What is a DEF 14A proxy statement?

Most shareholders do not attend annual meetings in person. They vote by proxy, which means they authorize someone else to cast their votes as instructed. Because that authorization is a decision, the SEC’s proxy rules (Regulation 14A) require the company to give shareholders the information they need in a proxy statement. The definitive version is filed on EDGAR as form type DEF 14A.

What is in a proxy statement?

The content follows Schedule 14A and depends on what is being voted on. A typical annual meeting proxy for a large company contains:

• The meeting logistics: date, record date, how to vote and how votes are counted.
• Director elections: each nominee’s background, skills, independence and committee assignments, plus the board’s leadership structure.
• Executive compensation: the Compensation Discussion and Analysis (CD&A), the summary compensation table and supporting tables, the pay-versus-performance disclosure and the chief executive pay ratio.
• Say-on-pay: an advisory vote on executive compensation, which companies must hold at least once every three years.
• Auditor ratification: the audit committee’s choice of independent auditor and the fees paid to it.
• Shareholder proposals submitted under Rule 14a-8, with the board’s recommendation.
• Security ownership of directors, officers and holders of more than 5%.

Many companies also use the proxy to satisfy Part III of their Form 10-K. General Instruction G(3) of Form 10-K allows Items 10 to 14 to be incorporated by reference from a proxy statement filed within 120 days after fiscal year end.

PRE 14A, DEF 14A and DEFA14A

A preliminary proxy statement (PRE 14A) must be filed at least 10 calendar days before the definitive version when the meeting includes matters other than routine ones such as director elections, say-on-pay and auditor ratification. Examples include charter amendments or a merger vote. The definitive proxy (DEF 14A) is the version sent to shareholders. Any further soliciting material, such as a letter or presentation to shareholders, is filed as DEFA14A.

What changed with universal proxy?

In a proxy contest, an activist nominates its own director candidates. Since the SEC’s universal proxy rules (Release 34-93596) took effect for meetings after August 31, 2022, both sides must use a universal proxy card listing all duly nominated candidates, so shareholders voting by proxy can mix and match nominees as they could in person. Dissidents must also meet notice and solicitation requirements under Rule 14a-19.

How to read a proxy efficiently

Start with the summary at the front, which most large companies now include. Then read the CD&A to see which metrics drove bonuses and long-term awards, and compare those metrics with the results in the 10-K. Check the director nominee table for tenure, independence and other board seats. For shareholder proposals, read both the proposal and the board’s statement in opposition.

After the meeting, the company files a Form 8-K under Item 5.07 with the vote counts. A low say-on-pay result, or significant support for a shareholder proposal, is often discussed in the following year’s proxy.