Glossary
Proxy statement
The SEC filing (Schedule 14A, DEF 14A) a company sends before a shareholder vote, covering board nominees, executive pay and proposals.
On this page
A proxy statement is the document a public company must provide to shareholders before they vote at a shareholder meeting. It explains what is on the ballot, such as electing directors, approving the auditor, an advisory vote on executive pay and any shareholder proposals, and gives the background needed to vote. Because most investors never attend the meeting, they vote by proxy, authorizing someone to cast their votes as they direct, which is where the name comes from.
How it works
US companies file proxy statements with the SEC under Schedule 14A; the definitive version appears on EDGAR as form type DEF 14A. Most companies file one each spring before the annual meeting, and extra ones before special votes on mergers or other major changes. Shareholders who own the stock on the Record date are entitled to vote.
Typical sections include:
- Board of directors. Nominees' backgrounds, independence, committee roles and director pay.
- Executive compensation. A summary compensation table and a discussion of how pay is set, plus the say-on-pay vote required since the 2010 Dodd-Frank Act.
- Ownership. Who holds 5% or more of the stock, and how much directors and officers own.
- Related-party transactions and auditor fees.
- Shareholder proposals, with the board's recommendation for or against.
Why it matters
The proxy is the best single source on who runs a company and how they are paid. It shows whether pay is tied to performance, how independent the board is and whether insiders have conflicts. In a proxy fight, an Activist investor files its own competing proxy materials and nominees, and the contest can change the board. Most retail shareholders do not vote, so institutional holders and proxy advisory firms often decide close outcomes.