Proxy statement

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A proxy statement is, according to the Securities and Exchange Commission (SEC), "a document which is intended to provide security holders with the information necessary to enable them to vote in an informed manner on matters intended to be acted upon at security holders' meetings." Publicly-traded companies are required to send proxy statements to all shareholders, each of whom has a vote in the operation of the business, in advance of annual and special meetings. It includes information pertaining to issues that require a shareholder vote as well as a ballot for voting. This ballot is used for the election of the Board of Directors for the next year and may be used for other issues requiring a vote as well.

Proxy statements also provide information on all other matters which will be discussed at the annual or special meeting, such as approval of company auditors, approval of employee bonus plans, approval of changes in the company's preferred stock, etc. In addition, proxy statements contain a wealth of financial information about a company's significant shareholders, composition of the board of directors (including background and investment holdings), and compensation (salary, bonuses, stock options) paid to its top executives.

Finally, proxy statements contain SEC-mandated performance graphs detailing the company's stock performance and shareholder return when stacked up against other industry indexes, such as a national market index (like the Standard & Poor's 500), and broad industry averages. This information, if studied with a discerning eye, can help stockholders discern the fortunes and priorities of a company's top management. It serves as a financial benchmark for comparing the relationship between executive compensation and company performance. For example, proxy statements are less likely to create controversy if the company is performing well and rewarding stockholders of publicly traded companies with profits, or if the company is struggling financially and the executives are limiting their compensation accordingly. However, if key executives are pulling in enormous compensation packages while the company founders, attentive shareholders will notice. "Examining compensation is especially important for young, fast-growing companies that have yet to begin generating profits," wrote Geoffrey Simon in Business Journal of Tampa Bay. This aspect of the proxy statement cannot be hidden from public view, so experts urge leaders of growing firms to exercise appropriate judgement when establishing executive compensation packages.

In the future, analysts believe that many proxy statements will be delivered to shareholders via the Internet. This methodology, while still uncommon in the late 1990s, is trending upward both for reasons of convenience and cost savings (in such realms as printing and postage expenses). Costs associated with converting to this delivery method can be significant for smaller companies, due to the expense of establishing/upgrading Internet sites and converting proxy documents to HTML format. But most observers agree that once an electronic delivery system has been put in place, the firm can register considerable annual savings.

Further Reading:

Q and A: Small Business and the SEC. Securities and Exchange Commission, 1997.

Roberts, Bill. "No Chads, No Rips, No Errors." Electronic Business. January 2001.

Simon, Geoffrey A. "Proxy Statements are Full of Highly Valuable Information." Business Journal of Tampa Bay.

Sosnoff, Martin. "Forget the Annuals, Read the Proxies." Forbes. May 4, 1998.

A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting.

Investopedia Says:
Issues covered in a proxy statement can include proposals for new additions to the board of directors, information on directors' salaries, information on bonus and options plans for directors, and any declarations made by company management.

Related Links:
Don't overlook this overview of a company's well-being. Pay Attention To The Proxy Statement
The proxy statement can help determine whether a CEO is well compensated - or just overpaid. Executive Compensation: How Much Is Too Much?
The forms companies are required to file provide a clear view of their histories and progress. SEC Filings: Forms You Need to Know
We delve into common stock owners' privileges and how to be vigilant in monitoring a company. Knowing Your Rights As A Shareholder
We tell you where to find the telltale signs of corporate misdeeds. Putting Management Under The Microscope
CEOs, CFOs, presidents and vice presidents: learn how to tell the difference. The Basics Of Corporate Structure
You have the right to take part in important company decisions - even if you cannot attend the meetings. Proxy Voting Gives Fund Shareholders A Say
Your research will be easy if you compile all the decision-making information you need. Get Organized With An Investment Analysis Form

The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. Please improve this article and discuss the issue on the talk page. (December 2011)

A proxy statement is a statement required of a firm when soliciting shareholder votes. This statement is filed in advance of the annual meeting. The firm needs to file a proxy statement, otherwise known as a Form DEF 14A (Definitive Proxy Statement), with the U.S. Securities and Exchange Commission. This statement is useful in assessing how management is paid and potential conflict-of-interest issues with auditors. The statement includes:

• Voting procedure and information.
• Background information about the company's nominated directors including relevant history in the company or industry, positions on other corporate boards, and potential conflicts in interest.
• Board compensation.
• Executive compensation, including salary, bonus, non-equity compensation, stock awards, options, and deferred compensation. Also, information is included about perks such as personal use of company aircraft, travel, and tax gross-ups. Many companies will also include pre-determined payout packages for if an executive leaves the company.
• Who is on the audit committee, as well as a breakdown of audit and non-audit fees paid to the auditor.

SEC proxy rules: The term "proxy statement" means the statement required by Section 240.14a-3(a) whether or not contained in a single document.

In many cases, shareholder votes - particularly institutional shareholder votes - are determined by proxy firms which advise the shareholders...

Traditionally, broker-dealers have been permitted to vote for "routine" proposals on behalf of their shareholders if the shareholders do not return the proxy statement. This has been controversial, and in 2006 the NYSE Proxy Working Group recommended that the rules be modified so that uncontested director elections were not considered routine.^[1] The SEC approved the rule on July 1, 2009.^[2]

In July 2010, the SEC announced that it was seeking public comment on the efficiency of the proxy system.^[3]

There has been some controversy over "proxy access" which is a method to allow shareholders to nominate candidates which appear on the proxy statement. Currently, only the nominating board can place candidates on the proxy statement. The United States Dodd–Frank Wall Street Reform and Consumer Protection Act specifically allowed the SEC to rule on this issue. In 2010, the SEC passed a rule which allowed certain shareholders to place candidates on the proxy statement,^[4]; however, the rule was struck down by the United States Court of Appeals for the District of Columbia Circuit in 2011.^[5]

References

1. ^ NYSE Working Group. (June 5, 2006). REPORT AND RECOMMENDATIONS OF THE PROXY WORKING GROUP TO THE NEW YORK STOCK EXCHANGE.
2. ^ Order Approving Proposed Rule Change, as modified by Amendment No. 4, to Amend NYSE Rule 452 and Corresponding Listed Company Manual Section 402.08 to Eliminate Broker Discretionary Voting for the Election of Directors, Except for Companies Registered under the Investment Company Act of 1940, and to Codify Two Previously Published Interpretations that Do Not Permit Broker Discretionary Voting for Material Amendments to Investment Advisory Contracts with an Investment Company. Release No. 34-60215; File No. SR-NYSE-2006-92. Discussed by the NY Times Dealbook at: Curbs on Broker Voting Are Approved.
3. ^ SEC. SEC Votes to Seek Public Comment on U.S. Proxy System.
4. ^ SEC Adopts New Measures to Facilitate Director Nominations by Shareholders.
5. ^ What Would Proxy Access Look Like if Done Right?. Corpgov.net.

External links

• Recently filed proxy statements
• List of items required in proxy statements in Schedule 14A (SEC) (PDF) - note: the SEC published its final rules governing disclosure on August 11th, 2006. This Schedule does not reflect the additions and changes.
• {http://s.wsj.net/public/resources/documents/info-PROXYPRIMER1003_retro.html?mod=e2tw Wall Street Journal primer on how to read a proxy statement]

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