Over the past decade, companies have been increasingly communicating with their investors online, as regulators have allowed them to reduce the number of printed annual reports and proxy materials they mail to shareholders. But if the trend has been good for investor-relations budgets (and postal workers’ shoulders), it has been less so for shareholder participation in corporate elections.

During last year’s proxy season, companies that solely used the Internet to alert their shareholders to the availability of proxy documents had a much lower retail-vote turnout than those that mailed all of the proxy materials, according to brokerage-services firm Broadridge. (The decline in retail votes has also been attributed to a new New York Stock Exchange rule that prohibits brokers from voting in favor of management without their customers’ direction.)

As a result, many IR professionals view this proxy season as a test of how effectively they are communicating with investors. For the most part, companies are keeping their printing budgets level and waiting to see how new changes to the Securities and Exchange Commission’s e-proxy rules play out. The changes, which went into effect on Monday, are aimed at reducing investor confusion and encouraging higher voter turnout.

Meanwhile, the traditional printed annual report, with its glossy pages and colorful photographs and charts, may be a dying art. It’s been three years since the SEC allowed companies to dispense with mailing paper copies of annual reports to their shareholders, unless requested to do otherwise. In 2008, just 35% of companies were producing a traditional annual report, and many of them had cut their print runs, according to the National Investor Relations Institute. To satisfy the requests for the printed version, other companies are sending out so-called 10-K wraps, scaled-down versions that bundle the 10-K filing with minimal commentary from the company.

“The days of splashy production numbers are probably over,” says Gene Marbach, group vice president for investor-relations firm Makovsky & Co. He adds, “It’s tough to do something flashy when you’re recording losses, because that would be a terrible message to send to your shareholders.”

To be sure, IR and design firms are hoping that companies will devote funds formerly used for sprucing up their printed reports to online presentations, by adding video, HTML coding, or Adobe Flash to make them more interactive. For instance, Nasdaq OMX recently launched a new product, Dynamic Annual Report, that enables companies to incorporate video, Flash (to simulate page turns), RSS feeds, and social media.

While larger companies tend to already have interactive online reports, some are holding off on making the reports fancier as they attempt to appease the varying needs of investors who straddle generational lines. Baby boomers seem to view printed financials “as more relatable or believable,” while younger generations are less likely to question the validity of information they see on their desktops or BlackBerrys, according to John Avila, executive design director at public-relations firm Edelman.

But aversion to the Web is generally waning. “People are becoming more and more comfortable with the use of the Internet as a primary means of disseminating information,” says Rob Williams, director of investor relations for Dell, which stopped producing a traditional printed annual report three years ago. Instead, the company makes what Williams calls an “interactive year in review,” which includes video and links to various sections of its Website.

If companies are devoting fewer resources to printed proxy materials, they can still be creative in turning out the vote. For example, Prudential Financial is experimenting with a promotion for its 2.4 million registered shareholders. Those who vote in the 2010 proxy season can choose to either receive an organic tote bag or have a tree planted in their honor. “We had to figure out how to engage shareholders, how to incentivize them, without bothering them,” says Peggy Foran, Prudential’s chief governance officer. If the program turns out to be effective, Foran says the firm may extend it to retail voters in future seasons.