Proxy Vote
Offered an opportunity to give their voting power to a representative
What Is a Proxy Vote?
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.
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:
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When a shareholder is unable to attend the company’s annual meeting
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When a shareholder doesn’t want to vote on a certain issue
Furthermore, there are two types of proxies: general and limited.
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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.
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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.
Key Takeaways
- A proxy vote is a written authorization allowing one person to vote on behalf of another.
- In the context of corporate governance, companies use proxy statements to seek approval from shareholders on various issues.
- There are two types of proxy votes: general and limited.
- Proxy voting allows shareholders to express their opinions and expectations regarding company decisions. While most proxy proposals are non-binding, they can influence corporate policies.
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:
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Annual report: containing information related to the company’s financial position
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Proxy statement: a booklet describing the issues to be voted on
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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:
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Are unable to vote in person due to employment or disability
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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 the proxy vote consists of. Some of the elements are:
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Application from the voter stating the reasons for wanting proxy & identifying the person assigned
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Evaluation of the reasons by the electoral management body and whether the proxy name is qualified to act as a proxy or not
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The advice provided to the voting station manager in voting stations
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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.
Proxy Vote FAQs
Unless mentioned otherwise in the proxy or the company's governing documents, a proxy is valid for three years from the date it is signed.
Notwithstanding the period of irrevocability specified, the proxy becomes revocable when:
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The pledge is redeemed
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The agreement purchase is terminated
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The seller either dies or does not own any shares
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The debt of the corporation is paid
The organizing efforts for proxy voting have grown stronger over the years.
Yes, it does make a difference.
Corporate board elections are a great example, as board composition can make a difference in the company's overall performance.
You can ask anyone to act as a proxy, as long as they satisfy the following conditions:
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They are registered to vote
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They are allowed to vote in the type of election taking place
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They can vote in the polling station stated on your poll card
In case the person assigned to act as a proxy cannot make it to your polling station, they will need to contact your local Electoral Registration Office to cast their proxy vote by post.
It is opaque, complex, and often hard to tabulate accurately.
Also, the lack of an auditable, end-to-end trail makes it hard to verify whether votes were cast and counted properly.
Members who don't attend the meetings can't hear the actual conversation and might base their vote on misinformation or no information at all.
It depends on whether the bylaws or state laws grant it.
If there is no provision for it in the governing documents, then proxies are not counted in the quorum.
For example, both the Washington HOA Code and the Condominium Act allow for proxies to be counted in the quorum of a meeting.
Researched and Authored by Céline Khattar | LinkedIn
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