Proxy Statement reveals the dark secrets of a company

What is a Proxy Statement?

A proxy statement is a document that contains details about a company and assists investors in making informed decisions.

It is simple to access a company’s financial health by consulting its annual report, especially the three parts. These are:-

  1. Balance Sheet
  2. Profit and Loss/ Income Statement
  3. Cash flow statement

Yet, if the investor’s main concern is to learn more about the firm, the proxy statement is the method to use.

It aids in the discovery of a company’s dark secrets, which are sometimes missing from an annual report.

The proxy statement’s second name, “Form DEF 14 A,” is well known.

 
 

What is the scope of the proxy statement?

The main purpose of the proxy report for the investor is to verify the details such as

  • Pay for executives
  • The company’s board of directors
  • A company’s financial objectives.
  • A company’s voting rights

It also points out a company’s sensitive issues and in-depth details by clearly defining its strengths and weaknesses.

The proxy statement is mainly used by investors to check the three important parts. These are as follows:

  1. Management’s background and experience
  2. Senior management compensation
  3. A company’s corporate governance

Let us go over it in more detail:

1. Management’s experience:

Notably, management decisions play a main role in developing strategic plans for the company’s growth, which leads to the company reaching new heights.

But, this is only possible if the management team is qualified to drive the company’s growth in the right direction.

A proxy statement can help an investor check details about senior management such as name, current title, age, and business experience.

For eg:

Name– ABC is an abbreviation for “name”

Education – PhD from the M. school of business

Age – 73

Roles and responsibilities – He has assisted the board of directors in identifying and fixing the risks associated with new ventures.

In addition, he brings the Board of Directors’ success in strategic business planning, which is a critical component of the growth strategy.

Experience – He has served as a director on an Audit and Technology Risk Committee since 2000.

Previously, from 1991 to 1994, he worked as a professor at the College of South California’s Center for Techno.

He was also the co-founder and chairman of Gentech Corp. from 1994 to 1996.

He was the CEO of N2 tech in 1996. N2 Tech is a non-profit organization dedicated to the advancement of technology in rural America. He was there until the year 2000.

Aside from that, he is a scholar at the Department of Home Security, where he advises on cybersecurity issues.

Passions – His passion is to write books, and he has published nearly 15 books on business and technological progress.

2. Compensation

It is critical to distinguish the CEO’s earnings from the company’s salary profits, especially when the CEO is receiving a raise despite the company’s continued loss.

The compensation section of the proxy report looks like this.

70% of senior management compensation is based on objective criteria, while 30% is based on a subjective evaluation of one’s results.
The FY 2020 long-term incentive program (LTIP) includes equity incentives focused on good results over a three-year performance period.

3. Corporate governance

The proxy report also covers the company’s corporate governance activities, which are governed by established policies and laws.

Corporate governance is essential for the company’s reputation, honesty, and stockholder service.

It is described as follows in the proxy statement:-

  • An independent chairman and CEO serve on the board of directors.
  • The Audit, Compensation, Nominating, and Technology Risk committees all have independent members.
  • Directors take part in employee orientation activities to inform them of the Corporate Governance Guidelines.
  • They also have a risk control plan in place to avoid business risk.

Aside from the above, the proxy report also includes the following two important parts. There are the following:-

1. Conflict of interest:

When a senior executive or a board member is unable to act on a potential threat, there is a conflict of interest..

2. Ownership details

The distribution of shares is critical in transferring ownership to shareholders.

Any executive, director, or board member who owns a significant part of the company’s stock has a greater stake in the company.

How to find the Amazon Proxy Statement?

The pdf document attached is an Amazon proxy statement for the fiscal year 2020.

2020-Amazon-Proxy-Statement-compressed

A proxy report on Amazon will include different information that can assist an investor in making the best decision possible before investing in Amazon.

If an investor wishes to review Amazon’s proxy statement from the previous year, they can do so by clicking on the link below, which will take them to a page where they can download the previous year’s statements.

https://ir.aboutamazon.com/annual-reports-proxies-and-shareholder-letters/default.aspx

Conclusion

A good business would encourage its stakeholders to read the proxy statement since it summarizes:-

  • The current fiscal year’s results of the company
  • Compensation policy changes at the business
  • Corporate governance standards are being revised.

The proxy statement is the most effective way to examine a company’s corporate governance and protection.

Another segment at the end of the proxy statement that addresses general stakeholder questions is the commonly asked questions section.

  • What is the proxy statement’s origin?
  • What is the aim of the annual meeting?
  • At the annual meeting, who is qualified to vote?

Shareholders are free to submit issues to the meeting for a vote. The company will take a shareholder’s proposal into account and include it in the proxy.

The proxy statement is an essential document that shareholders can review prior to the annual meeting of stockholders.

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