A proxy statement is a document that U.S. companies must file with the Securities and Exchange Commission (SEC) ahead of their annual shareholders’ meetings. It’s typically sent to all shareholders and contains information necessary for them to make informed decisions on matters that will be voted on during the meeting.
The statement includes, among other things:
- Information about the date, time, and location of the annual meeting.
- Details about the items that will be voted upon during the meeting, such as the election (or re-election) of directors, executive compensation plans, ratification of the selected auditors, and approval of any significant corporate actions such as mergers, acquisitions, or amendments to the company’s charter.
- Data on executive compensation, including salaries, bonuses, and stock options, broken down by individual for top executives and directors. This is often a major focus for shareholders and the public, as it can be a point of controversy.
- Information about any potential conflicts of interest that may exist among the company’s executives and directors.
- Biographies of directors and nominees, which can include their experience, qualifications, and any relationships that might affect their ability to serve.
- Shareholder proposals. If shareholders holding a significant number of shares put forward a proposal, the company is often required to include it in the proxy statement for a vote.
- Instructions on how to vote via proxy. Shareholders who cannot attend the meeting can vote on proposals and directorships by proxy, which allows another party to vote on their behalf. The proxy statement includes instructions on how to do this.
Remember, the proxy statement is designed to allow shareholders to exercise their right to vote on corporate matters in an informed way, whether they attend the annual meeting or not.
Example of a Proxy Statement
Let’s say XYZ Corp. is a publicly traded company in the United States and it’s approaching the time for their annual shareholder meeting. To prepare its shareholders for the meeting and the decisions that need to be made, XYZ Corp. issues a proxy statement.
In the proxy statement, XYZ Corp. includes the following:
- Meeting Details: The meeting will be held on September 15, 2023, at 10:00 AM at the company’s headquarters in New York City.
- Voting Information: Details on how shareholders can vote, either by attending the meeting, online, by phone, or by mail, using the proxy card that accompanies the statement.
- Director Nominations: Biographies of three directors who are up for re-election and one new candidate. The bios include information about their careers, qualifications, and any potential conflicts of interest.
- Executive Compensation: The proxy statement also discloses the salary, bonus, stock options, and other compensation for its top executives, including the CEO, CFO, and other key officers.
- Proposals: XYZ Corp. proposes a merger with another company, ABC Inc. The proxy statement includes detailed information about the proposed merger, including why the board of directors believes it’s in the best interest of the company and its shareholders.
- Shareholder Proposals: There is also a proposal from a group of shareholders who want the company to commit to reducing its carbon emissions by 50% over the next decade.
- Auditor Ratification: The proxy statement includes a proposal to ratify the appointment of the company’s auditors.
After reading the proxy statement, shareholders of XYZ Corp. have the necessary information to make informed decisions about the matters to be voted on at the upcoming meeting. If they can’t attend the meeting in person, they can follow the instructions in the statement to vote by proxy.