Preparing proxy materials in an electronic age

As many public corporations prepare for their upcoming 2000 annual shareholders' meetings, some corporations are introducing a new concept in their proxy materials -- electronic delivery and electronic voting.

Conventionally, a corporation prepares for its annual shareholders' meeting by preparing a proxy statement, (a document often in excess of 100 pages), printing the proxy statement and proxy voting card (a process that can cost thousands of dollars) and mailing the proxy materials to all of its shareholders (a significant undertaking for any public corporation).

At this point, the conventional corporation waits and waits and waits for shareholders to return their proxy voting cards by mail (with postage prepaid by the corporation) indicating their voting preferences.

In today's age of e-mail, Web sites and high-speed Internet access, some corporations are trying to find an alternative to the costs and delays presently associated with delivering annual proxy materials.

These corporations are offering their shareholders the opportunity to receive proxy materials electronically and to vote electronically, too.

By offering proxy materials electronically, a corporation can reduce the costs associated with its annual shareholders' meeting substantially, eliminating much of the printing and postage costs that be in excess of several thousands of dollars. Additionally, delivering proxy materials electronically and offering an electronic voting option is much faster than the standard "snail mail" delivery.

A corporation can literally send its proxy materials to a shareholder and receive the shareholder's electronic vote on the same day.

The Securities and Exchange Commission has approved electronic delivery of corporate documents, including proxy materials, provided certain guidelines are followed:

* The shareholder must consent to electronic delivery.

* The corporation must give the shareholder notice that the materials have been delivered electronically.

* The shareholder must have access to the electronic documents -- must be able to print them.

* The corporation must receive evidence that electronic delivery was achieved.

The SEC guidelines for electronic voting provide that:

The corporation must be able to verify the authenticity of proxies -- such as by including a control number on the proxy card.

* The shareholder must be able to verify that his or her vote was received correctly.

* Electronic voting must be permitted by the state in which the corporation is incorporated.

* The corporation must retain voting records, including the date of receipt of voting instructions and the name of the recipient.

As a practical matter, the process of distributing proxy materials electronically and having shareholders vote electronically starts with a conventional paper distribution by mail.

The corporation mails a letter to its shareholders informing them that they have the option to receive the corporation's proxy statement and certain other corporate documents electronically rather than by mail.

Shareholders who prefer electronic delivery enroll in an online system, with each shareholder using a unique control number that is provided by the corporation.

Once a shareholder is enrolled in the online system, the corporation can deliver its proxy materials and other corporate materials to that shareholder electronically until the shareholder notifies the corporation that electronic delivery is no longer desired.

Shareholders who prefer to receive a hard copy of a corporation's proxy materials by mail can still vote electronically.

A number of online services are available through which a corporation may enable its shareholders to vote electronically regardless of what delivery methods they utilize.

The corporation simply includes a provision in its proxy materials telling shareholders the name of the Web site they can visit to place their votes electronically. Again, each shareholder uses a unique control number that eliminates questions about delivery and authenticity. The corporation gets its voting results more quickly and the shareholders who vote electronically do not have to return their proxy voting cards by mail.

Currently, more than 30 states, including Oklahoma, explicitly authorize corporations to deliver proxy materials electronically and solicit electronic votes from shareholders.

Additionally, many corporation are updating their corporate documents to allow electronic delivery and voting.

Corporations that previously had provisions in their bylaws allowing shareholders to vote by proxy "appointed by an instrument in writing signed by the shareholder" are updating their bylaws to provide that the proxy may be appointed "either by written instrument or electronically or by other means permitted by law."

Jennifer Wheeler is an attorney with McAfee & Taft.

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