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Kezia Farnham
Senior Manager

What is a proxy statement? Definition, rules, & examples

July 24, 2023
0 min read
what is a proxy statement

Proxy statements are documents that the Securities and Exchange Commission requires companies to give to shareholders so they can weigh in on important company issues. Proxy statements offer shareholders information about changes on the board and other important decisions the board needs to make. They’re also a valuable tool for boards that want to stay ahead of risks and activist attacks. 

Investors and shareholders are pushing for greater disclosures, making proxy statements even more crucial. Many corporations aim to satisfy the SEC requirements or oblige shareholders by including additional detail. Still, it’s important to think of proxy statements as a strategic tool to identify risks proactively. This article will help you do that by explaining the following:

  • What a proxy statement is
  • The purpose of a proxy statement in governance
  • Proxy statement rules, requirements and examples
  • The benefits of thorough proxy statements
  • Best practices for preparing proxy statements
  • Answers to common questions about proxy statements

What is a proxy statement?

A proxy statement is a document filed by public-traded companies before annual or special shareholder meetings to give shareholders the necessary information to make informed votes on board business.

Proxy statements must offer insights into board and company performance, including:

  • The salaries of the company’s five highest-paid executives (including bonuses and equity) and the appropriate benchmark in chart form
  • Executive performance and the performance of executives of similar companies
  • Executive perks, like company travel and other expenses
  • Potential conflicts of interest between the company, the board and the audit committee
  • Any previous transactions between the company and executives
  • Actions of the audit committee, including any fees for external public accounting

Proxy statements also indicate the position that the board is taking on nominations and proposals. They may also include shareholder proposals, even when those proposals contradict the board's stance.

What is the purpose of a proxy statement?

A proxy statement aims to give shareholders key company and executive information so they can make informed votes at shareholder meetings. Proxy statements ask shareholders to vote for such things as:

  • Electing new board members
  • Approving the salaries of officers and other top directors
  • Approving mergers and acquisitions
  • Changing company bylaws

But proxy statements have a secondary, equally important purpose in governance. Because they’re a regulated reporting structure, they also present boards with an opportunity to uncover crucial information that could impact the company's reputation. By identifying such insights early and often, boards can avoid risks — like unpopular mergers or questionable conflicts of interest — before they can impact the company’s financial performance.

Proxy voting

Proxy statements also make it possible for shareholders who can't attend the annual meeting to vote — called their proxy — to other shareholders, the board of directors or another representative so that the decisions made at the meeting are as legitimate as possible.

Shareholders can get all the information they need from the proxy statement, then instruct their proxy to vote according to their wishes by writing the vote on a proxy card.

Proxy statement examples

The SEC maintains an archive of definitive proxy statements from large companies, all of which are ideal examples of thorough proxy statements. View past statements from corporations like Apple Inc. and Meta.

Proxy statement requirements

The SEC regulates the rules corporations must follow when releasing their proxy statements. Some important rules are:

  1. Corporations must submit their proxy statements annually as form DEF14A.
  2. Corporations registering securities under Section 12 of the Securities Exchange Act must send a proxy statement before their annual shareholder meetings. Regular and special meetings require proxy statements.
  3. Boards must file the information on their proxy statements with the SEC before asking shareholders to vote on board director nominees or other significant corporate decisions. Solicitations may also originate from shareholders.
  4. Proxy statements disclose all pertinent facts about issues on which shareholders will be voting regardless of the source of the solicitations.

Benefits of proxy statements

Proxy statements are tailor-made with the shareholders in mind, but they have some other, broader benefits that can aid company growth. These include:

  1. Investor assurance: Proxy statements also include all the information an investor requires. Think of these as a tool to offer investors desired transparency around key issues like executive compensation and potential conflicts of interest that could harm their investment. 
  2. Competitive CEO compensation: It can be challenging to build CEO compensation that attracts suitable candidates and passes shareholder scrutiny. Proxy statements are an opportunity to benchmark your compensation packages to either defend the compensation or revisit it to better align with industry standards. 
  3. Risk mitigation: Conflicts of interest are common in many corporations. They aren’t always problematic, either. But understanding where your conflicts of interest lie can also help identify misuse of funds or financial impropriety and prevent more costly conflicts. 

