When you purchase shares of a company's stock, you're not just buying the right to share in its profits; you're also buying the right to vote on certain corporate decisions. However, because most shareholders are unable to attend the meetings where voting on major issues takes place, corporations give shareholders the option to vote via a proxy. A proxy is a written authorization in which one person can delegate another to vote on his or her behalf. In the context of corporate decisions, when a shareholder votes by proxy, he or she is instructing another party to vote according to his or her choices on the proxy ballot.
The voting process
Before a meeting of shareholders takes place, a company must send proxy materials to all shareholders, including information on the items to be voted on during the upcoming meeting. Proxy materials are typically distributed 35 to 40 days before a meeting is set to occur. Shareholders frequently receive proxy materials by hard copy in the mail, though some companies allow shareholders to elect to receive electronic materials instead.
Proxy statements must review a company's voting procedures and include detailed information on the issues being voted on. For example, if the issue at hand is an upcoming board election, shareholders must receive detailed information on the nominated candidates, including their respective backgrounds and proposed compensation. Once a shareholder receives a proxy ballot along with information regarding the upcoming vote, he or she must cast a vote and return the ballot to have that vote count.
Some shareholders don't vote on corporate matters because they feel that their votes won't actually make a difference. In reality, just as every vote counts during a national election, individual votes count when it comes to corporate matters. Proxy votes often decide whether to elect directors to a company's board, to approve compensation packages for top company executives, and to approve mergers and acquisitions. Proxy voters may also weigh in on decisions that could affect a company's reputation, business model, or environmental impact.
As a shareholder, casting your vote is the best way to ensure that your voice is heard and that your best interests are protected. You may not feel as though your vote carries a lot of weight, but combined with the votes of other shareholders, it can have significant influence over corporate decisions.
Remember: It's your money on the line when major business decisions arise. Voting via proxy is a good way to protect your personal bottom line.
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