According to a report by the Financial Times, under the current system, companies must mail proxy statement and annual reports to shareholders. This activity costs US companies an estimated $1 billion a year.
The obvious advantages afforded by such a change to the system, were pointed out by Alan Beller, director of the SEC corporation finance division, who told the Financial Times, The proposal, by reducing cost and by providing the advantages of online communications, would make it cheaper and easier for everybody, including management and those soliciting against management, to reach investors.
Unsurprisingly, the adoption an electronic system over the old paper one is likely to increase the number of contested board elections, which are currently a relatively rare phenomenon.
The Financial Times concluded its report by suggesting that, although it is unlikely shareholders will experience any greater success at installing their own directors, the voluntary changes made by companies may, to some extent, reflect the majority vote.
The SEC’s ruling is expected to be given on November 29, 2005.
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