How Does A Proxy Vote Impact Shareholders?

Larry Davidson - May 15, 2018

Individuals own stock for a variety of reasons, most notably to accumulate wealth. Owning stock gives investors partial ownership of a company, which comes with responsibility. One of these responsibilities is voting at shareholder meetings, however, many choose a proxy vote.

What Is A Proxy Vote?

proxy vote
Proxy Votes Allow Shareholders Say In The Company

Companies hold annual shareholder meetings in order to give information on current business affairs, and vote on executive benefits. However, many cannot attend these meetings for a various number of reasons, and choose to vote by proxy, which is a ballot cast by one on behalf of another.

Additionally, shareholders designate someone that votes in line with shareholder interests, as indicated by the shareholder. This individual may be management, or even someone on the board of directors.

What Does A Proxy Vote Do?

Based on corporate laws, certain issues require majority shareholder approval. Some of these events include election of directors, stock option plans, or mergers and acquisitions. These votes typically arrive at least one day before the shareholder meeting.

Different types of proxy votes include plurality vote and majority vote. Plurality vote only requires that one candidate receive more votes than a competitor. This makes it easier to win with less votes. A majority vote requires majority of shareholder approval. If an individual chooses to withhold a vote, or abstain, the information is disclosed in the proxy statement.

Proxy Fight Situation

Furthermore, proxy voting gives shareholders tremendous power. A proxy fight takes place when a large shareholder or a group of shareholders convince others to surrender their voting power, such as in a proxy vote. This large block of voters exert greater influence than acting independently. This often helps achieve desired results that would not be possible without it.

Final Thoughts

Finally, a proxy vote is an efficient means of allowing shareholders a say in the company they own. It allows companies access to capital in a responsible way, while remaining accountable to the shareholders .

Larry D. is one of the most experienced writers at the Dork. His expert insights into the individual stocks have made small fortunes for some of his readers and profitable trades for many more. Best known for his work with under-the-radar growth stocks, Larry has been picking winners for over 30 years.

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