Notice and access use
rises on last year
Jump comes despite broker vote change
The use of notice and access (N&A) is up on last year among both
large and small issuers, according to new data from
Issuers that used the notice model stood at 821 for the period July 1, 2009
to March 31, 2010. This compares with 526 over the same period the year
Breaking this down, the number of large companies (defined as having more
than 300,000 beneficial positions) using N&A rose to 57 over the nine months
to the end of March, up from 45 during the previous year. Smaller companies
(defined as having less than 10,000 beneficial positions) also saw the
number of users jump, from 175 to 295 year on year.
The numbers cover only the first part of the 2010 proxy season and the
full-season results will not be out until early July, but the stats do
provide some insight into the attitude corporates are taking toward N&A in
its third year.
Despite evidence N&A adoption lowers retail voting at the annual meeting,
repeat use of the notice model is high, the data reveal. In the nine months
to March 31, the number of repeat users of N&A rose to 577, compared with
177 the year before.
This suggests issuers have not deserted N&A following the SEC’s decision to
eliminate the broker vote in director elections, which may further lower
retail participation during this year’s proxy season.
‘The behavior of companies is that those that use it, use it again,’
comments Chuck Callan, senior vice president of regulatory affairs at
Broadridge Financial Solutions.
Cost savings also rose, from $124 mn to $138 mn net of notice fees,
estimates Broadridge. ‘There are significant dollar savings on printing and
postage and that is reflected in the usage, including the repeat usage,’
Overall, the data show the amount of eligible jobs using N&A rose from 22
percent to 29 percent, while the number of beneficial shareholders covered
by N&A climbed from 24 mn to 27 mn.
There are a number of reasons why issuers might still choose to sit out N&A.
One is the SEC’s recent change to Rule 452, which blocks brokers from voting
uninstructed shares – mainly retail shares – for director elections.
As N&A may also lower retail participation, some feel this year it is safer
not to adopt N&A, as to do so would put extra pressure on the retail vote.
‘Some companies have indicated they did not use N&A because of concerns
about the broker vote,’ notes Callan.
Indeed, Johnson & Johnson’s senior counsel and assistant corporate
secretary, Doug Chia, told IR magazine’s
sister publication Corporate Secretary
earlier this year that ‘the elimination of 452 is enough of a factor for us
to believe this is not the year to be experimenting with notice and access,
whether stratified or not’.
Another reason, points out Jeff Morgan,
NIRI’s CEO, is that the notice model may
not make financial sense under some conditions. ‘Once they start doing the
segmentation, companies may feel it’s not cost-effective. I’m thinking of
companies that have a lot of retirees or former employees they want to send
all the materials to anyway,’ he explains.