Definition
A Proxy Statement is a document that a company sends to its shareholders, that contains information essential for them to make decisions on matters that will be brought up at an annual stockholders meeting. It includes proposals for new policies or changes to existing ones, information on nominees for the board of directors, and details on executive compensation. Shareholders can vote on these matters either in person at the meeting or by using a proxy vote.
Phonetic
The phonetic pronunciation of “Proxy Statement” is: Prox – ee Stayt – ment
Key Takeaways
- Important Disclosure: A Proxy Statement is a document that publicly traded companies are required to submit to the U.S. Securities and Exchange Commission (SEC). It provides shareholders important details about matters that will be discussed at an annual shareholder meeting.
- Contents: It typically contains information on company directors, executive compensation, and any proposed mergers or acquisitions. Shareholders refer to this document to make informed voting decisions regarding board members and executive pay, among other things.
- Voting Rights: The Proxy Statement also outlines voting procedures for shareholders who cannot attend the meeting in person. It includes the use of a proxy, a person or an entity that is authorized to vote on behalf of another shareholder.
Importance
A Proxy Statement is a vital document in the world of business and finance as it provides shareholders of a public company with crucial information which enables them to make informed decisions during voting on business matters. It’s legally required by the U.S. Securities and Exchange Commission (SEC) to be delivered before annual shareholder meetings and it includes details about the issues to be discussed or voted on, including appointing directors, ratifying the selection of auditors, approving bonus plans, merger or acquisition proposals, and more. The statement also contains information about the company’s executive compensation plans, making it key for shareholders interested in governance and pay equity matters. Essentially, the Proxy Statement ensures transparency and gives shareholders the necessary data to uphold their voting rights effectively.
Explanation
A proxy statement is a vital communication tool used predominantly in the corporate world, especially in relation to shareholder meetings. Its primary purpose is to inform shareholders about crucial matters that require their vote. These matters often encompass issues such as proposed mergers or acquisitions, nomination and approval of company directors, executive compensation plans, and shareholder proposals. The proxy statement essentially serves to ensure shareholders are well-informed about the matters at hand so they can vote in a manner that best aligns with their investment interests. In addition, proxy statements also serve a purpose of endorsing transparency and accountability within the company. This document outlines detailed information about the company’s management and the board of directors, including their qualifications, compensation, vested interests and potential conflicts of interest. It also provides the company’s financial data and performance metrics, giving shareholders a thorough understanding of the company’s current position and future prospects. Thus, it is an essential tool for facilitating informed voting decisions and fostering corporate governance.
Examples
1. Microsoft Corporation: Microsoft uses proxy statements annually to communicate crucial information to its shareholders. The proxy statement includes relevant details about the matters to be addressed during the annual meeting, including proposed changes to the board of directors, compensation for top executives, and any material matters of corporate governance. Shareholders use this information to guide their voting decisions during the meeting.2. Coca-Cola Company: Each year, the Coca-Cola Company issues a proxy statement to its shareholders in preparation for the annual shareholders meeting. It contains facts about the company’s operations, financial statements, information about the executive compensation, and other corporate governance matters. It also includes resolutions up for a vote like changes in company charter or by-laws.3. Goldman Sachs Group, Inc.: Before the annual shareholder’s meeting, Goldman Sachs provides a proxy statement to its shareholders which includes detailed information about board director nominees, executive compensation, audit-related matters, and proposals by shareholders. This document assists shareholders in making an informed decision while voting on the issues that impact the direction and governance of the company.
Frequently Asked Questions(FAQ)
What is a Proxy Statement?
A Proxy Statement is an official document produced by a company to provide crucial information to shareholders about matters that will be voted on during an annual stockholder meeting, ranging from the election of board directors to confirmations of auditor appointments.
Why is a Proxy Statement needed?
A Proxy Statement provides a means for shareholders to make informed decisions on matters that affect the direction and governance of the company. It outlines issues up for a vote, presents arguments for and against, and includes voting procedures.
Where can I find a company’s Proxy Statement?
Proxy Statements are typically mailed to shareholders ahead of annual meetings and can also be found on the company’s website or accessible through the Securities and Exchange Commission’s (SEC) online EDGAR database.
What information is typically included in a Proxy Statement?
Proxy Statements usually include details about the directors up for election or re-election, executive compensation, company performance, and any proposals from management or shareholders.
Is a Proxy Statement required by law?
Yes, the Securities and Exchange Commission (SEC) of the United States requires a Proxy Statement to be filed ahead of a company’s annual shareholders’ meetings.
Who can vote using the Proxy Statement?
Any shareholder who owns registered shares in the company is typically entitled to vote on the matters laid out in the Proxy Statement.
Is the Proxy Statement the same as the annual report?
No, the Proxy Statement and the annual report are two different documents. While they both provide crucial details about the company, the Proxy Statement is focused on upcoming votes, while the annual report focuses on the company’s performance and financial health.
How often is a Proxy Statement issued?
A Proxy Statement is typically issued annually, usually before a company’s annual shareholders’ meeting. However, in the event of a special meeting of shareholders, a special Proxy Statement may be issued.
Related Finance Terms
- Shareholder Voting
- Annual General Meeting (AGM)
- Securities and Exchange Commission (SEC)
- Board of Directors
- Proxy Solicitation
Sources for More Information
- Investopedia
- U.S. Securities and Exchange Commission (SEC)
- Corporate Governance by Harvard Law School
- CFA Institute
