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Ownership

Investor Jargon: Shareholder Meetings & Proxy Voting

A lot of investing-related language can be straight-up confusing. This can make ownership seem scary and much more complex than it actually is. We’d rather ownership be approachable, so we’re breaking down some of the common terms you might see or hear.

Do you own at least one full share of common stock in a company? If so, you may be able to vote in shareholder meetings. It’s not just a benefit—it’s a right.

What's a shareholder meeting?

Shareholder meetings are (usually annual) gatherings of a publicly traded company’s shareholders, where they get to vote on certain business decisions. They’re a regulatory requirement—and also an opportunity for shareholders to have their voices heard. You’ll typically hear about the upcoming meeting from the company—either electronically or via mail. Notices usually include info about when and where the meeting will be held, as well as an annual report and what will be up for vote.

It’s possible—and frankly, probable—that many folks may not live close enough to the shareholder meeting venue to justify the trip. In fact, most voting is done remotely with what’s called proxy voting.

What's proxy voting?

If you can’t make the in-person shareholder meeting, voting by proxy is a way to stay home and still get your votes counted. When companies let you know about upcoming meetings, they’ll also let you know how to return a ballot—whether it be online, by mail, or over the phone. When you return your ballot, a designated company representative (that’s the proxy part) will cast your vote as you’ve requested, and there you have it—your votes get counted.

How does voting work?

Shareholder meetings can include any number of issues to vote on. You might think that shareholders are allotted one vote per share of stock they own, per issue to be voted on. So if you only have the one full share, you get one vote per issue. If you have 100 shares, you get 100 votes per issue. Easy, right? Well, it gets a little more complicated when it comes to electing candidates to the board of directors.

In board elections, there can be two different types of voting: statutory or cumulative. The company will lay out which one it uses in the their stockholder agreement.

To break down statutory voting, it helps to remember the rules of voting on other types of issues: you have one vote per share of company stock that you own for each issue. Statutory voting is similar. If you have 500 shares in Totally Made Up Company and there are three open positions, you can use 500 votes for your ideal candidate in each individual election.

If your stockholder agreement calls for cumulative voting, on the other hand, you actually get to add up your total number of votes for each issue and use them how you want across elections. Using the same example, that would that instead of 500 votes for three elections, you’d get to sum that up to 1500 votes to use however you’d like. So you could use 1000 votes in one election, 500 in an another, and none in the third, if you so desired. Cumulative voting is cool because it can give folks with fewer shares a bigger impact when it comes to deciding the board.

Why does shareholder voting matter?

As a shareholder, you’re an owner—and as such, you’re opinion matters. It matters so much that shareholder voting is a right. We’ve said this before in another blog post, but we’ll repeat it here anyway. As an owner, there are two big ways you can express your opinion: you can vote, or you can sell your shares. When you vote, you’re making your voice heard—and potentially even making a big impact on the company you own part of.

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