Proxy statement

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A proxy statement is a statement required of a firm when soliciting shareholder votes.[1]: 10  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 of 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.

Voting process[edit]

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, e.g. Rule 452, be modified so that uncontested director elections were not considered routine.[2] Broker voting is, for the most part, governed by Rule 452.[1]: 2 The SEC approved the rule on July 1, 2009.[3]

In July 2010, the SEC announced that it was seeking public comment on the efficiency of the proxy system.[4][5]: 1 

Universal proxy ballots[edit]

In contested elections for the board of directors, shareholders typically have to vote using either the management form ("card") listing management candidates or separately listing the contesting candidates in a dissident form. In 2016, the SEC proposed a rule requiring a "universal" proxy card so that shareholders could vote on a mix of candidates, which as of 2019 had not passed.[6][7]

Electronic voting[edit]

Prior to 2009, companies in the United States were required to send proxy materials via postal mail, but following a rule change effective in 2009, companies, can handle voting electronically.[8] According to one study, about 31% of voting happened electronically in 2019.[9] One major vendor, Computershare, reported that 27% of votes occurred on the web in 2017.[10] Broadridge is another major vendor.

Proxy advisory[edit]

Voting is important for corporate governance, but many of the votes are cast by institutional shareholders, including many who are passive investors. These organizations use proxy advisory firms, notably including Institutional Shareholder Services and Glass Lewis, to help them vote their shares in a responsible way.[11]

Proxy access[edit]

The Securities Exchange Act of 1934 also gave the SEC the power to regulate the solicitation of proxies, though some of the rules the SEC has since proposed (like the universal proxy) have been controversial.[12]: 4  There has been some controversy over "proxy access" which is a method to allow certain shareholders to nominate candidates which appear on the proxy statement.[12]: 4 [13] Historically, only the nominating board can place candidates on the proxy statement. Activist investors typically had mailed their own ballots when running competing candidates. 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;[14] however, in Business Roundtable v. SEC[15] the rule was struck down by the United States Court of Appeals for the District of Columbia Circuit in 2011.[16]

Beginning in 2015, proxy access rules began to spread driven by initiatives from major institutional investors, and as of 2018, 71% of S&P 500 companies had a proxy access rule.[17]

Retail investors[edit]

According to one estimate, retail investors voted 46% of the time between 2011 and 2016.[8] According to a 2013 estimate, between 23 and 38% of stocks are held directly, compared to 20% held by mutual funds and 16% held by pensions.[9]

When retail investors own stock via investment funds such as mutual funds, the investor cannot vote the shares as the investment manager has that power.[9]

Regulation 14A and Schedule 14A[edit]

Regulation 14A is the set of rules around proxy solicitations while Schedule 14A sets rules for the proxy statement.[18]

See also[edit]


  1. ^ a b Hirst, Scott (2017-01-01). "Frozen Charters". The Harvard Law School Program on Corporate Governance Discussion Paper (2016–01).
  3. ^ 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.
  4. ^ SEC. SEC Votes to Seek Public Comment on U.S. Proxy System.
  5. ^ Hirst, Scott; Bebchuk, Lucian (2010-01-01). "Private Ordering and the Proxy Access Debate". The Harvard John M. Olin Discussion Paper Series (653).
  6. ^ "CII Universal Proxy". Retrieved 2020-02-29.
  7. ^ "The Harvard Law School Forum on Corporate Governance | Universal proxy ballots". Retrieved 2020-02-29.
  8. ^ a b Governance, Harvard Law School Forum on Corporate; Regulation, Financial (16 January 2019). "Electronic Proxy Statement Dissemination and Shareholder Monitoring". Retrieved 2020-02-29.
  9. ^ a b c Geoffroy, Rachel (2018-11-30). "Electronic Proxy Statement Dissemination and Shareholder Monitoring". Rochester, NY. SSRN 3264846. {{cite journal}}: Cite journal requires |journal= (help)
  10. ^ "Ten Years In: Analyzing 2017 Proxy Votes after a Decade of Electronic Distribution". Retrieved 2020-02-29.
  11. ^ Governance, Harvard Law School Forum on Corporate; Regulation, Financial (28 February 2020). "Business Roundtable Comment Letter to SEC on Proposed Proxy Rules for Proxy Voting Advice". Retrieved 2020-02-29.
  12. ^ a b Hirst, Scott (2018-04-01). "Universal Proxies". The Harvard Law School Program on Corporate Governance Discussion Paper (2016–11).
  13. ^ Webber, David H. (April 2018). The Rise of the Working-Class Shareholder: Labor's Last Best Weapon. Harvard University Press. p. 48. ISBN 978-0-674-91946-4. Retrieved 15 November 2019.
  14. ^ SEC Adopts New Measures to Facilitate Director Nominations by Shareholders.
  15. ^ Business Roundtable v. SEC, vol. 647, April 7, 2011, p. 1144
  16. ^ What Would Proxy Access Look Like if Done Right?.
  17. ^ Gregory, Holly J.; Grapsas, Rebecca; Holl, Claire; LLP, Sidley Austin; on (February 2019). "The Latest on Proxy Access". Retrieved 2019-08-29.
  18. ^ "SEC Financial Reporting Series 2019 proxy statements" (PDF). Archived (PDF) from the original on 2020-02-29. Retrieved 2020-02-28.

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