The Proxy Edge: Exercising Your Shareholder Rights
Corporate governance has been a hot button issue since the collapse of Adelphia, Enron, Worldcom and others. The Securities and Exchange Commission (SEC) is keeping the heat on public companies by requiring broader and deeper disclosure on how corporations are actually governed—most of which can be found in the proxy. If you wanted to find a company that was "ideally" governed in line with shareholders' interests, it would be the proxy statement that you would turn to for most of the information.
Unfortunately, many individual investors don't know what to do with the proxy statement—they don't know how to vote on certain issues, or feel that their votes do not count for much. Many shareholders simply toss their proxies in a file or, worse, the trash. But with it, they are throwing away their votes—and their shareholder right to keep management's interest in line with their own.
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As a portfolio manager for a mutual fund, I read proxy statements carefully during my initial company analysis and on a regular basis once a position is taken. And, needless to say, I always want my votes counted. Although proxies are written by attorneys and can make for some dry reading, they are generally arranged in sections that lead to organized analysis. Here are some tips on getting the most out of a proxy, sequentially organized according to a typical proxy's format.
The SEC requires that shareholders receive a proxy statement prior to any shareholder meeting. The statements must disclose all important facts about issues on which shareholders are asked to vote, including the election of directors and the approval of other corporate action, or even solicitations by other shareholders. The information contained in these statements must be filed with the SEC before any shareholder votes are solicited.
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