The RFP Process Panel Discussion Carl Hagberg – Carl Hagberg and Associates Kathy Huston – Group...

The RFP ProcessPanel Discussion

Carl Hagberg – Carl Hagberg and Associates

Kathy Huston – Group Five, Inc.

Best Practices for Evaluating Options for Shareholder Services

• Identify key issues

• Identify key contractual terms you have and want

• Develop a profile of your account

• Request pricing proposals in a standard form

• Consult with an industry expert

Things to Avoid

• Auction bidding on services

• RFP’s with more than 10 questions

• Doing your evaluation in a vacuum

• Doing the evaluation alone

Small Shareholder Buyback

and

Direct Stock Purchase Plan

Analysis

Shareowner CompositionShareowner Composition

• 1.3 Million Shareowners– 1.2 million beneficial owners– 310,000 registered shareowners

• 75% held less than 100 shares– Average shares per odd-lot account - 17.3

• 2.3 Billion Shares Outstanding– 1% of the outstanding shares were held by

the odd-lot accounts.

Odd-Lot ConsiderationsOdd-Lot Considerations

• Odd-lot accounts represent a significant and recurring expense.

• One-third of the odd-lot accounts were not reinvesting

• Company’s last odd-lot was in 1988

• Stock price

Program HighlightsProgram Highlights

• Program managed by Georgeson• Shareowners received notification by

mail – Correspondence clearly indicated a voluntary

program

• Thirty day program with a 30 day extension period

• Option to sell or round up– 50 shares or 100 shares round up– Sales matched with purchases

• Follow up with automated phone calls

Concerns and Results Concerns and Results

• Board of Directors concerns– Shareowner alienation

• Program estimates vs. actual participation– Conservative estimate of 8% on sales, 4% on

purchases– Actual participation was 10% on sales, 2% on

purchases– More than 70% that sold were in DRP

Costs and SavingsCosts and Savings

• No costs to the Company

• Estimated savings of 10% annually in shareowner servicing fees and expenses

Direct Stock Purchase Plan ConsiderationsDirect Stock Purchase Plan Considerations

• Public interest for DSPP

• Dated Dividend Reinvestment Plan

• Registered Plan vs. Bank Plan

• Date of Implementation

• Cost Savings

Program HighlightsProgram Highlights

• Purchases– Weekly– Initial investment

minimum - $500– Optional cash

investments • Minimum - $50• Maximum - $250,000

annually– Automatic deductions

• 1st or 15th of the month

• Sales– Batch order sales

• $15.00 plus $0.12/share

– Market order sales• $25.00 plus

$0.12/share

• Fees– Initial investment

• $10.00 plus $0.03/share

– Optional Cash investments • $3.00 plus $0.03/share• $2.00 plus $0.03/share

(ACH)– Reinvestment of Dividend

• 5% of the amount reinvested up to a maximum of $2 plus $0.03/share

Concerns and ResultsConcerns and Results

• Presentation to shareowners

• Shareowner complaints

• Estimated savings of 12% annually in shareowner servicing fees and expenses

Questions?Questions?

Results of Survey of Cost Savings Ideas

Belinda MassafraShareholder Services Consulting LLC

Thank You to Responders!

• Ken Kaminski – BP Karl Wagner – Merck

• Patricia Tai – Chevron Bette Jo Rozsa – AEP

• Dru Cessac – AT&T Dianne Perry – Xcel Energy

• Mark Gereb – VerizonBernadette Maffei – Comcast

• Kim McKiernan – The Walt Disney Company

Transfer Agent Account Fees • Perform database clean up to reduce number of

accounts*:– Sweep fractional shares monthly.– Perform account consolidations on some regular

basis. *May also reduce printing and mailing costs.

• Negotiate a reduced fee for “inactive” accounts with the fee adjusted monthly.

• Reduce number of small accounts with an odd lot

program.

Out-of-Pocket Costs

Envelopes• Eliminate return envelopes in mailings.• Use back of envelopes to promote your

shareholder website.

Certificates• Eliminate certificates or use print on demand.• Consider charging for certificates.

Out-of-Pocket Costs

Documents/Brochures/Forms• Use print on demand instead of keeping an

inventory.• Be sure copies are available on your website.

Out-of-Pocket CostsPostage and Printing• Be sure you are receiving all available postal

discounts.• Promote use of TA website to shareholder for

self help and statement/document delivery.• Provide incentive for shareholder to use

Internet delivery.• Combine mailings when possible (e.g., last

dividend w/1099).

Out-of-Pocket CostsPostage and Printing• Use top and back of check or statement to

communicate and educate shareholders on services available online.

• Promote ACH deposit of dividends – safer and possibly faster.

• Don’t mail ACH advices. They can check their bank accounts.

• Go to an annual dividend.

Dividend Reinvestment and Direct Stock Purchase Plans

• Calculate the cost/benefit of your dividend reinvestment plan. Does upper management still support it?

• Change Plan terms so participants cover some

or all of the costs.

Dividend Cash

• Negotiate with TA to receive interest on cash balance related to un-cashed dividend checks.

• Alternatively, use a zero balance account that

pays as checks are presented.

Shareholder Communications -- Newsletters

• Eliminate print quarterly newsletter.

• Put electronic version online if management thinks one is still necessary.

• Mail print version with the dividend check(s) to save postage.

Proxy Process• Use Notice and Access to reduce print and

postage costs.

• Consider stratified mailing if concerned about vote.

• Promote e-delivery of documents.

• Use householding to reduce number of packages.

Annual Meeting

• Make it a business meeting without elaborate food and give aways.

• Hold meeting in corporate headquarters or town to reduce travel expenses.

• Hold a “virtual meeting” – Example: Intel

Other Ideas?