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 general meeting (AGM) may vote their shares by proxy by allowing someone else to cast votes on their behalf, or they may vote by mail.

Key Takeaways

  • A proxy is an agent legally authorized to act on behalf of another party.
  • The proxy may also allow an investor to vote without being physically present at the annual shareholder's meeting.
  • Management ensures ownership interests are fully represented by encouraging shareholders who are unable to attend annual meetings to vote by proxy.
  • A Proxy Statement is a packet of documents containing information necessary to make informed votes on issues facing the company.

How Does a Proxy Work?

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 a power of attorney and extends official authorization to the designated individual to vote on behalf of the stated shareholder at the annual meeting.

A proxy cannot vote if the shareholder arrives late and decides to vote for him or herself.

Proxy Statements

Before the annual shareholder meeting, all shareholders receive a packet of information containing the Proxy Statement. 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 (SEC) 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.

Anyone can look up a public company's proxy statement via the SEC website under the name "DEF 14A."

Benefits of Proxy

Management ensures that ownership interests are fully represented by often encouraging shareholders that are unable to attend annual meetings to vote by proxy. 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.

Real World Example of a Proxy

Below is a portion of the proxy materials for the annual shareholders' meeting of Corning Inc. in 2016.

  • The corporation's assigned proxy is highlighted in blue showing that the shareholder's vote can be cast by the proxy.
  • As noted in the bolded statement, if no choices are made, the nominated members of the board will be voted for by the proxy.
Example of Proxy for Corning Inc.
Example of Proxy for Corning Inc.  Investopedia

Proxy Card

  • Below is the Proxy Card showing the specific board members that were to be voted on as well as some of the proposals by management. If the shareholder wanted to vote, the proxy card could be mailed to the corporation.
Example of Proxy Card from Corning Inc. 2016 Annual Shareholders' Meeting
Example of Proxy Card from Corning Inc. 2016 Annual Shareholders' Meeting.  Investopedia