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Proxy Statement and Annual Meeting Toolkit
Practical Law Toolkit 4-500-3812 (Approx. 10 pages)
Proxy Statement and Annual Meeting Toolkit
by Practical Law Corporate & Securities
| Maintained • USA (National/Federal) |
Resources to prepare a proxy statement and conduct an annual meeting of stockholders.
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, including the following:
- Clarification of voting standards. In November 2021, the SEC adopted amendments to the federal proxy rules to amend the form of proxy and proxy statement disclosure requirements to specify the applicable voting options and voting standards in all director elections and require the use of universal proxy cards in non-exempt solicitations in connection with contested elections of directors. For more information, see Legal Update, SEC Adopts Rules to Require Universal Proxy Cards in Contested Director Elections.
- Adopting pay versus performance disclosure. In August 2022, the SEC adopted rules implementing the Dodd-Frank pay versus performance disclosure requirements. Companies began providing pay versus performance disclosure for the 2023 proxy season. For more information, see Practice Note, The Pay Versus Performance Rule: Preparing for Compliance and Article, What's Market: Pay Versus Performance Disclosure.
- Increasing transparency around stock option awards granted to executives in close proximity to the release of material nonpublic information. In December 2022, the SEC adopted rules requiring narrative disclosure about the company's option grant policies and practices regarding the timing of option grants and the release of material nonpublic information and tabular disclosure of option awards granted within the four business days before and one day after filing Exchange Act reports. This disclosure is not required for the 2023 proxy season. For more information, including compliance dates, see Legal Update, SEC Adopts Amendments to Rule 10b5-1 and Related Disclosure Requirements.
Other changes affecting proxy season include:
- Annual revisions and updates adopted by proxy advisory firms. For example, in November/December of each year, Institutional Shareholder Services, a prominent proxy advisor, updates its proxy voting guidelines, the ISS Governance QualityScore platform, Equity Plan Scorecard and its pay for performance methodology.
- SEC Staff Legal Bulletins, no-action letters and other announcements offering additional guidance on the SEC no-action request process generally and the stockholder proposal process, including the scope and application of the ordinary business operations exemption (Rule 14a-8(i)(7)), the exemption for direct conflict with a company proposal (Rule 14a-8(i)(9)), and the "substantial implementation" exemption (Rule 14a-8(i)(10)).
As a result of these constant changes, the proxy statement has evolved into a marketing document in which companies must "sell" their corporate governance practices, sustainability and social efforts 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.