January 10, 2006
Ladies and Gentlemen:
Publicly traded corporations should continue to default to paper copies of materials for investors. Far more investors have mailing addresses than access to and knowledge of computers and printers.
Over time, I believe that an increasingly large percentage of investors will request material online as typical investors become more computer savvy many may wish to avoid paper clutter. The side benefit will be reduced corporate printing costs.
However, a large percentage of current stock owners are older and less computer savvy. Even the most computer loving active investor is likely to want a hard copy of the lengthy and rather difficult to read annual reports, etc. I often digest corporate material in places where I have no computer access. The few of us who attend annual stockholder meetings (they are usually at inconvenient midweek times) often make notes in our hard copy booklets for reference before discussing important issues with top executives and/or directors.
Besides, receiving the paper copy is a tangible reminder to vote your shares. If the SEC's proposal is adopted, the agency should monitor whether stockholder participation increases, paying particular attention to small investors. The potential for increased proxy fights under a proposal adoption would likely benefit stockholders if the history of proxy fights holds true in the future.
The larger questions that need to be addressed are what effects do voting ones shares have beyond expressing investor sentiment and approving a relatively large merger/acquisition, where a majority is required.
Currently in most publicly traded corporations, only one owner need vote only one share to get a director elected, as most elections are uncontested. And a majority of shares voted for a shareholder resolution is considered merely precatory or advisory, meaning that typical U.S. listed corporations need not adopt what the owners of most shares seek.
Stockholder ownership should include majority stockholder control. Perhaps the SEC can place the issue of majority control online for public comment in the future.
On paper vs. online, and on many other issues, I applaud the SEC for seeking public comment.
Frank Coleman (Cole) Inman
Former Business Professor