Transcript

Scott:

Welcome to On the Dot, I’m Scott Snyder. Joining me today is Mike Spelman, our go-to expert on all things annual meeting and proxy at Toppan Merrill. Our conversation today focuses on simplifying the Annual Meeting and Proxy process and key things that preparers can do between the end of this current proxy season and next season to be better prepared. Mike, thank you for joining me, and welcome to On The Dot.

Mike:

Hey, thank you, Scott. I appreciate it.

Scott:

Mike, for listeners who may not be, completely familiar with you, could you share a couple of highlights about your career and your journey in the proxy space?

Mike:

Yeah, Scott, I’ve been in the financial print space for 40 plus years. I’ve seen, the proxy workflow from the financial print side. I’ve also spent a number of years at ADP Investor Communication Services now Broadridge. So, my experience has covered both the SEC filing and the print production of proxy materials all the way through the tabulation of, of the proxy itself.

Scott:

Mike, let’s, let’s jump right into the conversation. You’ve called the proxy season, that annual proxy process, stressful, it’s chaotic for issuers. They’re juggling projects and priorities across the legal, finance, IR, compliance, and of course multiple vendors. Can you talk about, I mean, yeah, there’s a lot of players, but why does it often feel so overwhelming?

Mike:

Issuers have a tendency to pick up the blueprint from the prior year and just go down the same rabbit hole without a basic understanding as to, you know, what their decisions are, how their decisions, I should say, affect not only the, the effective use of their timeline, but also their budget. And an upwards of 15 to 20 suppliers can be involved at any given point of time, both internal, clients as well as, external clients. And this chart pretty much tells it all. You’ve got distribution agents, and at the three o’clock mark, that’s just three of the smaller distribution groups, you’ve got about seven or eight of them. And on top of that, solicitors and compensation consultants, etc. So, you know, we lovingly refer to this as organized chaos, and the issuer begins the process early in the year. So, change is not always embraced until something typically goes south.

Scott:

Mike. Yeah, there’s an awful lot of players in here. Obviously, those, those distribution agents are, are really critical to this process, and we’ve spent some time in other webinars and other thought leadership that you’ve written about those, those distribution agents. Can you spend a couple of minutes and share with our audience why they are so critical and, and perhaps how to get them to line up with your own timeline or with the issuer’s timeline?

Mike:

Yeah, so again, I’m, I’m respectful of the work that these distribution agents, these mail houses provide. However, because there’s been so much consolidation in the industry over the years, they have a tendency to push the issuer to the limit. And by that, I mean they establish timelines that are not necessarily achievable. They typically require materials in advance of four to five days before a mailing date, for instance. And so, it’s the old saying, it’s the tail wagging the dog, right? The issuer needs to establish a firm timeline, and the mail house needs to accommodate that, right? Again, we, we don’t want to do something that’s, that’s not achievable on the, on either side. But the bottom line is issuers need to realize that they’re in full compliance the minute an electronic delivery is sent out, and that happens on the commencement date. So, you don’t need 10,000 sets of proxy materials on the floor of Broadridge or your transfer agent. Bottom line is they could send out one set or an email, and quite frankly, they, that could alleviate a lot of stress on the part of the issuer.

Scott:

Feels like the process maybe over the course of time has perhaps unintentionally flipped, right? It’s backwards a little bit with maybe the, the company losing control of their timelines and, and maybe yielding to what the distribution agents have, have come to expect.

Mike:

Yeah, and again, I think this is all about education. I think that most publicly traded companies truly don’t have a firm understanding of the scope of services that each of the players are responsible for. I think everybody knows that Broadridge has a monopoly or a virtual monopoly on the street, 97 to 98% of the banks and brokers. But there’s also a small number of, mail houses like Mediant and ICE and Folio and Say, and Inveshare who handle the, the remaining number of banks and brokers that don’t subscribe to the Broadridge offering. Most issuers get invoices from these entities, and they have no idea what they’re for. Are they, are the invoices accurate? And so, we really try to, to peel back the layers of the onion and show each publicly traded company what services are, approved by the issuer themselves and, and whether or not these, these invoices are fair.

Scott:

So, let’s, let’s step into that. because, you know, there are groups of vendors right, involved in this process. How should issuers think about managing these different groups, if you will, or these priorities, these vendors, so that they really optimize their proxy process?

Mike:

They all need to be vetted. And again, I think in the case of the transfer agent, we’re going start at the lower right hand side here. Transfer agents, provide a variety of services to publicly traded companies, and, one of them is annual meeting services for the registered shareholder positions. You have the street, you have the registered and street is handled by the banks and brokers, with, you know, through Broadridge. For the most part, transfer agents handle the registered shareholder base and embedded in the annual fee, our annual meeting services in the form of project management, the vehicle for the votes to return for the registered shareholders themselves. That’s the internet, the telephone and return proxy card inspector of election services, in many cases, master Tabulation. Well, those fees are spread out over a 12-month period, yet a lot of, probably 75% of publicly traded companies move that registered mailing to Broadridge in an effort to create a single source for all distribution purposes without them realizing that those fees are already covered under the transfer agent agreement.

