eVoting, 2000
1999 may well be remembered as the year when internet proxy voting
became a little more common, a little less avant garde. But it also was the
year when many IR professionals realized that internet proxy voting would not
necessarily enjoy the magical, mind-boggling growth of so many other online
innovations.
If internet proxy voting is going to prove more popular when next
year's proxy season rolls around, it will be because IROs start taking steps in
the right direction today. That's according to Carl Thompson, CEO of Carl
Thompson Associates, who says internet proxy voting must be marketed and
promoted just like any other bright new idea.
Thompson urges investor relations officers, especially those in
small-cap companies, to take the concept of internet proxy voting to the very
top of their organizations. 'I think it's a cool idea,' he enthuses. 'And I
think that every IRO should be buying their CEO dinner to sell it. An involved
and knowledgeable shareholder is a loyal shareholder.'
Consultant Carl Hagberg of Carl T Hagberg & Associates in Jackson,
New Jersey agrees. He faults companies for 'focusing on the nitty gritty and
the bother.' Hagberg maintains that any smart company would say, 'I see this as
part of a much bigger strategy: a marketing, an IR, and an e-commerce strategy.
For him, internet proxy voting could be a crucial first step in helping
investors get comfortable with accepting electronic goods and services from
your company. 'Internet voting is the tail that will wag the dog,' he predicts.
Ready for the Street side?
Heavy hitters like IBM, Bell & Howell, and Intel are all squarely
behind internet proxy voting already. But electronic voting is available far
more widely than many suspect: the Street-name investors (investors registered
in their brokers' names) of some 5,000 publicly-traded US companies are enabled
for internet proxy voting, thanks to Automatic Data Processing (ADP).
Street-name investors fill out voting instructions, not legal proxies, and
these forms can be transmitted to ADP online.
This year, ADP saw 60 percent of all shares returned by phone, the
internet or a PC. That's up from around 50 percent last year, according to Mary
Ann Butera, senior VP of sales and marketing at ADP. She says the number of
shares returned electronically is not the same as the number of positions voted
electronically. For instance, in 1999, ADP saw just over 6 percent of positions
voted over the internet. The numbers are up according to Butera, but not by as
much as she hoped: 'We thought we'd get a higher return on the Internet, quite
frankly.'
One cause for concern is that companies are proving slow to put out the
electronic versions of their annual reports and proxy materials. 'Electronic
presentation has to become an integral part of planning.' she says. Butera
urges IROs to time the arrival online annual reports and proxy materials to
coincide with printed versions.
Adding value
Another reason for lacklustre participation in internet voting may be
the proxy systems themselves. Michael Warras, president of Straightline
International in Manhattan, recommends that companies make internet voting as
easy and user-friendly as possible. To this end, he suggests creating and
mailing out a printed piece on why your company is embracing internet proxy
voting and why it's in everyone's best interests to give it a whirl.
Speed and ease are key to a successful Internet voting system. 'Not
everybody wants to sit down and have a long voting session on the internet,'
says Hagberg. This means, he says that companies should be encouraging
shareholders to bookmark the online voting booth so they can get there quickly
and easily. Tom Newton, vice president at EquiServe, points out that his
company sends those Investors in the paperless program an e-mail message when
the annual report and proxy materials are available, hotlinking them directly
to the transfer agent's web site.
Another way to entice shareholders to cast their votes online is to
make the electronic process more interesting and informative than voting with
pen and paper. 'More things need to be done to achieve critical mass,' says
Newton. 'There need to be more bells and whistles added to the investor's
experience'. Consequently, EquiServe is offering a slew of extras. One is
interactive online proxies, where shareholders click on a board member's name
to see a photo and bio. Another is a direct link to the full text of specific
proposals on the proxy ballot.
Here's a small but nifty advantage for your indecisive shareholders:
altering your online vote is a cinch. Most electronic systems time and date
stamp all votes, counting only the last. In the paper world, a share-holder
experiencing a change of heart would have to reorder the proxy materials and
then cast and mail out a new vote before the deadline.
Internet proxies are now allowed in a total of 20 US states, up from
just 14 in 1998. Only recently did New Jersey for instance, say 'yes' to
electronic proxies. Although less than half of all states permit internet proxy
voting, those that do (New York, Delaware, California, for example are home to
a disproportionately high share of corporations.
Nevertheless, regulatory prohibitions are taking their toll on the
spread of internet proxy voting. David Sharp, manager of proxy tabulation
services for Georgeson, says that several of his firms' clients who are eager
to deliver internet voting could not do so because they're headquartered in
states where it's not yet legal. Most believe this problem is only temporary:
'In a year or two, every state will have changed their laws to take care of
this,' predicts Hagberg.
In the UK, the expansion of internet proxy voting is definitely being
impeded by the laws; today a British proxy vote must be in writing. Sarah
Wilson, managing director and founder of Manifest in Fssex, says that her
company - a voting agent for pension funds, institutional investors and unit
trusts - is getting around the regulatory logjam by accepting voting
instructions via e-mail, fax, or phone, and then issuing a written proxy for
her clients.
Wilson anticipates that the regulatory regime in the UK will be
modified in the next two or three years, malting electronic voting possible.
For this to happen, the E-Commerce Bill, which makes electronic signatures
valid for some transactions, would have to pass; and the Companies Act would
have to be amended to eliminate expressions such as 'in writing,' and 'under
the hand of' Wilson also points out that companies would have to rewrite their
bylaws to allow poll votes at their meetings instead of the old-fashioned show
of hands.
Luckily there appear to be several influential backers of electronic
proxy voting in the UK. For example, a recent National Association of Pension
Funds independent inquiry came out in favour of pushing the agenda forward.
Image is everything
Practicalities aside, some of the best arguments for Internet proxy
voting are also the fuzziest. Everyone agrees that internet voting should
increase participation rates and stimulate shareholder involvement, but no-one
can prove it.
Robert Williams, investor relations manager at Dell Computer, maintains
that companies also need to look at the host of benefits that come from
internet proxy voting. For a company that sells PCs like Dell, the argument
makes obvious good sense: 'We want shareholders to come to the site,' says
Williams. 'You own the stock, why not own the PC?'
Projecting an up-to-date image is the number-one reason to embrace
internet voting, asserts Thompson. 'We need to connect with the owners of the
company and this is a way to make our companies more shareholder friendly,' he
concludes. 'Internet proxy voting is the wave of the future. It's the way that
the world is going. Shareholders will be laughing at this article five years
from now.
Investor Relations
August, 1999
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