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A proxy is an agent who has been legally authorized to act on behalf of someone else. When shareholders are unable to attend corporate meetings they can still cast their votes by using a proxy, who votes on their behalf. The proxy needs to produce a power of attorney document.
Generally shareholders get a mail from the particular company, in which they hold shares, prior to any meeting containing several documents providing information about the company’s growth, performance, its management, information about changes in the share structure, notices about any mergers or acquisitions etc. The mail would contain all the matters that shareholders would require to vote during the meeting. Along with these documents, there would be a form to allow shareholders to vote by a proxy if they cannot attend the meetings in person.
Importance of Proxy Voting
Shareholders have to carefully study all the documents provided to them and cast their votes. It is the primary means by which a shareholder can influence a company’s operations, its corporate governance and other important issues. Therefore voting and making their choices clear is very essential for a shareholder. Hence, voting in person is not possible; proxy voting becomes essential for a shareholder. Usually a shareholder has the right to cast one vote per share he owns, so it is important that the shareholder casts his vote at least by a proxy. Proxy voting enables a shareholder to own shares of companies registered all over the world and influence the company’s decisions.
The Role of Institutional Investors
Thanks to the Internet, several large institutional investors post their decisions online explaining their stance and making small time investors aware of why they have made their choice. They put up proxy voting guidelines, helping proxy voters to know their views about the matters to be decided on at the meeting. These institutional investors can urge the company to alter or at times even withdraw some of the proposals making the institutional investor’s proxy voting guidelines fairly important.
Proxy Voting – Service Providers
The Internet has made it very easy for shareholders to cast their proxy votes online. Proxy service providers, such as EquiServe, Automatic Data Processing and other such companies deliver the documents in an automated electronic format and the shareholders just have to fill out the form and cast their votes. They have to log in using a personal number or a code number assigned to them and cast a vote for or against the corporate resolution that has been proposed.
Companies allow shareholders to nominate members to the board of directors. While it may be a refreshing change to get to nominate directors, the shareholders should have the prudence and the ability to elect an appropriate person who will guide the company to better, above-average growth and to ensure good corporate governance in the company. The wrong choice may make them elect someone with no experience causing a lot of harm to the company. Shareholders get to vote on such matters as election of directors, auditors, acquisitions and mergers.
The Role of Internet
Owing to the excellent choice of software available to enable the process of proxy voting to be simple and easy for a shareholder, within a matter of a few minutes a shareholder can cast his vote by a proxy through the Internet or by a simple phone call. The Internet has made it possible for an investor to own shares of companies across the globe and cast his vote after making an informed decision influencing the company’s decisions regarding corporate governance and other important issues.
David Gass is President of Business Credit Services, Inc., founder of http://www.SmallBusinessConsulting.com and co-developer of the Corporate Manager Software which manages the records of a Corporation or LLC. For a Free Trial of the software visit http://www.corporateforms.net
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