What is a proxy vote?


Investing with your values in mind is easier than ever. Still, retail investors make up a slim portion of shareholder votes. Research firm ProxyPulse says only 28% of individual-owned shares vote on corporate matters. That means almost three-quarters of retail investors aren’t taking advantage of their full potential.

Proxy voting—AKA voting on shareholder resolutions for public companies without being present at meetings—makes it easy to get involved. What is a proxy vote and how does it increase investor impact?  

TL;DR

  • A proxy vote is similar to an absentee ballot. It lets you vote on shareholder matters in companies you invest in—without being present at the meetings.
  • Shareholders with voting shares can submit proxy votes before annual meetings or other special events.
  • You can cast proxy votes easily online.
  • It’s also possible to change or revoke a proxy vote before or during the shareholder meeting. 

What is a shareholder proxy vote?

For individual and institutional investors, a proxy vote allows you to cast a ballot on shareholder issues without being present at the company’s meeting. It’s like an absentee ballot in an election. These votes can impact issues like share structure, mergers and acquisitions, board members, and more.

Proxy votes used to arrive in packets in the mail, but email is a more common delivery method these days. Individuals can submit a proxy vote on behalf of themselves, or investment advisors can do so on behalf of their clients.

Here’s what the SEC says about proxy voting: “Some matters appear regularly and consistently at each annual meeting of shareholders, such as the shareholder vote on whether to ratify the issuer’s selection of an outside auditor. Other matters, such as shareholder votes on proposed [mergers and acquisitions], are generally more idiosyncratic in substance and timing.”

When investors can cast proxy votes

Investors will receive a proxy vote ballot (or a link to one) ahead of shareholder meetings.

These meetings often come in the form of an annual meeting. Annual meetings, which often take place in the spring during “annual meeting season,” are a regulatory requirement for public and private companies with shareholders. 

Sometimes, voting by proxy takes place at other times for special shareholder resolutions. If a company has a matter that cannot wait until the next annual meeting, they’ll get shareholders involved. For companies incorporated in Delaware (most companies), only the board of directors can call a special shareholder meeting.

Does everyone get a proxy vote?

Your shareholder voting rights depend on the class of shares you own. For example, Class A stockholders typically get more voting capabilities than Class B stockholders. This means each share is worth more votes.

Here’s an example of share classes in action: Berkshire Hathaway Inc. Class B (BRK.B) is worth $281.64 per share as of mid-October. At the same time, Class A (BRK.A) is worth $423,647.94. Obviously, BRK.A has greater voting rights.

Generally, stock classes can be divided into two categories:

  • Common stock: These shareholders have voting and dividend rights. This is Class A, Class B, etc.
  • Preferred stock: These shareholders don’t vote, but they do get first dibs on equity during a company’s liquidation or bankruptcy, as well as first dibs on dividends.

You can find details about voting rights for different classes of stock in a company’s prospectus. Look for this prospectus on the company’s investor relations page on their website or through the SEC EDGAR tool. 

Empowering investors to get involved

Can individuals affect change? Proxy voting says yes.

Voting by proxy makes shareholder activism more accessible for everyday investors. Most people (especially retail investors) aren’t going to show up to the shareholder meetings in person. Fortunately, that’s no longer necessary.

Increasingly, shareholder activists are proving that individual investors can impact corporate change. In May 2021, sustainable hedge fund Engine No. 1 lobbied for board member positions at oil giant Exxon (NYSE:XOM). Following a shareholder vote, Engine No. 1 secured three seats on the 12-member board despite only owning a 0.02% share of Exxon. This makes a shift toward renewable energy more possible for Exxon than ever before.

How to cast a proxy vote as an investor

Here’s how to cast your proxy vote as an individual investor:

  • Public companies are legally required to report to shareholders, usually by inviting them to the annual meeting and offering proxy voting options.
  • Take note of the proxy statement that you receive (either by email or physical mail). Follow the link or get the proxy card ready. You will need to enter a control number, which should be in your correspondence.
  • Look at the voting matters and do your research. You can always come back later, but it’s important to be informed about what you’re voting on.
  • Submit your vote. You don’t have to attend the shareholder meeting (not even virtually) for your vote to count.

How to revoke proxy votes

According to ProxyVote.com, you can change or revoke your proxy vote at any time before the meeting. You can do this by “granting a new proxy bearing a later date, which automatically revokes the earlier proxy, by providing a written notice of revocation to our Corporate Secretary prior to your shares being voted, or by attending the annual meeting and voting in person.”

Attendance at the meeting will not automatically revoke your previously granted proxy unless you request it.

Bottom line

According to Gabe Rissman, co-founder of YourStake: “The information gap is one of the biggest challenges to retail participation in proxy voting.” 

Staying informed as an investor is easier said than done. News travels fast and it can be hard to keep pace. Using proxy votes as a framework helps investors educate themselves on the issues that matter—like who’s in charge, what’s next for the company, and whether or not it’ll be good for the planet and its people. 

Rachel Curry is Pennsylvania-based content writer and journalist talking all things finance. She likes to give meaning to numbers by humanizing them. You can connect with her on Twitter at @writingsofrach.

The above content provided and paid for by Public and is for general informational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such. Before taking action based on any such information, we encourage you to consult with the appropriate professionals. We do not endorse any third parties referenced within the article. Market and economic views are subject to change without notice and may be untimely when presented here. Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable. Past performance is no guarantee of future results. There is a possibility of loss. Historical or hypothetical performance results are presented for illustrative purposes only.

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