Ironfire Capital's Plea to Dismantle Broadridge Monopoly

August 7th, 2009		\| More
Contributed by: Eric Jackson, Ironfire Capital
Last month, I wrote to Chairman Mary Schapiro of the SEC about dismantling the monopoly Broadridge (BR) enjoys counting electronic proxy votes for all US public companies. Wednesday, I wrote to Senator Mel Martinez (R-FL), who serves on the Senate Banking Committee, about the matter. August 5, 2009 VIA FAX The Honorable Mel Martinez U.S. Senate Room 356 – Russell Senate Office Building Washington, D.C. 20510 202-224-3041 (Fax) 202-228-5171 Re: Encouraging the SEC to dismantle the Broadridge monopoly Dear Senator Martinez: I am an individual investor and hedge fund manager based in Naples, FL, who is concerned about shareholder voting and communications issues. I would like to urge you to write to SEC Chairman Mary Schapiro and ask her and her fellow Commissioners to break up the monopoly currently enjoyed by Broadridge (ticker: BR) in overseeing electronic proxy voting for all public companies. I have also recently written to the Chairman on this matter (see the end of this letter). The foundation of our capital markets is a “one shareholder, one vote” system for running our public companies. On an annual basis, shareholders get to voice their approval or disapproval about the way their representatives are running the company on the Board of Directors and in Senior Management. Broadridge is the company which is solely responsible for counting those votes. It has a monopoly. Last August, after Broadridge released the results of the Yahoo! (YHOO) annual shareholders’ meeting vote, there was a large protest made by Gordy Crawford of Capital Research (one of the largest mutual funds in the country) who questioned the veracity of the results. Because of Mr. Crawford’s stature, the fact the Capital Research was one of the largest Yahoo! investors, and the intense media interest in the Yahoo! voting results, Broadridge was forced to verify the results. They later admitted their results had been far off the mark from the actual ones. Although Broadridge said the problem was a simple “truncation error” made by a computer, it’s clear when you look at the actual results and the ones first reported that there was human error involved. What was shocking about the incident was that it likely would never have been reported had Gordy Crawford not spoken up. It makes me wonder how many other errors made by Broadridge are never reported or acknowledged. I understand that the only check and balance over Broadridge’s monopoly is that they have to submit regular “updates” to the SEC. I don’t believe this is sufficient, given the importance of these voting results. I also understand from those who work in Investor Relations at corporations using Broadridge that they are often frustrated by monopolistic pricing demands placed on them by Broadridge for using their services. In my view, investors and public companies would be best served by allowing another company to compete with Broadridge. Let the best provider to companies and shareholders be successful. It’s that spirit of competition and innovation which has served our country so well. I hope you will consider writing to Chairman Schapiro about this matter. Although the SEC has many issues it is tackling at the moment, breaking up the Broadridge monopoly will help make our companies more competitive and risk-conscious than they previously had been. This certainly would have served them and the whole American economy well in the past 5 years. Thank you. /Eric M. Jackson/ Eric M. Jackson, Ph.D. Managing Member Ironfire Capital LLC