Proxy Statement - Explained
What is a Proxy Statement?
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
What is a Proxy Statement?
A proxy statement refers to a document which contains some of the information which the Securities and Exchange Commission (SEC) requires businesses to offer to shareholders to enable them to make decisions via a wide range of available data about issues which has the possibility of stepping out during an annual stockholder meeting, or any specially fixed meeting. A proxy statement can cover different issues, ranging from proposals for new additions to the board of directors, details on directors wages, information on bonus pays and options plan for directors, as well as any other statement or declaration made by the company's management team.
How Does a Proxy Statement Work?
For a company to be approved as a publicly traded firm, it must be willing to file a proxy statement as required by the Securities and Exchange Commission (SEC). A publicly-traded company is mandated to file its proxy statement before every shareholders meeting of any sort, and the statement is required to contain useful information of the company that is relevant for soliciting shareholder votes and final approval of selected or handpicked directors. All proxy statements are to be filed with the SEC as Form DEF 14A, or using the SECs database, one can file a definitive proxy statement. The SECs database for finding a proxy form is known as the electronic data gathering, analysis and retrieval system (EDGAR).
Information Contained in Proxy Statements
A proxy statement is required to disclose details about directors pay and bonuses, a company's voting method, and the list of nominated candidates for a firms board of directors. Since the election of a new member of the board of directors is more important to the company than the other two options, a proxy statement usually goes into substantial details about directors, their past track record, and information about them. It also analyzes how much these directors have been paid in the past several years, and provides a detailed guideline of bonuses and option plan compensations for such directors. A proxy statement must reveal a firms executives and directors wages and bonuses, compensations like equity award, and any deferred compensation. A proxy statement can also cover details about other perks that an executive or a director has in a company, like the use of a corporate plane, company covered travel costs, and other expenses handled by the company. Also, a proxy statement can reveal any possible conflict of interest between the company and its auditors, directors, and executive. In summary, a proxy statement is required to show all details of any related-party transactions that might have occurred or have occurred with the company and its key employees or personnel in the past. It also offers and reveals details about the firms audit committee or team, as well as amounts paid as audit and non-audit fees to its external public accountant. A proxy statement points out a person with manual and tangible ownership of a firms common stock, including its directors and executive officers.
How is the Proxy Statement Useful?
A proxy statement is useful both to shareholders and potential investors in a firm. For the shareholder, a proxy statement helps him or her prepare for a company's special or annual meeting, while an investor uses this document to observe and determine what is currently happening in a company. The investor in this case uses the document to check out who is among the board of directors, their qualifications, and the compensations which they receive. If a potential investor finds that a chief executive officer earns a bonus that is way higher than that of his or her peers, it might raise a red flag, and possibly signify overspending in the company. An investor will surely be wary of something like this. Also, when the frequency of related-party transactions between the firm and directors or executives increases drastically, it can signify a misuse of company resources and in most cases, warrant further investigations.
- Corporate Governance Law (Intro)
- What is Business Governance?
- Berle-Means Thesis
- Corporate Governance Rating Definition
- Who are the members of a corporation?
- Corporate Charter
- Shareholder Register
- Common Stock
- Preferred Stock
- Par Value
- Authorized Shares
- Issued Shares of Stock
- Unissued Shares of Stock
- Outstanding Shares
- Institutional Shares
- Dual Class Shares
- What is a closely-held corporation?
- Close Corporation Plan Definition
- What is a Private Company vs a Public Company?
- What is the role and purpose of the corporation?
- What is the Agency theory of corporate governance?
- Shareholder-Centric Perspective
- Shareholder Value
What is the Stakeholder theory of corporate governance?
What is the role & rights of Shareholders in the corporation?
- Shareholder Democracy Definition
- Quorum Definition
- Class Voting Shareholders
- Changing the Voting Rules
- Supermajority (Voting)
- Shareholder Sponsored Proposal
- What are the variations on attributes of Ownership structure?
- Stock Split
- What are the fiduciary duties owed by shareholders?
- When is a shareholder personally liable for corporate obligations?
- Appraisal Rights
- Dissenter's Rights
- Say on Pay Rights
- How can shareholder enforce their rights (direct and derivative actions)?
- What is the process for bringing a Derivative action?
- What are corporate vote Proxies?
- Proxy Statement
- Proxy Fight or Contest Definition & Explanation
- What is Shareholder Activism and the significance of Institutional Investors?
- Activist Investor
- Overview of Board of Directors
- Board Decision Making
- Advisory Board (Observer Directors)
- What is the role of the Board of Directors?
- Board of Trustees
- Board of Governors
- Outside Director
- Outside Director or Non-Executive Director Definition
- Independent Outside Director
- Budget Committee
- Audit Committee
- Compensation Committee
- Nomination Committee (Corporate Board)
- What standards govern the actions of the board of directors?
- Duty of Candor Definition
- Board Evaluation Definition
- What is the Business Judgment Rule?
- What is D&O insurance?
- Codetermination (Foreign)
- What is the role of Managers of the corporation?
- What standards govern manager actions?
- Chief Executive Officer (CEO)
- Chief Financial Officer
- Chief Information Officer (CIO)
- Chief Investment Officer (CIO)
- Chief Legal Officer
- Chief Operating Officer
- Chief Risk Officer
- Chief Security Officer
- Chief Technology Officer (CTO)
- What are the primary state and federal corporate governance laws?
- What is the role of the state in corporate governance?
- What is the role of Securities Laws in corporate governance?
- What is the role of the Foreign Corrupt Practices Act in corporate governance?
- What is the Sarbanes-Oxley Act (SOX) effect on corporate governance?
- Sarbanes-Oxley Act (SOX)
- What is the Dodd-Frank Wall Street Reform and Consumer Protection Act effect on corporate governance?
- Corporate Monitors
- What industry organization standards affect corporate governance?
- How do proxy advisory firms affect corporate governance?
- What is the role of ethics in corporate governance?
- What are the major causes of corporate governance issues?
- What are the access to information issues?
- What are decision-making structure issues?
- What are the power struggle or competition issues?
- Holding Company
- What are hostile takeovers and defenses to hostile takeovers?
- Williams Act
- Staggered Board
- Delay-Tactic Defenses?
- Legal Lockup Defenses?
- White Knight and Pac Man Defenses?
- Jonestown Defense
- Lady Macbeth Strategy
- Macaroni Defense
- Yellow Knight
- Back-end Plan Definition
- Backflip Takeover Definition
- Dead Hand Provision Definition
- Kamikaze Defense
- Operating Company Property Company Model
- Scorched Earth Policy Definition
- Revlon Rule
- What are benefit-alignment issues?
- Cadbury Rules Definition