Companies shrug off shareholder e-forum idea

WASHINGTON (Reuters) - Companies have largely ignored the Securities and Exchange Commission's call to create electronic shareholder forums, saying such websites are more trouble than they are worth.

Hyperdynamics Corp (HDY.A) was one of the few to jump on the idea. The Houston oil company in December circulated a splashy press release that said it would reach out to investors by launching such a forum.

But it never materialized.

"They decided not to do it," said company spokesman Tony Schor. "Conceptually it's brilliant, but what ends up happening with these message boards is that they're filled with people with reasons to want the stock to go up and down."

The SEC in November encouraged companies to engage with shareholders online by adopting regulations that cleared up some liability questions about e-forums, but few of these sites have emerged.

A February survey by Thomson Financial found only 4 percent of 42 public companies surveyed planned to create a shareholder e-forum or were seriously considering it. Another 56 percent were not considering the idea, and 40 percent said they were only beginning to think about it.

E-forums have been slow to take off because corporate boards typically listen only to shareholders who hold large blocks of stock, said consultant Dominic Jones, who runs the IR Web Report. Such pension funds and hedge funds often meet with management behind closed doors.

"Directors just don't see the need to communicate with all their shareholders," Jones said.

Nor do the vast majority of shareholders communicate with their companies, at least in terms of casting votes for directors and corporate proposals at annual meetings.

In fact, voting by small investors actually fell sharply after the SEC tried in June to make the process easier by requiring companies to post proxy materials on the Internet.

Data released last month from proxy vote processor Broadridge Financial Solutions Inc (BR.N) indicate the number of individual shareholders voting dropped more than 75 percent under the e-proxy initiative, to 4.6 percent.

MOVING INTO A NEW SPACE

Amerco Inc (UHAL.O) is one of the few companies to launch an e-forum.

During its proxy season last summer, the parent of moving truck company U-Haul International set up a link from its main website to an e-forum that required users to create an account and log in with a password. Participation was "very modest," with fewer than 100 posts and few direct questions for management, said investor relations director Jennifer Flachman.

Still, Amerco plans to relaunch the site soon, with more publicity and direct involvement by company insiders.

"It kind of levels the playing field for those who might not be comfortable speaking up at an earnings conference (call) or annual meeting," Flachman said.

Amerco would like to change the image of such forums, she said, noting that traditional Internet chat rooms and message boards sometimes stray from company-related topics and are sprinkled with obscenities.

SEC Chairman Christopher Cox said in November that sites like Yahoo Finance message boards were missing "any meaningful connection to what actually goes on in the company."

The SEC envisioned companies sponsoring e-forums to gauge shareholder interest in certain issues, express management's views, and help investors form coalitions.

Such sites could "generate attention for sound proposals that could increase the value of share ownership," the commission said in a notice, "and they could filter out proposals not supported by other shareholders."

But some companies fear the agendas of anonymous posters.

Whole Foods Market (WFMI.O) Chief Executive John Mackey posted anonymous messages for several years about then-rival Wild Oats Markets on Yahoo Finance bulletin boards. Mackey, writing under a pseudonym, said Wild Oats management "clearly doesn't know what it is doing" and that the company had "no value."

Whole Foods later acquired Wild Oats. The SEC conducted a probe into the postings, but took no further action.

Investment banker Gary Lutin, who has conducted issue-specific e-forums about Verizon Communications Inc (VZ.N) (www.shareholderforum.com/vz/) and CA Inc (CA.O) (www.shareholderforum.com/CA/), said it is difficult to open forums up to all shareholders while moderating them sufficiently.

"If you have an open (message) board, you get a lot of clutter," he said. The Verizon forum currently has links to news stories about the company, but no shareholder messages.

A Verizon spokesman said the company did not participate in Lutin's forum and declined to comment further.

Lutin said he had heard some executives express fear that e-forums could be costly to operate and make companies more vulnerable to activist hedge funds.

Amerco, however, is optimistic about such sites. "With this forum," Flachman said, "we think we're stepping into the present."

(Editing by Lisa Von Ahn)