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Proxy Statement

Proxy Statement

What Is a Proxy Statement?

A proxy statement is a document containing the information the Securities and Exchange Commission (SEC) expects companies to give to shareholders so they can settle on informed conclusions about issues that will be brought up at an annual or special stockholder meeting. Issues covered in a proxy statement can incorporate proposition for new increments to the board of directors, information on directors' salaries, information on bonus and options plans for directors, and any declarations made by the company's management.

Grasping Proxy Statements

A proxy statement must be filed by a publicly traded company before shareholder meetings, and it unveils material matters of the company important for requesting shareholder votes and last endorsement of nominated directors. Proxy statements are filed with the SEC as Form DEF 14A, or definitive proxy statement, and can be found utilizing the SEC's database, known as the electronic data gathering, analysis and retrieval system (EDGAR).

What's in a Proxy Statement?

Proxy statements must uncover the company's voting method, nominated contender for its board of directors, and compensation of directors and executives. The proxy statement must reveal executives' and directors' compensation, including salaries, bonuses, equity awards, and any deferred compensation. Proxy statements can likewise reveal insight into some other advantages utilized by executives, like the utilization of a company's aircraft, travel, and other material expenses covered by the company.

Important

Since the election of directors is the main part of shareholders' meetings, a proxy statement meticulously describes directors, their experience information, and the amount they had been paid in the past several years.

Moreover, a proxy statement reveals any potential conflict of interest between the company and its directors, executives, and auditors.

In particular, proxy statements must rundown any related-party transactions that occurred in the past between the company and its key personnel. The statement additionally gives information about the company's audit committee, as well as audit and non-audit fees paid to its outer public accountant. A proxy statement demonstrates persons with material ownership of the company's common stock, including its executive officers and directors.

Benefits of Proxy Statements

While a proxy statement is generally important for shareholders getting ready for a company's special or annual meeting, this document can aid likely investors in evaluating the capabilities and compensation of its management team and board of directors. A finding that chief officers of an underperforming company are paid compensation essentially over those of friends might raise a red flag of exorbitant spending and burden a financial backer's decision of undertaking an investment. Likewise, successive and material related-party transactions between the company and its executives or directors might represent a risk the company's resources are being abused and warrant further investigation.

Proxy Voting

With a proxy vote, a shareholder or firm delegates the right to vote on certain company issues to a representative, either in light of the fact that the shareholder can't truly go to the meeting or on the grounds that the representative is viewed as more informed on the issue.

Ahead of annual meetings, eligible shareholders could receive a proxy polling form — in the mail or carefully — as well as an information booklet containing proxy materials, called a proxy statement that portrays what issues are up for vote. Shareholders most commonly vote to choose board members, to support executive compensation, to endorse mergers or acquisitions, or to support stock compensation plans. Investors who own applicable voting shares in the company as of the record date might be eligible to vote on these issues.

Since most shareholders can't go to the company meeting, they will frequently assign somebody, for example, a member of the company's management team to vote for them. This person is referred to as a proxy and can give a proxy vote a role according to the shareholder's desires, written on their proxy card. Proxy votes are projected online, by telephone, or via mail, ahead of the cutoff time, regularly 24 hours before the shareholder meeting.

Special Considerations

In some cases companies are helpless before what is called a proxy fight or proxy fight. This happens when a group of shareholders band together so they will have sufficient power to win a vote. This is generally put in play in corporate takeovers.

Whenever a corporate takeover is particularly petulant to the point that it has turned into a hostile takeover, the obtaining group might try to persuade shareholders to vote out some or a company's all's senior management, to make it more straightforward to assume command over the organization.

Proxy Statement FAQs

How Do You Find a Foreign Company's Proxy Statement?

Foreign companies that offer SEC-registered securities in the United States need to file forms with the SEC likewise to U.S. companies in order to give investors accurate and opportune information. All such forms can be found utilizing EDGAR, the SEC's database. Companies that are not registered with the SEC must post exposures in English on the internet, according to SEC rules.

What Happens If a Company Fails to File a Proxy Statement on Time?

A public company that can't file quarterly financial outcomes, proxy statements, or other key filings with the SEC on time must file SEC Form 12b-25, otherwise called the Notification of Late Filing. Filing this form might empower a company to keep away from certain fees that it would somehow owe because of the late filing. The company filing the late form must give a justification behind the late filing and state whether it hopes to disclose any big shocks relative to its prior year's filing of the required form.

Is a Proxy Agreement the Same As a Proxy Statement?

A proxy agreement is a written agreement that one person can act legally for another. On account of shareholder votes, the proxy agreement states that a proxy can vote in the interest of the principal. That is not quite the same as a proxy statement, filed with the SEC, which is a document furnished by public companies and filed with the SEC that reveals material matters related to a company's voting procedures, contender for its board of directors, and executive compensation.

The Bottom Line

A proxy statement is a document containing information that the Securities and Exchange Commission requires public companies to reveal to shareholders while mentioning votes ahead of an annual meeting.

Features

  • The proxy statement, called a Form DEF 14A, features new board of director chosen people, proposed executive salary and compensation, and some other information a shareholder might have to vote on an issue.
  • A proxy statement is not the same as a proxy vote, in which a shareholder concurs that someone else can vote for the shareholder.
  • The proxy statement is filed when a company is seeking shareholder votes and is filed ahead of an annual meeting.
  • Proxy statements give shareholders essential information expected to survey the capabilities and compensation of key members of the company's management team and board of directors.
  • Public companies are required to file proxy statements with the Securities and Exchange Commission.