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With voluntary E-Proxy now effective, many companies have been waiting to see what fees will be charged by Broadridge (formerly known as ADP) in order to run a cost-benefit analysis and determine whether cost savings would truly be realized by using E-Proxy (don’t forget our “Cost-Benefit Worksheet“). Broadridge’s fees have finally been announced – and I believe they work like this:

1. Existing fee rates remain in place for beneficial owner processing.

2. If an issuer decides to use voluntary E-Proxy, the following incremental/step-based fees apply for sending a notice, etc. to beneficial owners:

– First 10,000 accounts @ $0.25 per
– Next 10,001 – 100,000 accounts @ $0.20 per
– Next 100,001 – 200,000 accounts @ $0.15 per
– Next 200,001 – 500,000 accounts @ $0.10 per
– 500,001 + accounts @ $0.05 per

Regardless of the number of accounts that an issuer wants to “E-Proxy,” Broadridge will charge a minimum fee of $1500. In other words, if an issuer wants to E-Proxy to just a few accounts, the fee will be $1500 regardless of step-based fee formula above (but this floor is not a fee that is tacked onto the step-based fee).

As an example of how this works, an issuer using E-Proxy for 100,000 beneficial owner accounts would incur fees as follows:

– First 10,000 accounts @ $0.25 = $2,500

– Next 90,000 accounts @ $0.20 = $18,000

Total Cost = $20,500

3. Rather than have separate fees for various services, Broadridge will provide the following services as part of the step-based fees above (ie. they are “inclusive”): print and fulfillment (ie. mail) services for the notice; fulfillment and fulfillment support for hard copy requests; 800# set up; Internet and 800# voting, support two work flows (sending notices and hard copy proxy materials), and will also provide a standard landing web page (ie. where shareowner inputs control number) and standard shareowner portal (ie. where shareowner arrives once the control number is recognized; this is where proxy materials, voting platform and place to request hard copy is located).

Issuers can upgrade and have a customized landing page and shareowner portal, where the fee will vary depending on what features an issuer wants. Annual storage fees for hard copies are approximately $1,000 per document (so storage is cheaper if you have a combined proxy and annual report vs. two separate documents) for the first 5,000 copies and $800 for every 5,000 after that.

4. Note that same rates in #2 above apply if Broadridge is hired to send notice, etc. to registered owners. However, when calculating costs, the registered accounts are not combined with beneficial accounts. In other words, when making your registered owners calculation, you start at the top of the step-based fee ladder.

5. Broadridge’s suppression fees remain in place for large issuers (>200,000 positions) at $0.25 per suppression, and changes slightly for small issuers (<200,000 positions) to $0.40 per suppression for householding, etc. The e-delivery suppression fee, however, remains at $0.50 for small issuers. The NYSE’s and SEC’s (Lack of) Role in Broadridge’s E-Proxy Fee-Setting

Note that the NYSE and SEC aren’t directly involved in Broadridge’s fee-setting process regarding E-Proxy. In contrast, the SEC requires issuers, brokers and banks to ensure that proxy materials are distributed to beneficial owners – and NYSE Rule 465 governs the fees paid by listed companies to brokers and banks for their distribution of proxy materials and other communications to the shareholders. Nearly every broker and bank have contracted with Broadridge to perform the functions related to these beneficial ownership obligations, including distribution of proxy materials, proxy tabulation and responses to requests for shareholder lists; resulting in a near-monopoly.

Under Rule 465, the NYSE and SEC are required to bless how much Broadridge charges brokers and banks to forward proxy materials to shareholders (issuers reimburse these brokers and banks – in practice, issuers directly get billed by Broadridge). This rate-setting exercise occurs every few years, with the last rate-setting transpiring in 2002. As part of this fee-setting process, the public is allowed to comment.

Under E-Proxy, Rule 465 comes into play only to the extent an issuer continues to rely on affirmative consents to e-delivery – or chooses to send paper to some beneficial owners. So, the SEC and NYSE largely remain uninvolved in setting Broadridge’s E-Proxy fees – something that has a number of issuers concerned, judging by the e-mails I recently have been receiving from some in-house members.

E-Proxy: The Issue of “Usability”

When E-Proxy was proposed, one fear expressed by commentators was that companies aren’t sufficiently prepared to provide proxy materials and a voting platform that enables shareholders to easily access the materials and vote. By looking at the first handful of companies that have revealed that they are trying E-Proxy, this fear may not have been far off the mark.

Here is one thought from an anonymous member: “What gets me about these initial E-Proxy companies is that everyone is following the prevailing vendors’ (some say manipulative) leads – in requiring people to enter their voting codes in order to view the proxy materials. The voting code should only be required to execute a proxy – not to view or print.

To my eyes, the SEC rule plainly states that the url/link provided to shareholders needs to link directly to the materials, no navigation required. I’d venture that the fact that a code is required to view could be interpreted by some as not being “public” in the general understanding of the word, as well. This technique is likely to make the first shareholder experiences less palatable and chase people back to paper. All those people who try to go to a site without the code in hand will bail and opt for paper. We have nanosecond tolerances these days on the web.”

If you read the transcript from our recent E-Proxy webcast (or listen to the audio archive), Dominic Jones did a great job talking about usability. Here are three recent blogs from Dominic that delve more into the usability of the first E-Proxy volunteers:

– AMERCO’s shareholder forum, e-proxy

– Is Shareholder.com client breaching SEC privacy rules?

– My bad experience with first e-proxy notice

“E-Proxy: Chilly”

Speaking of E-Proxy, check out the latest adventures of “Billy Broc” Oxley and Dave “The Animal” Sarbanes in this segment called: “E-Proxy: Chilly.”

– Broc Romanek