What’s a Proxy Statement?

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A proxy statement is a document prepared by a company that issues shares. The document usually includes information on issues facing the company that need to be voted on by shareholders, as well as vital data on the company’s officers and current board structure. The statement serves as a means of informing and authorizing shareholders, or those whom shareholders designate to act on their behalf, to participate in any voting process that may be required under the company’s articles of incorporation.

In most cases, a proxy statement will always include four vital pieces of information. The first involves identifying the current roster of executives associated with the company. While the extent of detail included about each officer varies, most will include the officer’s title and some information about the officer’s experience and educational credentials.

A proxy statement also provides shareholders with information on executive compensation. This allows shareholders to be aware of how officials are compensated for their efforts. With some companies, the structure may require shareholders to vote on any proposed increases in benefits or salaries associated with company officers, a fact that makes this type of information very important when considering how to vote on such proposed increases.

Information on the composition of the current control committee is also included in the proxy statement. This lets shareholders know who is evaluating the company’s financial processing and working to protect the interests of all those associated with the business in any way. As with the amount of detail provided about executive officers, this section of the statement may include information relating to the credentials of each individual who serves on the review committee.

A fourth type of information typically included in a proxy statement is the compensation structure of board members. Like executive officers, it’s not unusual for shareholders to have a voice and vote when it comes to salary increases or benefit changes for those currently on the board. In situations where a new board member needs to be elected, the details will include background information on the candidates under consideration, enabling shareholders to determine which candidate they prefer.

In the United States, the issuance of proxy statements must comply with regulations put in place by the Securities and Exchange Commission, or SEC. Other countries around the world also structure regulations regarding the nature and structure of these types of declarations. In each case, the purpose is to ensure that shareholders are kept informed of matters affecting the integrity of their investments and to enable them to receive this information in a timely manner before being called upon to deliberate or vote on matters facing the company.

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