SEC Should Break Up Broadridge Monopoly

From: Eric Jackson
Sent: Thursday, July 16, 2009 3:00 PM
To: '[e-mail]'
Subject: Breaking Up the Broadridge (BR) Monopoly

Dear Chairman Schapiro:

I would like to urge you to consider breaking Broadridge’s monopoly in overseeing electronic proxy voting for all public companies.

As you might recall, last year, after Broadridge released the results of the Yahoo! (YHOO) vote, there was a large protest made by Gordy Crawford of Capital Research who questioned the veracity of the results. Because of Mr. Crawford’s stature, the fact the Cap Re was one of the largest Yahoo! investors, and the intense media interest in the Yahoo! voting results, Broadridge was forced to verify the results and admitted their results had been far off the mark.

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. What does it matter if the SEC allows proxy access or gets rid of broker votes, if investors can’t trust the final voting results because of future Broadridge “truncation errors”?

In my view, investors would be best served by allowing another company to compete with Broadridge. Let the best provider to companies and shareholders be successful.

I also note that Broadridge appears to be much more company-centric (i.e., management) than shareholder-centric.

I hope you will consider adding further examination of Broadridge to your already busy list of plans.

Sincerely,

Eric Jackson

Eric M. Jackson, Ph.D.
Managing Member
Ironfire Capital LLC

Comments

[john s. gordon:]

let's hope SEC does its mandated job.
> jack

Jul 17 09:40 AM

[User 449704:]

As we are a competitor, we are pretty sure there is room for two...


On Jul 17 09:40 AM john s. gordon wrote:

> let's hope SEC does its mandated job.

Jul 17 09:50 AM

[4Foolz:]

So, your argument for breaking up the BR "monopoly" is bringing up the Yahoo proxy mistake as an example and claiming that surely there are other mistakes that were missed? BR is a software company. That's like saying that there are bugs in Windows that haven't been 'reported' yet. Oh no! All software companies make mistakes. Its human nature to miss something in the code or testing of the software. But all that aside, how does this tie into your argument that BR has a monopoly and it should be broken up? So, if there were another 10 software providers of proxy, surely there will NEVER be any mistakes made in proxy counts?

And you also imply that BR doesn't let other companies participate in the proxy business. What exactly is BR doing that is preventing others from entering the business? While you think up of an answer, I'll give you one - MOAT. Its a large infrastructure investment, along with building a reputation that is preventing other companies in participating in this business model. It was also their first mover advantage by having SEC accept e-proxy as a method of delivery. So, since when is MOAT considered a monopoly? Should SEC break up Apples because their iPod business has over 70% market share, with MOAT created by their iTunes software?

I can continue to poke holes in your letter, but I already wasted too much time...

Jul 17 01:51 PM