Company tries e-proxy, misses quorum

PROFESSIONAL Veterinary Products Limited (PVPL), a customer-owned wholesaler of supplies to veterinary clinics, has been forced to reschedule its annual meeting after its notice-only eproxy solicitation failed to achieve a quorum.

The company’s annual meeting, originally set for January 11, has been adjourned to February 1 to give the company time to drum up proxies. Last year when the company was not able to use the new default electronic delivery process, about 57% of the company’s shareholders returned their proxy forms.

The company did not say in its filing with the SEC yesterday how many had done so for this year’s failed meeting.

PVPL has 2,068 shareholders, all of whom are veterinarians or veterinary clinics. The company says its “shareholders also are our primary customers.” The shares have a fixed value of $3,000 each and can only be sold back to the company.

A lesson worth noting

While PVPL’s ownership structure is atypical of most companies that are trying notice-only proxy solicitations to save money, its experience nonetheless highlights an important point.

Most companies would likely fail to achieve quorums if not for the fact that the majority of their stock is held by institutional investors who are obligated to cast their ballots.

As we highlight in our guidelines for shareholder meetings on the Web, a better measure of a successful notice-only proxy campaign is not the quorum figure, but the level of retail shareholder participation. Retail participation rates measure how many people participate because they want to, not because they have to.

Corporate secretaries and IROs who talk about the “success” of their notice-only campaigns, even while they experienced massive declines in retail participation, really have nothing to be proud of.

Finally, the fact that so many of PVPL’s customer-shareholders were not motivated to go online to access their proxies may suggest deeper problems in PVPL’s business itself.

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