With Fewer Nasty Battles, One
Firm Profits Less
September 29, 2010, 10:45 pm
By LYNNLEY BROWNING
Brutal proxy fights that pit
shareholders against executives are the lifeblood of IVS Associates,
a private firm with a headlock on the high-stakes business of tallying
shareholder votes in corporate battles.
But as proxy fights show
some signs of waning and competitors emerge, IVS is facing a struggle of its
own: how to maintain and expand its business.
“The economic downturn has
changed the size and scope of proxy fights, so our earnings have been
affected,” said William A. Marsh, the president and sole owner of IVS. He
declined to discuss earnings or revenue.
The battle that ensued when
Hewlett-Packard bought Compaq in 2002, a
megabrawl for which IVS counted the votes needed to seal the deal, earned
IVS an estimated $1 million and put the tiny firm, based in Wilmington,
Del., in the spotlight.
But with an economic damper
on the mergers and acquisitions activity that breeds such fights, “it’s now
small stuff,” said Mr. Marsh, 53. He was referring to “small biotech
companies, where a chair has been thrown off the board, and stuff like wars
Since its founding in 2000,
IVS, short for Independent Voting Services, has tabulated the votes for more
than 90 percent of all proxy fights in corporate America, giving it a
virtual monopoly. Typically hired by the management of Fortune 500 companies
Disney for proxy fights, the firm prides itself on its independence and
“If you call other people in
my industry and ask them for any one person that could take our place, you
will not get any names,” Mr. Marsh said with confidence.
But the intensity and size,
and thus profitability, of proxy fights have faded in recent years, despite
a recent flurry of battles that notably includes the billionaire investor
Ronald W. Burkle’s challenge to the board of
Barnes & Noble, which Mr. Burkle lost this week.
Looking beyond proxy fights,
IVS is embracing less sexy work. Think tabulating votes for director seats
at professional associations like the National Society of Hispanic M.B.A.’s,
counting votes at routine annual shareholder meetings and auditing votes
tallied by other securities-processing and investor communications firms for
corporations, mutual funds and retirement systems.
“We’ll still do 30 proxy
fights a year, but the majority of our stuff is audit” of tabulations by
other firms, Mr. Marsh said.
A competitor, Lang Johnston,
the chief executive of Corporate Election Services in
Pittsburgh, said, “If you live by the proxy fight, you die by it; their
revenue is probably like a roller coaster.”
While not required to do so,
corporations like to have an independent party certify votes in proxy
fights, now more than ever since a new
Securities and Exchange Commission rule makes it easier for shareholders
to nominate directors.
“Companies want tabulation
beyond reproach; it’s key to show to a judge if a fight goes to litigation,”
said Mr. Marsh, whose firm created the industry of independently certifying
proxy votes. “There’s an intrinsic value in having a totally independent
But sometimes, there is also
a cost. In 2008, a client,
CSX, lost a bitter fight against two hedge funds that sought to
install members on the railroad company’s board. IVS, which counted the
votes and certified that the funds had won, refused to consider CSX’s pleas
for a vote recount based on new arguments CSX raised after the polls closed.
Mr. Marsh argued that doing
so would have violated regulatory statutes. CSX is no longer a client.
IVS, which has only five
full-time employees, is facing competition for even its less glamorous work.
One competitive threat is from stock transfer agents, the back-office
companies that process trades, maintain shareholder records and mail
financial and legal statements, interest payments, dividends, proxies and
other materials to shareholders and regulators. Some agents are pushing into
the business of tabulating the votes of scores of registered shareholders,
or mom-and-pop stockowners, and not just “street” shareholders, the brokers
and financial institutions that own stock on behalf of investors.
Broadridge Financial Solutions, an investor communications and
tabulation company that mails proxy statements to more than 90 percent of
all publicly traded companies. Broadridge acquired a stock transfer agency,
StockTrans, this year and can offer a service that IVS does
The selling point of all
these competitors, some of which are also cutting prices, is that their
stock transfer and investor-communication services are bundled together, so
a client does not have to use a separate niche firm like IVS for routine
“The bigger picture is not
tabulation” — IVS’s specialty — “but proxy distribution and communications
services,” said Niels C. Holch, the executive director of the Shareholder
Communications Coalition, an advocacy group for transfer agents and
But if Mr. Marsh is worried,
he does not show it. He said he has no plans to sell the firm or take it
public. “I’m happy with the client base I have,” he said. “We’re not in this
to be millionaires.”
– Lynnley Browning
The New York Times