Proposal would send shareholders online

WASHINGTON – Shareholders would be able to get material from companies through the Internet on issues being put to a vote at annual meetings under a proposal made Tuesday by the Securities and Exchange Commission.

The commissioners voted 5-0 at a public meeting to allow companies to provide the annual proxy material electronically rather than requiring the bulky documents to be mailed to shareholders. The proposal, which was opened to a 60-day public comment period, is expected to save U.S. corporations $500 million a year or more in printing and postage costs.

The commission could formally adopt the proposal sometime after the comment period, but the proposal would not take effect until 2007.

Proponents see the move as another helpful step away from the paper-based investor information system that dates to the 1930s when the Securities and Exchange Commission was founded. An initiative also is under way to modernize the commission’s corporate filings system, known as Edgar, by providing for interactive data to make the information searchable and retrievable.

“A significant investor benefit of using the Internet as the delivery platform is that investors will cast more informed votes,” Chairman Christopher Cox said before the vote. “The tragic fact is that today, few ordinary investors read the proxy statements, which are written more like insurance policies against lawsuits than shareholder-friendly guidance.”

Under the Internet proxy plan, companies that choose to provide the material electronically would have to send shareholders a sort of postcard informing them that it is available on the company Web site at least 30 days before the annual meeting. There would be a toll-free telephone number and an e-mail address for shareholders who still wished to receive paper proxy material by mail.

But Tamar Frankel, a law professor at Boston University, criticized the commission’s proposal as inadequate because it does not compel companies to provide lists of shareholders to those mounting proxy contests.

“This list is crucial,” Frankel said. “A proxy fighter must know who the institutional and large shareholders are and usually solicit their votes by providing them with information and arguments. Putting solicitation materials and proposed new directors on a Web site is not enough.”