Four proxy statement best practices

Proxy statements are evolving in interesting ways. What used to be a superficial compliance update is increasingly becoming a powerful opportunity for storytelling, a strategic defense against activists, and even a window into the company's culture. Implement these four best practices to keep up.

  1. Focus on board processes: Investors are focusing more on board processes, whether for pay-setting, board evaluations, or engagement. This goes hand-in-hand with the recent focus on board composition, as investors want to know that boards have a mechanism for revisiting strategy and combatting complacency. How is your board consistently evaluating strategies for value creation, refreshment, incentive pay, etc.? What was the thought process behind crucial decisions the board has made?
  2. Use visuals: If the investors reading your proxy fail to understand key information, you can likely expect some follow-up communication. Checklists, tables and graphs communicate committee assignments, risk oversight frameworks, or compensation philosophies. When communicating board composition, matrices and infographics can often demonstrate a spectrum of director skill sets more quickly and succinctly than paragraphs of text.
  3. Don’t overlook ESG: Issues like human rights and emissions are crucial to long-term financial sustainability. Now that ESG initiatives link to shareholder value, boards must recognize this trend is accelerating. As major investors support these proposals, boards can expect to see even more in the proxy seasons ahead. 
  4. Tell your story: Companies that report only to meet the regulatory disclosure requirements need a prime opportunity to engage new and existing investors more comprehensively about how effectively a business is led and managed. Use sections of the proxy — like the Board/CEO Letter — to tell a story of improvement or innovation, like the board's strides in diversity or key accomplishments and challenges the company has faced.

Board management software systems support compliance and financial disclosures

Proxy statements are only due once a year, but that doesn't minimize their importance. But they’re the culmination of effective year-round governance that prioritizes the collection and disclosure of key data that’s meaningful to shareholders — and a true reflection of the state of your business.

Corporate boards and their audit committees are feeling more pressure than ever before from the SEC, institutional investors and shareholders for proxy statements that are accurate, responsible and transparent. Enterprise governance management software automates and streamlines the many important processes that boards use for annual and regular activities.

Good corporate governance practices enhance the relationships between corporate boards and senior executives and those of the company and its shareholders. Diligent Corporation is committed to providing digital solutions with the highest security to safeguard shareholder investments during proxy time and year-round.

Diligent Board & Executive Benchmarking Platform offers easy-to-use benchmarking tools powered by exclusive access to Glass Lewis Proxy Insights, making it even easier to comply with the SEC’s amended requirements. Paired with Diligent’s robust carbon accounting software and strategic board diversity tool, these solutions represent an entire suite of tools to help distill a year’s worth of achievements and insights into a transparent and defensible proxy statement.

Common questions about proxy statements

When are proxy statements due?

Proxy season depends on the date that a corporation's fiscal year ends. Most corporations in the United States set their fiscal year to end on December 31. Corporations hold annual meetings about five or six months after the end of the fiscal year. That means that the busiest time for the proxy season ranges from late April until early June. Corporations typically send their proxy statements about six weeks before their annual meeting.

Where to find a proxy statement?

You can find a proxy statement by searching EDGAR, the SEC’s database. Visit this page, then search by the company or fund name to see their filings.

What is a proxy statement vs. an annual report?

The main difference between a proxy statement vs. an annual report is their intended audience and use. Proxy statements are intended for shareholders with voting rights, while annual reports are for anyone following the company. This may be shareholders, including potential investors, regulators, financial institutions and more. As a result, annual reports are much more comprehensive, though they include some of the same information as a proxy statement.

What is a preliminary vs definitive proxy statement?

A preliminary proxy statement, or SEC Form PRE 14A, notifies shareholders of a vote and includes all the context shareholders need to make an informed decision about their vote. Companies usually file a preliminary proxy statement 10 days before the definitive proxy statement or SEC Form DEF 14A.

Shareholders only need preliminary proxy statements when voting on a merger, acquisition, or contested issue. In these cases, the shareholders file the definitive proxy statement with preliminary proxy statements.


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