What is a 'Proxy'?

A proxy is an agent legally authorized to act on behalf of another party or a format that allows an investor to vote without being physically present at the meeting. Shareholders not attending a company's annual meeting may vote their shares by proxy by allowing someone else to cast votes on their behalf, or they may vote by mail.

BREAKING DOWN 'Proxy'

While proxy voting is often an option, management encourages shareholders to vote in person. If the shareholder cannot attend, voting by proxy is another option. For a person to act as a proxy for an individual, formal documentation may be required that outlines the extent to which the proxy can speak on the individual's behalf. A formal power of attorney document may be required to provide the permissions to complete certain actions. The shareholder signs the power of attorney and extends official authorization to the designated individual to vote on behalf of the stated shareholder at the annual meeting.

Proxy Statements

Before the annual shareholder meeting, a packet of information containing the proxy statement is sent to all shareholders. The proxy documents provide shareholders with the information necessary to make informed votes on issues important to the company's performance. A proxy statement offers shareholders and prospective investors insight into a company's governance and management operations. The proxy discloses important information on agenda items for the annual meeting, lists the qualifications of management and board members, serves as a ballot for elections to the board of directors, lists the largest shareholders of a company's stock and provides detailed information about executive compensation. There are also proposals from management and shareholders.

Proxy statements must be filed with regulatory authorities, such as the Securities and Exchange Commission in the United States, on an annual basis before the company's annual meeting.

When voting by proxy remotely, shareholders may be eligible to vote by mail, phone or internet. Shareholders use the information in the proxy statements to aid in the decision-making process.

Reasons for Shareholders to Vote by Proxy

Management often encourages shareholders to vote by proxy so that ownership interests are fully represented, even if shareholders cannot attend the company's annual meetings in person. Information presented during annual meetings often affects the future direction of the company, which can directly impact the value of a shareholder’s stake in the company.

RELATED TERMS
  1. Proxy Vote

    A proxy vote is a ballot cast by one person or firm on behalf ...
  2. Proxy Materials

    Proxy materials are filed to shareholders before annual meetings ...
  3. Duplicate Proxy

    A duplicate proxy is a second voting proxy that allows a shareholder ...
  4. Proxy Fight

    A proxy fight occurs when a group of shareholders join forces ...
  5. Voting Right

    A voting right is the right given to a stockholder to vote on ...
  6. Proxy Directive

    Proxy directive is a legal document assigning the health care ...
Related Articles
  1. Investing

    Why Investors Should Look at the Proxy Statement

    The proxy statement is probably the most overlooked form that is filed with the SEC, find out why investors should promptly look at a proxy statement here.
  2. Investing

    How Your Vote Can Change Corporate Policy

    Shareholders are getting a bigger say in how companies are run. Find out how you can be heard.
  3. Investing

    A Peek Into Shareholder Meetings

    Shareholder meetings can be glamorous, exciting or controversial, but not particularly revelatory.
  4. Managing Wealth

    Putting Management Under The Microscope

    We tell you where to find the telltale signs of corporate misdeeds.
  5. Managing Wealth

    Why Keep Medical & Financial Powers of Attorney Separate?

    Representing your interests in financial matters is a very different job from communicating and advocating for your wishes with doctors.
  6. Investing

    Johnson Controls, Tyco Move Forward With Merger Plans

    The boards of both companies have unanimously recommended that shareholders vote "for" the matters specified in the joint proxy statement.
  7. Managing Wealth

    Executive Pay: How Much Do Shareholders Really Care?

    How much do shareholders - or the public - really care about executive pay? A new SEC proposal may be aimed at finding out.
  8. Small Business

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
RELATED FAQS
  1. How Do Proxy Fights Work?

    A proxy fight is when a group of shareholders are persuaded to join forces to win a corporate vote. Read Answer >>
  2. Do Shareholders Get a Say in a Firm's Operation?

    Stock ownership often provides a vote on board membership and other issues put out for shareholder approval. Read Answer >>
  3. What rights do all common shareholders have?

    Learn what rights all common shareholders have, and understand the remedies that can be taken if those rights are violated ... Read Answer >>
  4. What's the difference between a merger and a hostile takeover?

    Understand the difference between a merger and a hostile takeover, including the different ways one company can acquire another, ... Read Answer >>
  5. A Hostile Takeover vs. Friendly Takeover

    Learn about the difference between a hostile takeover and a friendly takeover, and understand how proxy fights and tender ... Read Answer >>
Trading Center