What is proxy season?

Proxy season is the nickname given to a period (usually in springtime) when a company engages directly with all shareholders. 

Giving an opportunity like this is a core principle of corporate governance. A board is, after all, responsible to the shareholders; it’s only fair that there is a regular change for communication and analysis.

It’s when most businesses hold their annual shareholder meetings. It usually takes place around April, but some companies could have theirs later, even into June.

Because during meetings, many shareholders can “vote by proxy”. In other words, they cast their votes without being present at the meeting. 

This is very common among shareholders. Meetings are often scheduled for workdays. Many shareholders live far away. Proxy voting is the natural solution. 

Additionally, the document sent to each shareholder before the meeting is the “proxy statement”. This is required by law and includes all relevant information, such as items up for a discussion and vote and biographies of (potential) board members. 

It’s the main opportunity for shareholders to voice their ideas and concerns. One of the cornerstone principles of corporate governance is that the company should regularly stay in touch with what the shareholders want. Proxy season is the arena in which this occurs. 

Managed correctly, the proxy season will allow for base-level accountability that keeps a company ticking over from one year to the next.

Common items include:

• The company’s performance
• Financial results
• Strategic direction
• Stock options
• Executive compensation
• The election of new board members or re-election of current ones. Sometimes, it’s a mix of both. 

You’ll notice that much of the above, from strategy to elections, directly concerns the company’s board of directors. For that reason, every board member must pay close attention to what happens during proxy season.

Not usually, but there is always potential. 

Most annual shareholder meetings pass without much incident. Issues such as the makeup of the board and company strategy are frequently given a simple stamp of approval for  “business as usual”, with perhaps minor amendments and no surprises. If this is true for your company, many shareholders might not attend or use their proxy voting power.

You should never forget that the shareholders’ meeting and proxy season are typical stages for activist or angry shareholders to voice their opinions, perhaps causing a major shift in company direction. 

If something like this is on the horizon, you’ll usually know about it beforehand. The mood will be difficult to overlook, and there will likely be public criticism in the media or other channels.

Proxy season is a cornerstone of corporate governance. 

It allows shareholders to influence the company’s direction and ensure their interests are reflected in strategy.

Governance professionals should recognise the significance of proxy season in shaping corporate governance and be prepared to actively engage in the voting process when necessary.