Proxy Statement

Proxy Statement Securities and Exchange Commission (SEC) Board of Directors Shareholder Voting Corporate Governance Executive Compensation Proxy Voting
A Proxy Statement is a document required by the Securities and Exchange Commission (SEC) to be provided to shareholders before they vote by proxy on company matters. It includes information on proposed members of the board of directors, inside directors' salaries, and pertinent information regarding their bonus and option plans.
On this page

Definition

A Proxy Statement is a comprehensive document mandated by the Securities and Exchange Commission (SEC) to be distributed to shareholders prior to their proxy vote on significant company issues. This statement is essential for ensuring transparency and informed decision-making among shareholders. It typically features detailed information including, but not limited to:

  • Proposed members of the board of directors
  • Inside directors’ salaries
  • Bonus and option plans for executives
  • Proposals for corporate governance changes
  • Various agenda items up for shareholder vote

Examples

  1. Apple Inc.’s Proxy Statement: This document includes detailed information on board nominees, executive compensation, and shareholder proposals.
  2. Procter & Gamble’s Proxy Statement: P&G’s proxy statement covers information on governance practices, director nominations, and shareholder meeting details.
  3. Microsoft Corporation’s Proxy Statement: Provides insights into the board’s composition, remuneration packages for executives, and details related to annual meetings and shareholder proposals.

Frequently Asked Questions

What is the purpose of a Proxy Statement?

A Proxy Statement informs shareholders about the issues they will be voting on, ensuring transparency and allowing shareholders to make informed decisions regarding company governance and executive compensation.

Who prepares the Proxy Statement?

The company’s management, typically the legal and financial departments in conjunction with the board of directors, prepares the Proxy Statement.

What information is required to be in a Proxy Statement?

The Proxy Statement must include information about board nominees, executive salaries, bonuses, stock options, proposed company changes, and other items needing shareholder approval.

When is the Proxy Statement issued?

The Proxy Statement is issued ahead of the company’s shareholder meeting, providing ample time for shareholders to review and make voting decisions.

Can shareholders receive a Proxy Statement electronically?

Yes, many companies provide electronic copies of the Proxy Statement to shareholders, often via email or company websites, in compliance with SEC regulations.

  • Proxy Voting: A mechanism allowing a shareholder to delegate their voting power to another party, typically the company’s management.
  • Board of Directors: A group of individuals elected to represent shareholders and oversee the company’s activities.
  • Corporate Governance: Practices and policies through which a company is directed and controlled.
  • Annual Meeting: A yearly gathering of a company’s interested shareholders where they vote on various corporate governance issues.
  • Executive Compensation: Financial remuneration awarded to the company’s executives, including salary, bonuses, and stock options.

Online References

Suggested Books for Further Studies

  • “Guide to Proxy Statements” by Thomas Hyde
  • “The Essentials of Corporate Governance” by Sankaran Venkataraman & David Larcker
  • “Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences” by David Larcker and Brian Tayan

Fundamentals of Proxy Statement: Corporate Governance Basics Quiz

### What is the primary purpose of a Proxy Statement? - [x] To inform shareholders about issues they will be voting on - [ ] To report company earnings - [ ] To recruit new investors - [ ] To audit financial transactions > **Explanation:** The Proxy Statement aims to provide shareholders with all the necessary information to make informed decisions on matters requiring their vote. ### Which regulatory body mandates the issuance of a Proxy Statement? - [x] The Securities and Exchange Commission (SEC) - [ ] The Federal Trade Commission - [ ] The Internal Revenue Service - [ ] The Department of Justice > **Explanation:** The SEC mandates that companies issue a Proxy Statement to ensure transparency and informed shareholder voting. ### Who typically prepares the Proxy Statement within a company? - [ ] The Human Resources Department - [ ] The Marketing Department - [x] The Legal and Financial Departments - [ ] The Sales Department > **Explanation:** The company's legal and financial departments, often in conjunction with the board of directors, typically prepare the Proxy Statement. ### What information about executive compensation must be included in a Proxy Statement? - [ ] Only salary information - [ ] Only bonuses - [ ] Only stock options - [x] Salaries, bonuses, and option plans > **Explanation:** A Proxy Statement must comprehensively cover executive compensation, including salaries, bonuses, and stock options. ### Can shareholders vote on the contents of the Proxy Statement? - [x] Yes, they vote on issues presented in the statement - [ ] No, it is only for informational purposes - [ ] Only institutional shareholders can vote - [ ] Only the board of directors can vote > **Explanation:** Shareholders use the information in the Proxy Statement to vote on the presented issues, influencing company governance. ### When is the Proxy Statement typically provided to shareholders? - [ ] After the annual meeting - [ ] Only upon request - [x] Before the annual meeting - [ ] At the time of earnings announcements > **Explanation:** The Proxy Statement is issued before the annual meeting to ensure shareholders have enough time to review it and make informed voting decisions. ### In what formats can shareholders receive the Proxy Statement? - [ ] Only in print - [x] Print and electronic formats - [ ] Only during the shareholder meeting - [ ] Verbal representation only > **Explanation:** Shareholders can receive the Proxy Statement in both print and electronic formats, aligning with modern SEC regulations for accessibility. ### Who are the typical recipients of the Proxy Statement? - [ ] Only board members - [x] All shareholders - [ ] Only institutional investors - [ ] Employees of the company > **Explanation:** All shareholders are the primary recipients of the Proxy Statement as they have voting rights and an investment interest in the company. ### What is Corporate Governance? - [ ] A type of financial analysis - [x] Practices and policies directing and controlling a company - [ ] Annual profit summaries - [ ] Government regulations for businesses > **Explanation:** Corporate Governance refers to the framework of practices and policies through which a company is directed and controlled. ### What do shareholders commonly vote on using information from a Proxy Statement? - [x] Election of board members - [ ] Day-to-day operational decisions - [ ] Customer service policies - [ ] IT infrastructure upgrades > **Explanation:** Shareholders commonly vote on major governance issues such as the election of board members, instead of day-to-day operational decisions.

Thank you for delving into the intricacies of Proxy Statements and challenging yourself with our insightful quiz questions. Continue expanding your knowledge in corporate governance!

Wednesday, August 7, 2024
Prudence
Proxy Fight
Statutory Voting January 1, 1
Annual General Meeting (AGM) January 1, 1
Board of Directors January 1, 1
Boardroom January 1, 1
Budget Committee January 1, 1
Chairman of the Board January 1, 1
Corporate Governance January 1, 1
Cumulative Voting January 1, 1
Director January 1, 1
Directorate January 1, 1

Accounting Terms Lexicon

Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.