proxy voting

What is proxy voting?

The term proxy voting refers to a vote by a company’s shareholders who may not be able to attend a general meeting of shareholders or who may not be able to choose to vote on a particular issue, either individually or on behalf of the company. Shareholders receive a proxy ballot in the mail along with an information brochure called a proxy statement that describes the issues to vote during the meeting. Shareholders vote on a variety of issues, including electing board members, approving mergers or approving stock-based compensation plans.

Registered investment management firms may also vote by proxy on behalf of mutual fund shareholders or high net worth investors with independently managed accounts.

key takeaways

  • A proxy vote is a vote cast by a person or company for shareholders of the company who cannot attend a meeting or do not want to vote on an issue.
  • Eligible shareholders may receive voting and proxy information prior to shareholder voting prior to the company’s annual meeting.
  • Instead of attending shareholder meetings in person, investors can choose someone else to vote in their place.
  • The person designated as a proxy will vote by proxy in accordance with the shareholder’s instructions on their proxy card.

How proxy voting works

Public companies report their activities to shareholders through annual meetings. Prior to these meetings, shareholders receive information on topics that will be voted on at the meeting, such as equity, the structure of the board of directors (BOD), and executive compensation and benefits. Investors who own the company’s applicable voting shares on the company’s record date may be eligible to vote on these issues.

Companies may provide proxy materials online, which typically include an annual report, a proxy statement describing the issue to be voted on, and a proxy card with voting instructions. Materials may also be mailed to investors eligible to vote at the Annual General Meeting (AGM).

Instead of attending the general meeting in person, investors may choose someone else, such as a member of the company’s management team, to attend the general meeting in person. This person is designated as a proxy and will vote by proxy in accordance with the instructions written on the proxy card. Proxy voting can be done by mail, phone or online before the deadline. This is usually 24 hours before the shareholders meeting. Responses may include “Yes”, “No”, “Abstain” or “No vote”.

For issues involving topics other than election of directors, such as a vote on a shareholder proposal, a majority vote usually results in approval of the issue.

special attention items

Sometimes, when a company elects its board of directors, a majority vote is used. In a majority, the winning candidate only needs more votes than their rivals. Therefore, directors who are not beckoning need only one vote. If shareholders oppose a candidate, they can retain their voting rights.

In some cases, the decision is made based on a majority voting system. When a majority vote applies, directors need to receive a majority of the votes in order to be elected. Because abstaining from voting can impact whether or not a director is elected, the company’s proxy statement must detail how abstained or withheld votes will affect the voting results.

Proxy voting example

On November 25, 2019, Kirkland Lake Gold (KL) announced its intention to acquire Detour Gold in an all-stock transaction.The two companies will merge into one company, with Kirkland Lake Gold shareholders owning about 73% of the final company and Detour Gold shareholders owning 27%.

Although the board members of each company unanimously approved the deal, shareholders are still eligible to vote on the acquisition. All eligible shareholders received voting and proxy information, and as instructed, shareholders were told they could vote for themselves or designate someone else to vote for them. The transaction closed in January 2020.

As a result of the transaction, Detour Gold’s shares were delisted in February 2020 as the company became a subsidiary of Kirkland Gold.

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