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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?