New SEC Rule Saved Sun $500,000 And 100 Million Sheets Of Paper
For Sun Microsystems, “eco” stands for both ecology, as in the environment, and economy, as in the financial bottom line. Recently the company realized savings in both areas when it decided to go electronic with its financial filings under a new U.S. Securities and Exchange Commission rule.
Under the SEC’s new Notice and Access rule, companies can make proxy materials available via the Internet. In place of the proxy materials, companies can mail a “Notice of Internet Availability of Proxy Materials” to stockholders and then provide Internet access to the materials.
By using the electronic financial filings, Sun reduced their hard-copy printing of proxy materials by 92 percent, from about 1 million copies to about 80,000, saving $500,000, according to Bret Schaefer, VP of Finance and Investor Relations for Sun Microsystems.
On the environmental side, that translates into saving about 100 million pieces of paper and avoiding the generation of 1300 metric tons of CO2 and 9.5 million gallons of wastewater.
The tradeoff? According to Sun, there really isn’t one. In 2006, the last year the IT giant mailed hard copies of proxy materials, 90 percent of shares voted. In 2007, using electronic proxy materials, 89 percent of shares voted, a reduction of only one percent.
The company says it is one of the first large accelerated filers (issuers having a market capitalization of $700 million or more) to adopt the notice and access rule.
For Sun, which considers itself “not totally mainstream,” the decision to take financial filings to the Internet was a natural one. The effort fit with the company’s overall sustainability initiatives and with their existing marketing efforts of leading with technology and web services.
The company, for example, only makes its complete sustainability report available in web-format, not as a PDF, which might encourage printing.
“We’ve been doing more and more interaction through web for a long period of time,” said Schaefer. “But when we looked at this from a pure financial perspective, we’ve been driving down our costs overall.”
Of course, there were a few hurdles Sun had to overcome to make the switch, including ensuring strict compliance with the new rule, which required close coordination with the company’s legal department.
In addition, there was some confusion among shareholders who were used to getting materials in the mail. And even though Sun is a top tech company, some shareholders didn’t have Internet access.
Under the SEC rule, companies are required to mail a free, hard-copy set of materials to any stockholder who requests one; only about one percent of Sun’s shareholders took advantage of the option.
Sun’s notice mailing included the single-page, SEC required document, which provided a brief outline of the new rule and simple step-by-step access and voting instructions. The company also launched a marketing effort about the change early on in the process, which included a press release and prominent treatment on the company’s website that explained the new SEC rule and how shareholders could access the documents online.
Next time, Sun will be clearer about what options shareholders have for voting and accessing the materials, Schaefer said. In addition, as Sun and other companies begin to use this new model, shareholders should become more comfortable with the approach.
“Since we were one of the early adopters there weren’t a whole lot of examples of best practices for what we were doing,” said Angela Zing, investor relations manager.
Sun’s 2007 annual report on Form 10-K and proxy statement may be viewed on Sun’s website.
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