Mike:

When they find out they’ve spent $12,000, $15,000 unnecessarily, then, you know, they, they’re surprised. They’re, truly surprised. They need to have a better understanding of the scope of services. Same with the solicitor. In many instances, solicitors act as project managers. They coordinate with the transfer agent and Broadridge in an effort to make the workflow for the issuer a little bit more seamless. And, and quite frankly, it’s an expensive endeavor and it’s time consuming. You don’t need them to, you know, play, run interference, I should say, the beneficial mailing that’s primarily Broadridge and Mediant and Say Technologies. But on the Broadridge front, you know, they’re, they’re obligated to conform to the approved rates by the New York Stock Exchange, and they do a good job of doing that. But let’s be honest, I mean, the Broadridge representatives do upsell and sell product to publicly traded companies that do not improve the ability of the issuer to connect with their stakeholders or improve responsiveness. And finally, on the financial print side, it’s just basically having a good understanding of the services that they’re providing and whether or not they provide end-to-end quality control measures on all aspects of service.

Scott:

So, Mike, let’s take just a quick moment. You, you mentioned Say Technologies. We’ve talked a little bit about this, but you’ve flagged Robinhood accounts specifically and the role of Say Technologies. Tell me a little bit more about that and what companies should be aware of.

Mike:

So Broadridge handles 97% to 98% of the street. And if you remember, the 2% to 3% are managed by Mediant and Say, and the, and the rest Say Technologies is owned by Robinhood, and there’s good news and there’s bad news. The good news is all of the positions through the banks and brokers that Say Technologies manages all receive e delivery, which is a good thing. You have 10,000 shareholders, 10,000 emails go out, there’s no full set packages mailed, there’s no notices mailed. But because Broadridge directs the company, say, to default to notice and access, the issuer is penalized by being charged for processing fees positions that will never ever receive a notice. Quite frankly, it’s a little disturbing. And, you know, we, we’ve written to the SEC and, you know, the state Attorney General of California’s office to find out if there’s something that could be done about that. But it’s an expense that is incurred by the overwhelming majority of issues who utilize the notice and access model unless you advise them not to. And it’s really important, again, getting back to that, having a better understanding of the roles and services that each of these players provide.

Scott:

Yeah, it’s watching for the overlap, right? And, ensuring that you’re only paying for things once. So, what might look like compliance to you actually might just be additional costs that you could be incurring.

Mike:

Absolutely. And we’re talking tens of thousands of dollars in many instances.

Scott:

So, Mike, as we close out our conversation today, let’s talk about maybe three key things that you’d like the audience to know to take away as they think about next year and begin that planning process.

Mike:

Yeah, and again, I, as I mentioned before, and of course self-serving because we’re a financial printer, but it all starts with your financial printer. I believe that your financial printer should be a trusted partner, a resource for all things annual meeting related, not just an order taker to process your document and make changes upon request. Financial printers need to be proactive in ensuring that their clients have a smooth process all the way through. And if we see things that could impact their budget, whether it’s, you know, printing costs or even the mailing costs on the distribution side, I think it’s our job to point that out. I think every single issuer needs to have a good understanding of the quality control measures that each of their providers has to ensure satisfactory result. And the second is really a SaaS platform that meets the design and star requirements.

Again, you know, proxy statements today are marketing pieces that showcase it, you know, the company’s goals and strategic platform during the course of the year. And of course, it’s a once a year process. And when you improve the aesthetics and the content of your shareholder materials, you’d like to have a SaaS tool, a collaborative tool that can embrace a lot of the graphics that really are uploaded into the document. And I think finally just having a real good understanding of the contractual  obligations for each of the players really understand what the contracts include. As I mentioned before, the transfer agents include a plethora of services during the course of the year, but there it also includes annual meeting services. There’s nearly no need to pay twice and make sure that your solicitors are not charging you for fees for project management, when in fact they’re not managing anything.

Scott:

You know, Mike, as I think about those three points, and I think about our conversation today, I’m just reminded of the, you know, the old adage, you know, if it ain’t broke, don’t, you know, don’t try to fix it, but of course if you don’t know it’s broken, that probably is part of the challenge, right? It seems like everything is working and flowing, but it feels like maybe this is just something that issuers should do, just make it part of their regular practice on an annual basis to review this process.

Mike:

No doubt about it. And, you know, it goes, you don’t know what you don’t know, right? Don’t settle for the same broken workflow year after year. There are major cost savings and efficiency improvements available only if you take a fresh look. You have to be willing to make change. We’re happy to help with that audit. If anyone wants to connect. I think that every single publicly traded company would benefit not only from a review of their expenses, but also a better understanding of how well you’re connecting with your investors electronically and the response rate online.

Scott:

Mike, perfect way to close it out. Thank you. And, and thanks for joining me today for On The Dot. For our listeners, of course, we have the latest version, our 2026 version of the proxy statement style guide available and a QR code here for you to connect with Mike. I know he’d be glad to have a conversation with you about your current process and ways to optimize that. Mike, thanks again for joining me.

Mike:

My pleasure, Scott. Thanks.