What the Heck is a Proxy?

If you own shares of a publicly traded company or fund, you have likely received a proxy statement and/or proxy card whether you know it or not. They are often mailed in the form of thick envelopes that look intimidating and can be quite confusing. I would suspect that most individual investors often ignore them and/or shred them. Although, if you are truly interested in a company’s performance and outlook, a proxy statement can tell you a lot. Granted, it is written from the company’s standpoint, but all statements are regulated by the SEC (Securities and Exchange Commission). So, all commentary in the proxy statement should be interpreted as true and accurate. Companies are required by the SEC to report to shareholders via proxy statements and annual meetings.


You may have heard the phrase, “vote by proxy” or something similar. The term proxy means “written authorization to act in place of another.” As a shareholder of any publicly traded security (stocks, funds, ETFs, etc.) you have a right to vote on certain material changes within a company. Much like an election ballot, a proxy asks you to select yes or no on certain actions as well as whether to approve the election board members.


While most voting can be done online or via phone these days, a physical proxy card is often still mailed. It instructs shareholders on how and where to vote. Below is an example:



As the name implies, your proxy vote (either written or electronic) will take the place of your physical presence at a shareholder meeting. Prior to proxies, shareholders would have to attend a shareholder meeting and vote their shares in person. Again, much like a general election, you are not required to vote.


My son’s face while reading a proxy statement


If your facial expression is similar to my son’s (above) when attempting to read through a proxy statement, there is a way to avoid receiving such statements. You can instruct your custodian (the company that holds your shares) not to share your contact information with any of the companies/funds that you own. Contact your custodian to determine the process for getting this accomplished.


Lastly, I don’t want to discourage anyone from voting their proxies. It can be a valuable tool for shareholders to make their opinions heard on corporate governance, social and environmental issues, and many other decision points. As we move forward, I suspect that proxy voting will become an area of more focus as we as investors learn more about the impacts our investments have on all sorts of issues. So, maybe skim through that intimidating proxy statement to see if there’s anything on which you have a strong opinion!



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