The Complete Shareholder Proxy Vote Guide

Shareholder Proxy VoteCompanies are bringing more social, environmental, economic and corporate issues to a shareholder proxy vote.  Some of the proposals are no more than a litmus test to public sentiment, but it’s a start to broader corporate reform and a good thing for shareholders.

Of course, for this trend to continue, shareholders need to take part, which seems to be the biggest obstacle.  Whether you have 100 shares or 100,000, it doesn’t matter.  It’s your money invested in these companies and a wasted opportunity by not voting.

As a shareholder, understanding your rights, the proxy voting process and knowing the SEC proxy rules is the best way to stay involved.  How you vote could have a direct impact on the company and your money going forward.

What is a Proxy Vote?

Every year there is an annual meeting and in between, any number of special meetings can pop up that need a shareholder’s vote.  These votes can be done in person.  But jumping on a plane every time a shareholder vote is needed can be excessive.

This is why the company provides the option of a proxy vote.  Which is just a vote cast by another person on your behalf.  Using a proxy vote makes it that much easier for shareholders to voice their concerns on any number of proposed issues that come up throughout the year.  It’s also one way to let management know just how well their doing (or not doing) without the extra travel costs.

Shareholder Voting Rights

The concept of shareholder voting rights is about accountability at the management level.  As a shareholder, you are an owner of the company.  For the most part, you’ll get one vote per share, though, there are exceptions where a specific class of shares get more or less votes per share.

Voting your shares gives you an opportunity to weigh in on a number of issues including:

  • Electing the Board of Directors
  • Approving of outside auditors
  • Adopting company by-laws
  • Approving or rejecting buyout/merger proposals
  • Amending the company’s Articles of Incorporation
  • “Say on Pay” vote on top management compensation practices
  • Approving shareholder or management proposals

Shareholders even vote on proposed social and environmental issues that impact the company.  Most recently, the SEC added mandatory voting on executive compensation.  Some of the proposals are non-binding votes like the “say on pay”.  But these proxy votes give the board of directors a sense of the shareholder sentiment and more importantly how the company is viewed by the public.

Proxy Materials

When a shareholder vote is announced, a record date is set.  If you own shares on the record date, you’ll receive a notice from the company containing the proxy materials by mail or information on how to get access to them online.  The proxy materials will contain one or all the following:

  • Proxy Statement – This has all the information that a shareholder needs to make a proxy vote on any issues being covered at an annual or special meeting.  It’s required by the SEC before any shareholder votes are taken.  The proxy statement will cover details about the meeting, shares owned, board structure, and any other information that will be voted on.
  • Proxy Card – This is the ballot for registered owners and will cover any issues to be voted on at the company meetings.
  • Vote Instruction Form – Or VIF, this is the ballot for beneficial owners to vote on any issues at the annual or special meeting.
  • Annual Report – This has all the information about management, operations and financial statements.  Sometimes it’s just a marketing tool used to sway votes.  Companies are required by law to make the annual report available to shareholders.  If it’s not sent, you can find it at the company’s website.
  • Proxy Notice – If you filed to receive the information online, you’ll get a proxy notice.  This will tell you where to find the proxy statement, proxy card, VIF and annual report online.

Ways To Submit a Proxy Vote

As we mentioned earlier, there are several ways to place your shareholder proxy votes.  The shareholder annual meeting is just one instance that owners can voice their concerns through a vote.  You can attend each shareholder meeting in person or you can submit a proxy vote in one of several ways:

  • By Mail – Vote on each proposal on the proxy card/VIF and return it in the business envelope that came with the proxy statement.
  • Online – Access the website provided on the proxy card/VIF, enter the control number on the proxy card,  vote on each proposal, and submit the results.
  • By Phone – Dial the number provided on the proxy card/VIF, enter the control number, vote on each proposal.
  • In Person – If you choose to vote in person, each company’s voting rules are different.  The proxy statement will cover, the how, when and where to vote at the meeting.  You can also send a proxy vote and attend the annual meeting.

Voting Options

When it comes to placing your vote, you’ll have several options on the proxy card or VIF.  You can vote for, against, abstain, or withhold, depending on each proposal.

When electing the board of directors, the voting options will be for or withhold.  You’ll be able to vote in favor of all directors or withhold on all directors.  There will also be an option to vote for each individual director.

Each proposal will give you the option for, against, or abstain.  The effect an abstain vote or for that matter a withhold vote, will depend on the corporate governance.  The proxy statement will explain how each voting option impacts the outcome.

You’ll be able to submit or change your vote by the cut-off or meeting date.  If you mailed in your proxy vote, another proxy card or VIF will be needed to make any changes.  To change an online or phoned in proxy vote, just follow the instructions again.

Research Before Your Vote

A bit of research will go a long way before you vote.  If everything is good at the company, management is doing their job, and the stock and company are performing well, then the time drain of research will be short.

But what if management has pulled the wool over shareholder’s eyes?  Maybe the company is being beat by competitors or the stock price hasn’t moved in a year.  There could be an activist investor looking to make a change for the worse.  A simple Google search could uncover other shareholder concerns.

Companies have looked more to shareholders about corporate, social, and environmental issues.  The shareholder’s voice is a necessary evil for today’s corporate management.  It’s a necessity to keep corporations honest, transparent, and open about the daily dealings of the company.  Sometimes it fails miserably, but most of the time, the shareholder’s voice leads management in a better direction.  If it doesn’t, do you really want to own the stock of a company that doesn’t listen to shareholders?

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