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Proxy Vote

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Will Kenton

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Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU.

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Updated December 29, 2020

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Margaret James

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Peggy James is a CPA with over 9 years of experience in accounting and finance, including corporate, nonprofit, and personal finance environments. She most recently worked at Duke University and is the owner of Peggy James, CPA, PLLC, serving small businesses, nonprofits, solopreneurs, freelancers, and individuals.

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Fact checked by Ariel Courage

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Ariel Courage is an experienced editor, researcher, and fact-checker. In addition to her work with Investopedia, she has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.

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What Is a Proxy Vote?

The term proxy vote refers to a ballot cast by a single person or firm on behalf of a corporation's shareholder who may not be able to attend a shareholder meeting, or who may not choose to vote on a particular issue. Shareholders receive a proxy ballot in the mail along with an information booklet called a proxy statement, which describes the issues to be voted on during the meeting. Shareholders vote on a variety of issues including the election of board members, merger or acquisition approvals, or approving a stock compensation plan.

Registered investment management companies may also cast proxy votes on behalf of mutual fund shareholders or high net worth investors in separately managed accounts.

Key Takeaways

• A proxy vote is a ballot cast by one person or firm for a company's shareholderwho can't attend a meeting, or who doesn't want to vote on an issue.
• Prior to a company's annual meeting, eligible shareholders may receive voting and proxy information before a shareholder vote.
• Rather than physically attending the shareholder meeting, investors may elect someone else to vote in their place.
• A person designated as a proxy will cast a proxy vote in line with the shareholder's directions as written on their proxy card.

How a Proxy Vote Works

Publicly-traded companies report their activities to shareholders through their annual meetings. Before those meetings, shareholders receive information on topics to be voted on at the meeting, such as share ownership, the structure of the board of directors [BOD], and executive salary and benefits. Investors who own applicable voting shares in the company as of the companys record date may be eligible to vote on these issues.

The company may make proxy materials available online, which typically includes an annual report, a proxy statement describing the issues to be voted on, and a proxy card with voting instructions. Materials may also be sent in the mail to investors who are eligible to vote at the annual general meeting [AGM].

Rather than physically attending the shareholder meeting, investors may elect someone else, such as a member of the company's management team, to vote in their place. This person is designated as a proxy and will cast a proxy vote in line with the shareholder's directions as written on their proxy card. Proxy votes may be cast by mail, phone, or online before the cutoff time. This is typically 24 hours before the shareholder meeting. Responses may include "For," "Against," "Abstain," or "Not Voted."

For issues involving topics other than electing directors, such as voting on shareholder proposals, a majority of the votes is what typically leads to approval of the issue.

Special Considerations

Sometimes a plurality vote applies when a company elects its board of directors. The winning candidate simply needs more votes than their competitor in a plurality vote. Therefore, an unopposed director only needs one vote to be elected. If shareholders are opposed to the candidate, they may withhold their voting rights.

In some instances, 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 companys proxy statement must detail how abstained or withheld votes will affect the voting results.

Example of a Proxy Vote

On Nov. 25, 2019, Kirkland Lake Gold [KL] announced that it intended to acquire Detour Gold in an all-stock deal. The two companies would become one company, with Kirkland Lake Gold shareholders owning roughly 73% of the resulting company, leaving 27% for shareholders of Detour Gold.

Although the board members of each company unanimously approved the deal, shareholders were still eligible to vote on the acquisition. All eligible shareholders received voting and proxy information, and per the instructions, shareholders were informed that they could cast their own ballot or appoint someone else to do it for them. The deal was completed in January 2020.

As a result of the deal, Detour Gold shares delisted in February 2020 as the company became a subsidiary of Kirkland Gold.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

1. Business Wire. "Kirkland Lake Gold to Add New Cornerstone Asset Through Acquisition of Detour Gold, Grows Free Cash Flow, Mineral Reserves and Production." Accessed Nov. 24, 2020.

2. Kirkland Lake. "Kirkland Lake Gold Completes Acquisition of Detour Gold." Accessed Nov. 24, 2020.

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Related Terms

Proxy Statement Definition

A proxy statement is a document the SEC requires companies to provide shareholders that includes information needed to make decisions at shareholder meetings.

What Is a Ballot?

A ballot is a document that a shareholder of a company fills in to vote on corporate matters contained in a proxy filing for the annual meeting.

Shareholders Should Cast Their Votes by Proxy and Be Heard

If you are unable to attend your company's annual general meeting, consider using a proxy to represent you.

Stockholder Voting Rights

A voting right is the right given to a stockholder to vote on matters of corporate policy. It is common for votes to be voiced by proxy.

Information Circular

An information circular is a document for a companys shareholders, outlining important agenda topics for the annual or special shareholders' meeting.

Proxy Materials Definition

Proxy materials are filed to shareholders before annual meetings to disclose important information and give them a chance to vote on basic issues.

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