What is Proxy Vote?

Explanation

Whenever a public company needs to make an important decision, a proxy ballot and a booklet are sent to every company shareholder through e-mail. The booklet is called a proxy statementProxy StatementThe Securities and Exchange Commission (SEC) requires companies to present important information to their shareholders in the form of a proxy statement. It is required to be filed prior to each annual general meeting.read more. It contains information about the issues that the shareholders need to vote on.

The issues can be very critical to normal decisions. For example, we can talk about: –

  • Getting the approval of the decision to merge or acquire.Selecting the right Board of DirectorsBoard Of DirectorsBoard of Directors (BOD) refers to a corporate body comprising a group of elected people who represent the interest of a company’s stockholders. The board forms the top layer of the hierarchy and focuses on ensuring that the company efficiently achieves its goals.
  • read more.Obtaining the consent of a plan of stock-based compensation etc.

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How is Proxy Voting Process Work?

Knowing only about the proxy vote is not enough. It is also important to find out how proxy voting works. Let us dive in.

  • It all starts with the accountability of publicly traded companies to their shareholders. And the companies showcase their responsibility by sharing information about their activities in annual meetings.During the meetings, these companies report to the shareholders about the Board of Directors (or any changes made), Executives’ salaries, expansion, merger, acquisition, etc.Along with reporting the organization’s critical information, the companies also ask the shareholders to vote for whatever they think is the right option.Before the annual meetings, the shareholders are sent the proxy statement stating the options to be voted on, the annual report, and a proxy card. This proxy card contains voting instructions.This arrangement is made because most shareholders/investors cannot arrive at the annual meeting to vote for/against the option. That is why each shareholder chooses a person to vote per the shareholder’s direction. This person can be anyone from the management team of the company.It allows the shareholder to choose the right option – approving the auditor’s report, electing the right directors, etc.One should cast it on or 24 hours before the annual meeting. It can be done online, by phone, or by mail.There are usually four options that shareholders can choose while casting their proxy votes. They are “not voted”, “abstain”, “against”, and “for.”

Why do you need to know about the proxy vote?

As shareholders of publicly traded companies Publicly Traded CompaniesPublicly Traded Companies, also called Publicly Listed Companies, are the Companies which list their shares on the public stock exchange allowing the trading of shares to the common public. It means that anybody can sell or buy these companies’ shares from the open market.read more, you should know what a proxy vote is and how it works. If you are not aware, you will find difficulty in dealing with a situation where you would be asked to cast your proxy vote, and you wouldn’t have any idea.

That is why you need to ask the company how the proxy vote works while you purchase the shares. No matter from whom you buy the sharesBuy The SharesKnowing how to buy shares is crucial for a person who wants exposure to the equity market. Equity markets are volatile, and timing is very important. Shares trade in exchanges, but you just can’t go and buy a share from the exchange. There are several steps involved in purchasing a share.read more, you need to know your rights as shareholders and how you would be contacted if there is a need for proxy voting.

Your broker or the company should inform you about proxy voting procedures. If not, you should request more information about it.

Conclusion

As shareholders, you have the power to vote, choose right from wrong, and elect the right person to take things forward for the company. Understand your right, and you would feel a sense of belongingness with the company.

This article is a guide to Proxy Vote and its meaning. We also have a look at how the proxy voting process works, and what you need to know along with examples. You may also have a look at these articles to learn more –

  • Capital Employed FormulaShareholders Equity StatementVoting Shares ExamplesProxy Fight Example