What is a Proxy Statement?

A proxy statement is a document that is prepared by a corporation that issues shares of stock. The document usually includes information about matters facing the corporation that must be voted on by the shareholders, as well as vital data about the officers of the company and the current structure of the board of directors. The statement functions as the means of informing and authorizing shareholders, or those that the shareholders designate to function on their behalf, to participate in any voting processes that may be necessary according to the founding documents of the corporation.

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

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

Information about the composition of the audit committee that is in place is also included in the proxy statement. This allows shareholders to know who is evaluating the financial processed of the corporation, and working to protect the interests of everyone who is associated with the business in some manner. As with the amount of detail provided on the executive officers, this section of the statement may include information regarding the credentials of each individual serving on the audit committee.

A fourth type of information that is normally included in a proxy statement is the structure of compensation for members of the board of directors. Like the executive officers, it is not unusual for shareholders to have voices and votes when it comes to increases in salaries or changes in benefits for those who are currently on the board. In situations where it is necessary to elect a new member of the board, the detail will include background information on the candidates under consideration, allowing shareholders to determine which candidate they prefer.

In the United States, the issuance of proxy statements must be in compliance 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 statements. In each case, the purpose is to make sure shareholders are kept informed on matters that affect the integrity of their investments, and allow them to receive this information in a timely manner before they are called upon to deliberate or vote on issues facing the corporation.