The long-anticipated "eProxy" ruling from the Securities and Exchange Commission will go into effect on July 1, to the relief of companies and their investor-relations departments. The new rule may allow companies to almost entirely bypass the costly process of printing and shipping proxy statements by providing the information via the Web.
"It's definitely a step in the right direction," says John Stantial, director of financial reporting for United Technologies Corp. With the new rules, UTC is likely to save about $1 million in shipping, graphics, and printing costs, not to mention what Stantial describes as "hundreds of man hours."
Thomas Murphy, a partner with McDermott Will & Emery, says the benefits of the eProxy rules go beyond savings. They should also speed up voting and increase participation because most investors and shareholders are already comfortable using the Internet. According to the SEC, 10.7 million shareholders agreed to receive their proxy materials electronically last year and about 88 percent of shares voted were voted electronically or by phone during the 2006 proxy season.
There is one possible downside, says Jason Simon, an attorney at Greenberg Traurig: companies could see more shareholder fights because shareholders can now use eProxies to more cost-effectively pitch their own board candidates or bring other matters to a vote. Still, Stantial says, the eProxy ruling is worth that risk because it paves the way for companies to go completely electronic. "Eventually, sending anything by paper will be seen as unconventional," he says. For many, eventually can't come soon enough.