Stock Analysis

Proxy Statement – A key document that reveal dark secrets of company

If an investor wants to study the firm’s financial position then he/she should consider either or all of three financial  statements but there is one more statement which is not a part of financial statements but plays an important role to study minute details which are not covering by financial statements such statements are known as the Proxy statement.
The proxy statement is also popular by its name Form DEF 14 A.
The proxy statement provides the companies with deep details that are not covered in the financial statements. Some of these details include executive pay and the composition of the board of directors.

The proxy statement is a key document which can use by shareholders before the shareholder meeting to find the aspects of a company which includes its strategic plan and financial goals.

The proxy statement provides information about all the matters that are related to voting right; it also covers the issues which are not a part of financial statements. An investor is well informed by the mode of the proxy statement about the details and sensitive topics that normally aren’t discussed in any financial statements.
The proxy statement provides valuable information about various areas that require special attention to determine the strength of a firm. These are:- 
  • Management’s experience: The proxy statement covers the detailed biographies and experience of the management team. The experienced and qualified management is very important for any firm to take a firm position at new height.It will cover name, current title, age, business experience.etc
  • Board of director compositionIt is important to know about the board of directors as this body is responsible to watch over the management team and take decisions to change the people or overall strategy when needed. Please refer below-mentioned director details taken from the proxy statement of a well-renowned company is the subject to the study purpose.

Name- ABC, Ph.D. Age: 73 Director Since: 2000 Committees: Audit and Technology Risk (Chair) Independent: Yes Experience, PhD is Professor Emeritus at the Marshall School of Business and the founding director of the Center for Technology Commercialization at the University of Southern California (1991-present). He was the co-founder and chairwoman of Gentech Corporation (1994-2004) and in 2006 co-founded and became the Chief Executive Officer and served on the board of directors of N2TEC Institute, a nonprofit company focused on technology commercialization in rural America, until it completed its mission in 2013. He has co-founded four private companies, is currently a principal and on the board of directors of a real estate investment and development company, and serves on the board of advisors for two life science companies. He is a Visiting Scholar at the Department of Homeland Security where she advises on issues related to technology deployment, including cybersecurity. He is the author of 15 books in the field of entrepreneurship and technology commercialization, He has helped our Board of Directors identify and assess the risks associated with new endeavours. Dr. ABC brings to the Board of Directors achievement in strategic business planning, which is a key part of our growth strategy.

  • CompensationIt is important to know the CEO earning from the salary income of the company. It is an obvious rule of corporate the compensations to CEO increased if the company performance is improving year by year but if the CEO salary is rising and company underperform then it is a big mismatch and gives the prior alert signal to an investor. Please refer a below mentioned corporate governance highlights taken from the proxy statement of a well-renowned company is a subject to study purpose

ü  70% of the compensation awarded under this program was based on objective criteria and 30% was based on subjective evaluation of individual performance.
ü   Our 2016 Long-Term Incentive Program (LTIP) consisted of equity compensation based on the achievement of our long- term performance goals over a three-year performance period. 70% of the compensation awarded under this program was based on our TSR performance relative to select industry indices and 30% was based on achieving objective operating metrics.  
  •   Conflicts of interest: A conflict of interest occurs when a senior executive or any of the board member’s is not able to act on the probable threat. 
  •   Ownership details: On the basis of shares distribution, sometimes an executive, director or any board member is big owners of the company’s stock. 
  •   Corporate Governance Highlights :  The company highlights the corporate governance practises. In addition to this enhancement, the company continue to uphold the following features of  corporate governance practices to maintain the company’s reputation for integrity and serving its stockholders responsibly. Please refer a below mentioned corporate governance highlights taken from the proxy statement of a well-renowned company is a subject to study purposeAll directors are subject to an annual election with a majority voting standard.
ü  Our Board of Directors is structured with a separate independent Chairman and Chief Executive Officer (CEO).
ü  All directors with the exception of our CEO are independent, and all members of our Audit, Compensation, Nominating/Corporate Governance, and Technology Risk committees are independent.
ü  Our directors conduct annual self-evaluations and participate in orientation and continuing education programs in accordance with our Corporate Governance Guidelines.
ü  Our Board of Directors conducts an annual Enterprise Risk Management process to identify and assess management’s visibility into company risk.
ü  Our directors, officers, and other employees are subject to a Code of Business Ethics to ensure our business is conducted in accordance with the highest standards of moral and ethical behaviour.
ü  Our Board of Directors has adopted a “whistleblower” policy to provide a line of communication to directors for anonymously reporting concerns.
·         The general thinking of other investorsBeing shareholders of a company, they are free to bring matters to a vote at the meeting. Sometimes, the company consider the proposal of shareholder proposals and input into the proxy. 
The proxy statement is the best way to look over the corporate governance which describes the safeguards a company has in place to make sure that the management of the company is acting in the best interest for the shareholders.
A good company always encourage their stakeholders to review the information contained in the proxy statement. It is meant to provide an overview of the company’s achievements during the year, including further improvements to the company’s compensation program and enhancements to a firm’s corporate governance practices.
At the end, the company mentioned the frequently asked questions which cover most of the queries of stakeholders such as what is the source of Proxy statement, what is annual meeting etc. Who is entitled to vote at the Annual Meeting?

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