Proxy Vote

Offered an opportunity to give their voting power to a representative

Generally, a proxy is a "written authorization to act in place of another." In simpler terms, the proxy statement is used by companies to seek approval from shareholders on issues related to corporate governance

Proxy Vote

It also informs voters on the range of issues on which they will vote, recognizing that the majority of shareholders vote remotely "by proxy" instead of attending the company's annual meeting. 

Moreover, it is a form of voting where a member of the concerned decision-making body is offered an opportunity to give their voting power to a representative so they can enable a vote in their absence

These days, very few investors attend shareholder meetings in person; thus, most votes are cast as "proxy votes."

Therefore, proxy voting used in two instances:

  1. When a shareholder is unable to attend the company's annual meeting 

  2. When a shareholder doesn't want to vote on a certain issue

Furthermore, there are two types of proxies: general and limited.

  • A general proxy is written in such a way that it gives the proxy holder the right to vote as they see fit on any business that may come up in a meeting.

  • A limited proxy includes on the proxy the business to be voted on, as well as a place for the member to sign and date the proxy. 

How a Proxy Vote Works

Annual meetings are held so a publicly-traded company can report its recent activities to its shareholders. 

A process is followed before publicly-traded company shareholders receive information on topics to be voted on during that meeting, such as share of ownership, for example. 

The company in question might post proxy materials online, which are:

  • Annual report: containing information related to the company's financial position

  • Proxy statement: a booklet describing the issues to be voted on

  • Proxy card: offering voting instructions 

However, these materials might also be sent in the mail to investors who are eligible to vote. 

Any investor is given a choice to attend the annual general meeting (AGM) either physically or not. 

In case they are not able to make it, investors may elect someone else to vote in their place, such as a member of the company's management team. 

The person designated is therefore identified as a proxy and will cast a proxy vote based on the investor's wishes.  

It can be cast either by mail, phone, or online.

How to apply for a Proxy Vote?

It can be applied using a paper form. It is mandatory to send it to your local Electoral Registration Office.

If you want to vote in England, Scotland, or Wales, you need to apply for a proxy at least six working days prior to election day. 

When it comes to voting in Northern Ireland, for example, there's a different form to apply to vote by proxy. 

It is imperative to apply at least 14 working days pre-election date. 

However, if the deadline has passed, it is still possible to apply for an emergency proxy vote if both involved parties:

  • Are unable to vote in person due to employment or disability

  • Became aware of that reason after the proxy deadline

An "appropriate person" (whether your employer or doctor) is required to sign the application form.

After the COVID-19 pandemic, it also became possible to apply for an emergency proxy vote if the person concerned had to self-isolate. 

As we all know, physical attendance at general board meetings is not always possible due to many reasons. 

In such cases, when companies face restrictions, they may choose to conduct meetings entirely online.

In fact, companies worldwide have witnessed increased participation when e-meetings and e-facilities take place. 

The e-proxy system offers a structured online platform to process electronic proxy appointments and voting instructions by shareholders. 

When it comes to e-meetings, the shareholder or member in question connects to their space using a code or invitation they have received beforehand. In fact, from this space, they can carry out their proxy. 

Once the representative has been appointed, a pdf file is generated, allowing an electronic signature of a power of attorney. 

Elements of a Proxy Vote

You might be wondering what it consists of.

Some of the elements are:

  • Application from the voter stating the reasons for wanting proxy & identifying the person assigned

  • Evaluation of the reasons by the electoral management body and whether the proxy name is qualified to act as a proxy or not

  • The advice provided to the voting station manager in voting stations

  • Verification by the voting station manager that the proxy is, in fact, the person appointed by the voter before proceeding to vote

Summary

Advocates of proxy voting believe that conscious and active proxy sends a message to companies that shareholders wish to remain involved and expect honest and responsive management.

Most corporations give shareholders a great deal of power, including the right to elect board members and vote on certain compensation issues.

Shareholder resolution has the potential to promote change. 

Nonetheless, one important facet is that most proxy proposals are non-binding. This means that even a majority vote doesn't require management to act.

The impact of proxy might increase in the future due to a proposal by the SEC, which would allow shareholders more access to a company's proxy ballot to name external directors. 

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Researched and Authored by Céline Khattar | LinkedIn

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