What is a proxy statement?
A proxy is a document containing the information that the Securities and Exchange Commission (SEC) requires companies to provide to shareholders so that they can make informed decisions on matters that will arise at an annual or special meeting of shareholders. Matters covered by a power of attorney may include proposals for new additions to the board of directors, information on directors’ salaries, information on bonus and option plans for directors and any statement made by management of the society.
How proxy instructions are used
A proxy must be filed by a publicly traded company before shareholders ‘meetings, and it discloses important matters of the company relevant to soliciting shareholders’ votes and final approval of appointed directors. Proxy statements are filed with the SEC in the form of form DEF 14A, or final proxy statement, and can be found using the SEC’s database, known as the electronic collection system, data analysis and recovery (EDGAR).
Requirements for proxy statements
Proxies must disclose the company’s voting procedure, the candidates proposed for its board of directors and the remuneration of directors and officers. The proxy must disclose the remuneration of officers and directors, including salaries, bonuses, share allocations and any deferred compensation. Proxy statements can also inform all other benefits used by officers, such as the use of corporate aircraft, travel and other material expenses covered by the corporate.
As the election of directors is the most important part of general meetings, a proxy details the directors, their basic information and the amount of their remuneration in recent years.
In addition, a power of attorney reveals any potential conflict of interest between the company and its directors, officers and auditors. Specifically, the proxy statements should list all related party transactions that have occurred in the past between the business and its key personnel. The statement also provides information about the company’s audit committee, as well as the audit and non-audit fees paid to its external accountant. A power of attorney identifies those who have significant ownership of the common shares of the company, including its senior officers and directors.
Benefits of Proxy Statements
Although a proxy is more relevant for shareholders preparing for an extraordinary or annual meeting of a company, this document can help potential investors assess the qualifications and compensation of its management team and its board of directors . A finding that executives in an underperforming business are paid significantly more than their peers can raise the alarm over-spending and weigh on an investor’s decision to make an investment. In addition, frequent and significant transactions between related parties between the company and its officers or directors may present a risk of misuse of company resources and warrant further investigation.