thus be evaluated on each score:
Will the proposed rule increase shareholder participation?
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My parents, who do not have a computer, are not likely to take the extra step of sending for an actual paper proxy. I concede that they often discard paper statements and ballots, as do many elderly shareholders.
The best we can hope for is that shareholders who normally vote their proxies will continue to do so. Is there any evidence that the net costs of processing returned cards and doing custom mailings will be less than current costs of printing and mailing to all shareholders? Should the price and speed of the postage category be increased? (See "adverse results" below.)
All notices and proxy ballots to include the city and state of the meeting, rather than just the date, time, and record date for voting rights. For example, the current paper proxy ballot itself, typically does not give the location city of the meeting.
This proposal will certainly save money. To what extent should any funds saved be devoted to increasing participation, for example, by reminding shareholders of upcoming elections in quarterly reports and other documents? A certain amount of money has already been saved by the shift (already having taken place) in voting by internet, initiated by the current paper ballot and proxies.
Clear rules and procedures for admission to the physical meeting should be included in proxies. Qualifications and documents to be presented are seldom stated, leaving shareholders the need to find an appropriate phone number, and feeling uncertainty about whether they will be admitted after a (possibly lengthy) trip to the meeting site.
Will the proposed rule increase the effort required to vote in an election?
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It would be desirable to require that the reply require no additional input from the shareholder. It should have a postal reply permit frank, it should already bear a bar code or other means of identifying the submitter, without exposing their name or address to the mails, and without requring "filling in the blanks" by hand. The recipient should not (as is currently the case, which I approve of) be required to provide an email addresss. The will facilitate voting from a public library, or a friend's computer.
However, shareholders who know they will not be at their address of record should be permitted to securely submit a temporary address for the single mailing of the requested statement and ballot.
Any internet references (such as proxy statements and internet voting procedures) should be tested on some number of the most frequently used internet browsers (say, five) in use in the U.S. at the time of the solicitation.
What adverse results could the rule possibly cause?
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If the rule results in a decrease in the already low shareholder response to proxies, the companies will petition for a decrease in quorum sizes. This would have the undesirable effect of reducing participation, increasing management's influence in the votes that are actually cast, and reducing management's accountability. The rule should contain some protection for shareholders in the event that proxy responses decline if the rule is adopted.
If the dates for proxy mailings are not adjusted, the time required for the shareholder's request, and the necessarily delayed submission of the subsequently mailed ballot, could result in fewer valid ballots.