A Basic Description of a Proxy Vote

When you invest into a corporation through purchasing shares in stocks or mutual funds, the investment entitles you to a say in how the corporation is run, including proxy voting rights on changes to the board of directors, important policy decisions, corporate compensation, mergers, acquisitions, how the corporation is run, and other issue pertinent to financial wellbeing over the long term. While communications about matters that are up for a vote come from the corporation's main office, proposals can be submitted by anyone with an interest in the corporation, including shareholders. Learn from experts about the basic description of a proxy vote and how you can participate.

What the "Proxy Vote" Means

The term "proxy vote" means that a person on the behalf of another person casts a vote. Basically, one person entrusts a second person to vote for them on important matters. Many times a proxy vote becomes necessary due to simple geographic distance.

How Proxy Vote Communications Occur

Shareholders usually receive notice of when a matter is on the table for a vote with receipt of what is called a "proxy" letter by mail. Along with the letter, the shareholder will find a proxy vote ballot card that can be completed and sent back to record the vote. It is usually possible for shareholders to vote in person, but due to geographic distance the vast majority of shareholders opt to vote by proxy for most issues.

Why Participate in a Proxy Vote?

While it may be tempting to assume that one vote can't make a big impact on corporate policy or direction, the proxy vote is actually the shareholder's greatest asset in helping to shape the future profitability of their investment into the corporation. Each proxy vote communications shareholder preferences to the board of directors and can pave the way for future positive change in stock value.