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A public company and its shareholders<br />
7.1 Proxy statement and annual meeting<br />
Morrow & Co., LLC<br />
(a) Annual meeting requirements<br />
Every public company in the United States<br />
is required to have an annual meeting, at<br />
which shareholders can cast their vote,<br />
either in person at the meeting or by proxy<br />
beforehand. At a minimum, shareholders<br />
are given the opportunity to vote on the<br />
election of directors of the corporation<br />
and are also given the opportunity to<br />
provide their advisory vote on executive<br />
compensation for the previous year<br />
(commonly referred to as “Say on Pay”).<br />
Most annual meetings are fairly<br />
formal affairs, well scripted and planned<br />
in advance. Generally, the venue for the<br />
meeting is chosen by the company and is<br />
usually suited to the number of holders<br />
expected to attend the meeting. Some<br />
companies hold the meeting at the same<br />
place every year, and others choose to<br />
rotate the meeting site to accommodate<br />
shareholders; the choice is up to<br />
management and the board of directors.<br />
There has been some movement toward<br />
holding “virtual” annual meetings, with<br />
no physical site for holders to attend;<br />
instead, it all takes place on the Internet.<br />
Most companies have chosen not to take<br />
this option; they use the once-a-year<br />
opportunity to meet shareholders in<br />
person, and many shareholders seem to<br />
prefer it that way.<br />
(b) Timeline<br />
The timing of the annual meeting is<br />
generally determined by the company’s<br />
fiscal year-end, and meetings are typically<br />
held at the same time each year. A number<br />
of important events in the preparation for,<br />
and lead-up to, the annual meeting require<br />
compliance with state laws, government<br />
regulations and other regulatory agency<br />
policies, as well as stock exchange listing<br />
requirements, if applicable.<br />
(c) Preparation<br />
Determine agenda and dates: Management<br />
and the board of directors, working<br />
together, will determine any other<br />
items to be presented to shareholders in<br />
addition to the usual items and determine<br />
the timing for the annual meeting. The<br />
board will set the record date (the date<br />
of stock ownership that determines<br />
eligibility to vote) and the meeting date,<br />
and management will communicate this<br />
information to all appropriate parties.<br />
The length of time between the record<br />
date and meeting date is set by state law<br />
(in Delaware, for example, the record date<br />
can be no more than 60 days prior to the<br />
meeting and no less than 10 days prior to<br />
the meeting).<br />
Communication: To ensure that the<br />
process runs smoothly, all parties involved<br />
need to work closely together to achieve<br />
the common goal. Parties involved include<br />
the issuer, the company’s transfer agent,<br />
the proxy solicitor (if one is used) and<br />
outside counsel.<br />
Notification of record date and meeting<br />
date (broker search): SEC rules require that<br />
all street name holders (brokers, banks and<br />
other custodians) be given advance notice<br />
of the record date and meeting date, and<br />
this notice must be given a minimum of 20<br />
business days prior to the record date. The<br />
notice sets forth the name of the company,<br />
the Cusip number of the security(ies)<br />
entitled to vote, the record date and the<br />
annual meeting date; it is sent to brokers,<br />
banks and their agents, as applicable, and<br />
affords them the opportunity to respond<br />
with the number of sets of material they<br />
will need to forward to their beneficial<br />
holders to allow them to vote at the<br />
meeting. This also gives the issuer the<br />
opportunity to determine the total number<br />
of copies of material that will be needed to<br />
be printed. If the company retains a proxy<br />
solicitor, the solicitor will take care of the<br />
broker search. In the absence of a proxy<br />
solicitor, the transfer agent will generally<br />
handle the search notice.<br />
Analyze the need for a proxy solicitor:<br />
Recent changes to NYSE regulations<br />
(which govern member firms, such as<br />
brokers, and not just listed companies)<br />
have changed the voting landscape for<br />
public companies. The most important<br />
change involves the election of directors;<br />
previously, member firms (brokerage<br />
firms) were permitted to vote on the<br />
election of directors in the absence of<br />
instructions from the underlying owners<br />
of the shares. However, since January 1,<br />
2010, brokers are no longer permitted<br />
to vote on the election of directors<br />
without specific instructions from<br />
their clients. Usually, member firms are<br />
permitted to vote on the ratification of<br />
auditors without specific shareholder<br />
instructions. A professional proxy<br />
solicitation firm not only can help with<br />
timing and mechanical requirements<br />
for the meeting but can also provide<br />
advice on the presentation of items to<br />
shareholders for optimal readability<br />
and the likelihood of achieving the<br />
requisite vote for the proposal to pass.<br />
The recent addition of the requirement<br />
to include a shareholder vote on<br />
executive compensation (Say on Pay)<br />
has added another level of complexity to<br />
annual meetings. Other issues, such as<br />
increasing support for certain shareholder<br />
proposals, the increasing influence of<br />
institutional and activist investors, and<br />
the views of proxy advisory firms have<br />
made planning for the annual meeting a<br />
more complex and longer process than<br />
it has been in the past. Companies with<br />
nonroutine ballot items (such as equity<br />
plans or shareholder proposals), and<br />
even those with “ordinary” agenda items,<br />
should consider retaining a professional<br />
proxy solicitation firm to help navigate<br />
the proxy process.<br />
7.2 Providing shareholders with proxy<br />
material<br />
Morrow & Co., LLC<br />
(a) Material preparation<br />
Materials to be provided to holders: In<br />
order to solicit votes from shareholders for<br />
the annual meeting, the issuer is required<br />
to provide holders with a proxy statement<br />
and form of proxy that allows holders<br />
to vote. In addition, the annual meeting<br />
materials must either be accompanied<br />
by, or preceded by, an annual report.<br />
These documents must be filed with the<br />
SEC concurrently with the mailing. In<br />
some cases (which can be discussed with<br />
counsel), the proxy may need to be filed<br />
in preliminary form, depending on the<br />
proposals to be presented to shareholders.<br />
The proxy statement, in addition to<br />
meeting applicable legal requirements, is<br />
also an advocacy piece for management’s<br />
position. Clarity of presentation and ease<br />
of reading are key to ensuring that holders<br />
take the time to read the material that is<br />
being sent to them.<br />
74 NYSE IPO Guide