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Spotlight on Proxy Matters — The Mechanics of Voting

How do I know when to vote?

U.S. public companies set what is known as a "record date." Investors who own the company's shares on that record date have the right to vote. If you own shares of the company on the record date, the company (or your broker or bank) will send you one of the following three communications:

  • A notice that proxy materials are available on the Internet;
  • A package containing a proxy card or voting instruction form, annual report, and proxy statement; or
  • A package containing an annual report and information statement, but no proxy card.

If you have given consent to receive information electronically, you may receive this correspondence electronically, such as by e-mail.

What is a record date?

A record date is a date announced by the company as the official date you must be an owner on the company's records in order to participate in the annual meeting and corporate election. Given that the timeframe to settle a securities transaction in the United States. is generally three days, an investor interested in being an owner on record date would have to purchase the company's securities at least three days prior to the record date.

How do I vote at a corporate election?

Shareholders may vote at a meeting by attending in person, but most shareholders vote by "proxy" without being present in person, as permitted under state law and as required to be permitted by certain stock exchange rules.

What is a proxy?

A proxy is a written authorization that one person gives to another person to act on the first person's behalf. In the context of corporate elections, when a shareholder votes "by proxy," he or she is instructing someone (often members of the company's management) to vote his or her shares in accordance with his or her instructions, as reflected on the proxy card, at the meeting. This way, the shareholder can vote without physically attending the meeting.

What are the mechanics of voting either in person or by proxy?

Typically, a company will allow you to vote in one or more of the following ways:

  • In person, you may attend the annual shareholder meeting and vote at the meeting. The materials you receive will describe what you must do to attend and vote, as well as the time, location, and date of the meeting.
  • By mail, you may vote by filling out a paper proxy card if you are a registered owner or, if you are a beneficial owner, a voting instruction form.
  • By phone, most companies provide a telephone number in the proxy materials through which you can vote. You will be prompted to vote using the control number provided in your materials.
  • Over the Internet, if the company has provided that option. The materials will provide a website and control number for you to use to vote.

How can I attend the annual meeting and vote in person?

Shareholders who are registered on the official books of the company on the record date are entitled to attend a shareholder meeting and will receive materials permitting attendance. These investors are generally referred to as registered or record owners.

If you hold securities through a broker-dealer or bank as a beneficial owner, your broker will generally have a process to give you the right to attend the meeting and participate in it on request. For information on how beneficial owners can cast their own votes, rather than voting through a broker, click here.

Can I change my vote after I have submitted it?

Yes, but the change must be submitted in time to be recorded by the company and before the close of the election. Companies are required to record the last completed proxy prior to the close of the election. Registered owners should contact the company to determine the time the polls close, and beneficial owners should contact their broker to determine how and when changes must be submitted.

What do "for," "against," "abstain" and "withhold" mean on the proxy card or voter instruction form?

Depending on what you are voting on, the proxy card or voting instruction form gives you a choice of voting "for," "against," or "abstain," or "for" or "withhold." Here is an explanation of the differences:

Election of directors: Generally, company bylaws or other corporate documents establish how directors are elected. There are two main ways to elect directors: by plurality vote or majority vote.

A "plurality vote" means that the winning candidate only needs to get more votes than a competing candidate. If a director runs unopposed, he or she only needs one vote to be elected, so an "against" vote is meaningless. Because of this, shareholders have the option to express dissatisfaction with a candidate by indicating that they wish to "withhold" authority to vote their shares in favor of the candidate. A substantial number of "withhold" votes will not prevent a candidate from getting elected, but it can sometimes influence future decisions by the board of directors concerning director nominees.

A "majority vote" means that directors are elected only if they receive a majority of the shares voting or present at the meeting. In this case, you have the choice of voting "for" each nominee, "against" each nominee, or you can "abstain" from voting your shares. An "abstain" vote may or may not affect a director's election. Each company must disclose how "abstain" or "withhold" votes affect an election in its proxy statement. This information is often found toward the beginning of the proxy statement under a heading such as "Votes Required to Adopt a Proposal" or "How Your Votes Are Counted."

Proposals other than an election of directors: Matters other than voting on the election of directors, like voting on shareholder proposals, are typically approved by a vote of a majority of the shares voting or present at the meeting. In this situation, you are usually given the choice to vote your shares "for" or "against" a proposal, or to "abstain" from voting on it. Again, the effect of an "abstain" vote may depend on the specific voting rule that applies. The company's proxy statement should disclose the effect of an abstain vote.

The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.
Modified: 05/23/2012