Companies shrug off shareholder e-forum idea
WASHINGTON (Reuters) - Companies have largely
ignored the Securities and Exchange Commission's call to create electronic
shareholder forums, saying such websites are more trouble than they are
Hyperdynamics Corp (HDY.A:
Research) was one of the few to jump on the idea. The Houston oil
company in December circulated a splashy press release that said it would
reach out to investors by launching such a forum.
But it never materialized.
"They decided not to do it," said company
spokesman Tony Schor. "Conceptually it's brilliant, but what ends up
happening with these message boards is that they're filled with people with
reasons to want the stock to go up and down."
The SEC in November encouraged companies to
engage with shareholders online by adopting regulations that cleared up some
liability questions about e-forums, but few of these sites have emerged.
A February survey by Thomson Financial found
only 4 percent of 42 public companies surveyed planned to create a
shareholder e-forum or were seriously considering it. Another 56 percent
were not considering the idea, and 40 percent said they were only beginning
to think about it.
E-forums have been slow to take off because
corporate boards typically listen only to shareholders who hold large blocks
of stock, said consultant Dominic Jones, who runs the IR Web Report. Such
pension funds and hedge funds often meet with management behind closed
"Directors just don't see the need to
communicate with all their shareholders," Jones said.
Nor do the vast majority of shareholders
communicate with their companies, at least in terms of casting votes for
directors and corporate proposals at annual meetings.
In fact, voting by small investors actually
fell sharply after the SEC tried in June to make the process easier by
requiring companies to post proxy materials on the Internet.
Data released last month from proxy vote
processor Broadridge Financial Solutions Inc (BR.N:
indicate the number of individual shareholders voting dropped more than 75
percent under the e-proxy initiative, to 4.6 percent.
MOVING INTO A NEW SPACE
Amerco Inc (UHAL.O:
Research) is one of the few companies to launch an e-forum.
During its proxy season last summer, the
parent of moving truck company U-Haul International set up a link from its
main website to an e-forum that required users to create an account and log
in with a password. Participation was "very modest," with fewer than 100
posts and few direct questions for management, said investor relations
director Jennifer Flachman.
Still, Amerco plans to relaunch the site
soon, with more publicity and direct involvement by company insiders.
"It kind of levels the playing field for
those who might not be comfortable speaking up at an earnings conference
(call) or annual meeting," Flachman said.
Amerco would like to change the image of such
forums, she said, noting that traditional Internet chat rooms and message
boards sometimes stray from company-related topics and are sprinkled with
SEC Chairman Christopher Cox said in November
that sites like Yahoo Finance message boards were missing "any meaningful
connection to what actually goes on in the company."
The SEC envisioned companies sponsoring
e-forums to gauge shareholder interest in certain issues, express
management's views, and help investors form coalitions.
Such sites could "generate attention for
sound proposals that could increase the value of share ownership," the
commission said in a notice, "and they could filter out proposals not
supported by other shareholders."
But some companies fear the agendas of
Whole Foods Market (WFMI.O:
Research) Chief Executive John Mackey posted anonymous messages for
several years about then-rival Wild Oats Markets on Yahoo Finance bulletin
boards. Mackey, writing under a pseudonym, said Wild Oats management
"clearly doesn't know what it is doing" and that the company had "no value."
Whole Foods later acquired Wild Oats. The SEC
conducted a probe into the postings, but took no further action.
Investment banker Gary Lutin, who has
conducted issue-specific e-forums about Verizon Communications Inc (VZ.N:
(http://www.shareholderforum.com/vz/) and CA Inc (CA.O:
(http://www.shareholderforum.com/CA/), said it is difficult to open forums
up to all shareholders while moderating them sufficiently.
"If you have an open (message) board, you get
a lot of clutter," he said. The Verizon forum currently has links to news
stories about the company, but no shareholder messages.
A Verizon spokesman said the company did not
participate in Lutin's forum and declined to comment further.
Lutin said he had heard some executives
express fear that e-forums could be costly to operate and make companies
more vulnerable to activist hedge funds.
Amerco, however, is optimistic about such
sites. "With this forum," Flachman said, "we think we're stepping into the
(Editing by Lisa Von Ahn)
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