What is a ballot?
A ballot is a document used by a shareholder to exercise their voting rights. Generally, shareholders submit such a ballot (electronically or by mail) before their company’s annual general meeting (AGM) or by proxy.
Shareholders can also use the ballot to vote on important issues that come up at other times during the year, such as accepting an offer from an outside party who wants to buy the company.
- The ballot is the official document that shareholders use to vote on corporate actions, board members, and other measures.
- Traditionally, ballots were physical documents; today electronic ballots are also used.
- Ballots are sent primarily before or during the company’s annual meeting. However, ballots will also be distributed if special decisions need to be made during the year.
- Examples of votes that can appear on a ballot include routine matters, as well as important decisions, such as changing the management team or approving the sale of the business.
How the ballots work
Although electronic ballots have become more common in recent years, shareholders are also free to present their ballots in person at the annual meeting. These meetings are required by law and are open to the attendance of all shareholders.
Not all shareholders will receive a ballot. For some, such as those who own shares through mutual funds, exchange-traded funds (ETFs), or other joint investment vehicles, the fund manager may submit ballots on behalf of its shareholders. In these situations, the investment manager will almost always vote in favor of the recommendations made by the company’s management.
Every shareholder has the right to vote on matters related to the company he owns. At least once a year, public companies must prepare a proxy statement called SEC Form DEF 14A. This statement specifies which items will be put to a vote by the shareholders.
A proxy vote is a ballot cast by a person or company for the shareholder of a company who cannot attend a meeting or does not want to vote on an issue.
Some of the items included in the ballot are routine in nature, such as the approval of the company’s audit fees for that year. Other matters also appear, such as the re-election of existing members of the Board of Directors or the request for changes in the Board. Sometimes these votes can get quite contentious, as management or shareholder groups advocate that shareholders vote in a particular way.
Real example of electoral ballots
One area where shareholders have expressed disagreement with management in recent years is when it comes to executive compensation. This ballot item is a non-binding “say over payment” vote that shareholders sometimes use to express dissatisfaction with the amounts paid to Named Executive Officers (NEOs) in cash, principal and other non-compensation. monetary.
Although shareholders generally vote in favor of management’s recommendations, some notable exceptions do occur. For example, in 2015, a staggering 85% of Nuance Communications (NUAN) shareholders voted against management’s proposed compensation package for the company’s CEO.
Technically, shareholder power is paramount in any corporation. Collectively, they can hire or fire the CEO, decide on board and executive compensation, and even ask for the sale or liquidation of the company. In practice, however, the shareholders are mostly passive, delegating decision-making to the management team and the Board of Directors.