Routine Vs Non-routine Proxy Proposals

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In the governance of any organization there must be a means to address issues, make changes, and set needed regulations. Public companies in the United States make major decisions about business and future strategies via proposals made at annual shareholder meetings. These proposals are akin to bills in the legislature of the United States government. Proxy proposals are created by the company’s management or owners, and like bills they are debated, and voted on at a set date. Of course, like US bills, not all proposals are alike. First, proposals within public companies can be put forward by:

  • Company management including company officers and board of directors, who can make Management Proposals.
  • Shareholders, who can make Shareholders Proposals.

In accordance with United States Securities and Exchange Commission regulations (rule 14a-8) shareholder proposals can be made by an owner or owners of at a minimum of $2000 worth of market value company stock, or 1% of the business outstanding stock, and must have owned this stock for over a minimum of one year. The shareholder or shareholders must also keep ownership of the stock through the proposal process.

Both shareholder and management proposals can be of two types:

  • Routine Proposals, which deal with matters that will not affect the privileges and rights associated with ownership of stock in the business. Examples of this type are proposals for the ratification of auditors.
  • Non-routine Proposals, effect the issuing of new stock, election of directors, a merger with another company, or any other proposal stockholders could have concerns with, and would affect their ownership.

In the United States, under the New York Stock Exchange Rules, a broker can vote on behalf of a shareholder. This will be done if you have not given your broker instructions about voting ten days before the shareholders meeting is scheduled, and you are considered a beneficial owner with your stocks held in Street Name. However, the broker can only vote on routine proposals, and is also not allowed to vote on non-routine or contested-proposals where the shareholders disagree with management.

At Colonial Stock, we can help you vote on routine or non-routine proxy proposals for your stocks. Just check proxy voting instructions on our website, or contact us to learn more.