Proxy Statement and Annual Meeting Toolkit

Resources to prepare a proxy statement and conduct an annual meeting of stockholders.

Practical Law Corporate & Securities

State corporate laws and the rules of the securities exchanges require a company to hold an annual stockholders' meeting and deliver information relating to the meeting to its stockholders. The proxy statement is a formal direct communication from a company to its stockholders which:

  • Provides information about the upcoming meeting, including the specific matters to be discussed.

  • Provides executive compensation and corporate governance information about the company, including descriptions of board committees, the nominations process and director communication policies.

  • Solicits proxies from the stockholders for the meeting. With a proxy, a stockholder gives written instructions to company officials as to how to vote on its behalf. This allows the stockholder to vote on the matters for the meeting without physically attending the meeting.

The federal securities laws set out the requirements that apply to any communication by a public company that would cause a stockholder to grant, withhold or revoke a proxy.

Recent changes to federal securities rules and regulations have increasingly focused on enabling stockholders to make more informed voting decisions and strengthening their power, including the following:

  • In February 2015, the SEC issued proposed rules on the Dodd-Frank hedging disclosure requirement. Final rules have not yet been approved.

  • On April 29, 2015, the SEC issued proposed rules on the Dodd-Frank pay for performance requirement. Final rules have not yet been approved.

  • On July 1, 2015, the SEC issued proposed rules on the Dodd-Frank clawback requirement. Final rules have not yet been approved by the SEC. Afterwards, the national securities exchanges will have to propose clawback policy listing standards, which will need SEC approval before becoming effective.

  • In August 2015, the SEC issued final rules on the Dodd-Frank pay ratio requirement. Public companies must begin making pay ratio disclosure for the first fiscal year that begins on or after January 1, 2017. Therefore, a company with a December 31 fiscal year end would be required to make the disclosure for fiscal year 2017 in its Form 10-K for 2017 due in 2018 or the proxy or information statement for its 2018 annual meeting.

Other recent changes affecting proxy season include:

  • Updates adopted by Institutional Shareholder Services, a prominent proxy advisor, including revisions to its ISS QualityScore platform and its pay for performance methodology.

  • SEC Staff Legal Bulletins and no-action letters offering additional guidance on the stockholder proposal process, including the scope and application of the exemption for direct conflict with a company proposal (Rule 14a-8(i)(9)), the ordinary business operations exemption (Rule 14a-8(i)(7)), and the "substantial implementation" exemption (Rule 14a-8(i)(10)).

  • Unofficial oral SEC staff guidance on proper identification and disclosure of the appropriate voting standards in the proxy statement and on the proxy card, as well as guidance implicit in the SEC rule proposal issued on October 26, 2016 to amend the form of proxy and proxy statement disclosure requirements to specify the applicable voting options and voting standards in all director elections.

  • For NASDAQ-listed companies, a new rule (approved by the SEC on July 1, 2016) requiring them to publicly disclose, on or through its website, or in its proxy statement or information statement for any shareholders' meeting at which directors are elected, certain payments made by third parties to their directors or director nominees.

As a result of these constant changes, the proxy statement has evolving into a marketing document in which companies must "sell" their corporate governance practices and executive compensation programs to their stockholders. Companies should review and revise their proxy statements on an annual basis. In addition, companies should have a well-planned meeting agenda, script and rules of conduct to run an effective and efficient stockholders’ meeting. These items may also need annual updating to keep up with the constant changes.

The Proxy Statement and Annual Meeting Toolkit provides a number of continuously maintained resources to help in-house counsel prepare for and conduct the annual stockholders' meeting.

 

Practice Notes

 

Standard Documents and Clauses

 

Checklists

 
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