A Room of Their Own

SEC chairman Christopher Cox says that the commission will allow companies to use the Internet to improve investor-management communications.

First came virtual annual meetings, then “paperless” proxies,
and now the Internet may play a role in shaping another aspect of company-shareholder
communications: ongoing dialogue between shareholders and management,
made feasible by dedicated chat rooms.

In May the Securities and Exchange Commission held a roundtable discussion
on the concept, and the following month SEC chairman Christopher
Cox told Congress that the commission is updating its rules to allow the use of
the Internet in order to improve investor-management communications.

As currently proposed, a company interested in offering this venue to
shareholders would alert them via various means (E-delivery or standard mail)
and provide them with an individual ID number to log in. Participating shareholders
would be known by that ID number and would also be identified by the amount of stock they own. “You don’t want to get someone who owns only five shares saying, ‘Let’s fire the board,’” says Chuck Callan, senior vice president of regulatory affairs at Broadridge Financial Solutions Inc., the company that consulted with the SEC on the concept. Shareholders would be free to discuss anything among themselves and to pose suggestions to, and presumably ask questions of, management. In theory, management would benefit from the ability to find out how shareholders feel about
proposals and issues on an ongoing basis.

In a letter to the SEC, Peter H. Mixon, general counsel for the California Public Employees’ Retirement System, said that an “unproven chat-room concept” shouldn’t replace traditional nonbinding shareholder proposals, and
expressed doubt that companies would heed any proposals suggested in chat rooms. Proponents counter that chat rooms are in keeping with the trend toward granting shareholders more say in how companies are run, and will result in moreefficient
annual meetings by deflecting less-urgent issues to offline (or, in this case, online) discussion. The SEC is now accepting public comments on the idea; there is no deadline or time frame for the next substantive move.

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