Proxy solicitation

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Proxy solicitation - A proxy is a writing signed by a shareholder authorizing a named person to vote his shares of stock at a specified shareholders' meeting. To ensure that shareholders have adequate information upon which to vote and opportunity to participate effectively at shareholder meetings, the 1934 Act regulates the proxy solicitation[1].

In corporate settings a proxy solicitation is usually accompanied by a proxy statement. Proxy solicitation is taking by voting - virtually indispensable for public corporations when shareholder voting takes place[2].

Information needed in the proxy solicitation

The rule defines a number of information types to include in the solicitation, including:

  • Information about where and when the meeting will be held
  • The date by which shareholders must submit their proposals for inclusion in the solicitation
  • The method for revoking proxies, if allowed
  • Any rights of appraisal for dissenters
  • Any interests that the company's directors and officers may have in items being voted upon
  • A summarization of the voting securities outstanding and who owns them
  • The date of record that is used to determine which shareholders can vote
  • Any relationship that directors may have with the company
  • The compensation paid to officers and directors
  • The amounts paid to the company's auditors for auditing and other services
  • A description of any benefit, bonus, pension, or similar plan to be voted upon
  • A description of any securities that will be authorized to be issued
  • A description of any property that the company plans to dispose of or acquire
  • A description of any proposed changes to the company's articles of incorporation

Proxy statements

The 1934 Act prohibits solicitation of a proxy unless each person solicited has been furnished with a written proxy statement containing specified information. As issuer making solicitations must furnish security holders with a proxy statement describing all material facts concerning the matters being submitted to their vote, together with a proxy form on which the security holders can indicate their approval or disapproval of each proposal to be presented. Even a company that does not solicit proxies from its shareholders but submits a matter to their vote must provide them with information substantially equivalent to that which would appear in a proxy statement[3].

Examples of Proxy solicitation

  • Proxy contests: A proxy contest is when one or a group of shareholders attempt to gain control of a corporation by persuading other shareholders to vote in favor of their appointed nominees to the board of directors. Proxy contests often involve a proxy solicitation firm that is hired by the shareholder or group to contact all other shareholders and attempt to convince them to vote in their favor.
  • Proxy voting: Proxy voting occurs when shareholders vote by proxy either through a proxy solicitation firm or by mail in response to a corporation’s request for their vote. This can be done before or during a shareholders meeting.
  • Solicitation of proxies: Proxy solicitation involves the process of obtaining proxies from shareholders in order to vote on a proposed action or election. Proxy solicitors may contact shareholders directly or through a third party such as a broker-dealer or registered investment adviser. Proxy solicitors must follow the applicable laws, including the disclosure of all relevant material facts, when soliciting proxies.

Advantages of Proxy solicitation

Proxy solicitation provides shareholders with a convenient way to participate in shareholder meetings without having to attend in person. The main advantages of proxy solicitation include:

  • A secure way to vote: Proxy solicitation allows shareholders to cast their vote in a secure and confidential manner, protecting their interests and preventing any possible fraud or manipulation.
  • Increased shareholder participation: Shareholders who are unable to attend shareholder meetings in person can still participate in important decisions and have their voice heard through proxy solicitation.
  • Easier communication between shareholders and the company: Proxy solicitation provides a platform for shareholders to communicate their thoughts and opinions on important matters to the company, allowing the company to make informed decisions based on the feedback of its shareholders.
  • Increased transparency: Proxy solicitation improves the transparency of the voting process, allowing shareholders to track their votes and the progress of the meeting.

Limitations of Proxy solicitation

Proxy solicitation is subject to certain limitations under the 1934 Act. These limitations include:

  • The proxy materials must be filed with the SEC and must contain specified information, including a description of the matters to be acted upon at the meeting and the date and place of the meeting.
  • The proxy materials must be sent to all shareholders at least 10 days before the meeting.
  • Shareholders must be given an opportunity to vote either in person or by proxy.
  • Shareholders must be informed of their right to revoke a proxy.
  • There are restrictions on the form of the proxy and on the persons who can solicit proxies.
  • There are limits on the use of coercion and undue influence.
  • Shareholders must be informed of their right to dissent from certain corporate actions.
  • Shareholders must be informed of the availability of cumulative voting.
  • Shareholders must be given an opportunity to inspect the list of shareholders entitled to vote at the meeting.

Other approaches related to Proxy solicitation

Proxy solicitation involves various other approaches, such as:

  • Proxy Voting: This is a process in which shareholders allow a representative to cast votes in their place on certain matters, such as resolutions or electing board members.
  • Proxy Access: This approach permits shareholders to nominate directors to the board. The board can then decide whether to accept or reject the nomination.
  • Proxy Advisory Firms: These firms provide shareholders with independent advice and research on matters such as proxy voting and corporate governance.
  • Shareholder Engagement: This involves shareholders directly engaging with the company’s management to discuss issues such as executive compensation and environmental policy.
  • Shareholder Activism: This involves shareholders taking direct action, such as submitting shareholder proposals, to influence a company’s decisions.

Proxy solicitation involves various approaches, such as proxy voting, proxy access, proxy advisory firms, shareholder engagement, and shareholder activism. These approaches provide shareholders with opportunities to take part in decision making and influence corporate governance.


Proxy solicitation — recommended articles
Statutory meeting — Minute book — Extraordinary general meeting — Parliamentary privilege — Written resolution — Distribution statement — Share register — Dissenters Rights — Bank secrecy

References

Footnotes

  1. ↑ R. A. Mann, B. S. Roberts, (2013)
  2. ↑ D. M. Branson, J. M. Heminway, M. J. Loewenstein, M. I. Steinberg, M. G. Warren III, (2008)
  3. ↑ R. A. Mann, B. S. Roberts, (2013)

Author: Alicja Ficek

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