By CHRISTINA REXRODE, Associated Press
For a host of public companies, springtime is when shareholders start speaking of "say on pay," CEOs are forced to face angry investors and so-called corporate gadflies make their rounds.
It's called proxy season, and everyday investors probably don't give it a second thought.
But the decisions that are made then affect millions of Americans. Even if you don't follow the daily ups and downs of General Electric or Disney, there's a good chance you own a piece through your 401(k) or pension.
Here's a primer on corporate proxies and annual meetings, and what they mean to you.
Q: What is an annual meeting?
A: Public companies are owned by the people who buy their stock. If you have, say, 100 shares of Wells Fargo bank, then you are the proud owner of about 0.0000005 percent of the company.
Corporate executives are required to face shareholders — technically their bosses — once a year. These annual meetings typically take place in spring, often at company headquarters. Any shareholder is allowed to question top executives.
Q: Who goes to these events?
A: Public pension funds, religious organizations, consumer activist groups and other institutional shareholders usually attend. Most individual shareholders can't go to a meeting in the middle of a workday in what might be a faraway city.
Among the individual shareholders, though, perhaps no one matches the chutzpah of Evelyn Y. Davis.
Davis has made a career of traveling to annual meetings, both hectoring and flirting with CEOs. She once told Bank of America CEO Brian Moynihan that he reminded her of her first ex-husband. (She has four.)
This year, she is scheduled to present proposals to Goldman Sachs, Bank of America and JPMorgan Chase, among others.
Q: What is a proxy statement?
A: It's usually a thin, unadorned booklet that companies mail to their shareholders before the annual meeting. The proxy can cause a stir because it's where companies disclose how much they are paying top executives. It also tells shareholders where and when the annual meeting will be and what proposals they'll be asked to vote on.
It's called a proxy because shareholders don't have to attend the meeting to vote. They can usually ask their broker, investment manager or some other representative to vote for them.
Shareholders or their representatives can wait until the meeting to vote, or they can usually vote online, by phone or by mail.
Q: What do shareholders vote on?
A: Both companies and shareholders can put proposals on the ballot. Companies will ask shareholders to vote in favor of all the people the company wants on the board of directors. Companies might also ask for votes on housekeeping items, like permission to keep using the same accounting company.
The shareholder proposals are where things get interesting.
A shareholder proposal can focus on a social issue, like requiring a company to recycle more of its materials or to stop animal testing. A shareholder proposal might also focus on corporate governance, the standards that determine how the company is run.
For example, if a company has the same person as CEO and board chairman, a shareholder might propose that the company split those jobs. The board is supposed to make sure the CEO is doing his or her job, and shareholder activists sometimes argue that it's difficult if the board is run by the CEO.
The Securities and Exchange Commission requires that a shareholder who wants to get a proposal in the proxy own either 1 percent or $2,000 worth of the stock.
Q: Who are the people on the board?
A: Board members keep tabs on the company as a part-time job. The majority of them must be independent, which means they can't work at the company or do substantial business with it.
If the CEO wants to make a major decision, like buying another company, he or she is supposed to consult the board. If the CEO is doing a lousy job, the board is supposed to fire him or her and find a replacement.
Board members are supposed to serve as shareholder representatives and encourage the company to do what's best for shareholders, sort of like Congress is supposed to be the people's representatives in the government.