Should the Securities and Exchange Commission
require U.S. corporations to use social media technology to communicate
with their shareholders?Broadridge Financial Solutions, the proxy
distribution and technology giant, might think so but an organization
claiming to educate corporations and institutional investors says it
shouldn’t.
“The eleven year experience of The Shareholder Forum (the
organization) supports many of Broadridge’s views about the benefits of
such communication processes, but does not support their view of a need
for new regulations,” writes Gary Lutin, chairman of the Shareholder
Forum in a letter to the SEC dated Dec.17. “The current regulations
should therefore be considered clearly satisfactory for purposes of
allowing both corporate and investor participants to fully engage in the
legitimate exchanges of information for which our Shareholder Forum
programs – and forum-type communications conducted by anyone else – are
intended.”
Lutin says the Shareholder Forum has been offering “forum-type”
communications since 1999 when it was a project of the New York Society
of Security Analysts. No longer affiliated with the NYSSA, the
Shareholder Forum’s programs “provide fair access to the information
needed for investor decisions about capital commitments and proxy
voting, as well as for decisions about public policy,” he says.
Lutin’s letter is one of several dozen received by the U.S. regulator
in response to its request for comments on reform of the proxy
“plumbing.”
Broadridge officials were unavailable for immediate comment late
Thursday afternoon.
In his
letter to the SEC, Lutin cites
an article appearing in Securities Technology Monitor on Dec. 8
which summarized a speech presented by Richard Daly, Broadridge’s chief
executive at a conference held by Hofstra University’s Frank Zarb School
of Business on December 1.
“Some believe we can wait and see,” said Daly in his speech which was
distributed by Broadridge Financial. “They believe these developments,
if they have merit, will take hold by themselves. But the truth is that
changing the paradigm rapidly for all investors will require regulatory
support.”
Citing statistics that retail voting declined from 20% four years ago
to less than 5% in 2010, Daly also said, “Reduced participation in key
governance issues is coming at a time when the need for two-way
communication with shareholders is dramatically increasing.”
According to Daly, the technology underpinning social media can
provide knowledge transfer, voting participation opportunities, and
transparency between shareholders, boards, management, and regulators at
levels that could prevent many of the financial mishaps over the past
decade. “A true Investor social network could both prevent these mishaps
and raise investor confidence,” he said in his speech.
In October 2008, Broadridge developed its own Investor Network after
the SEC adopted new rules under the Securities Exchange Act of 1934 to
”facilitate the use of electronic shareholder forums by public companies
and their shareholders. Broadridge defines its service as an “online
community where investors and corporations come together to share
information, ideas and perspectives.”
