Proxy Statement

A proxy statement is a letter sent to shareholders of a corporation, by the board of directors or an activist shareholder, in anticipation of a voting contest at the annual meeting. Because shareholders tend to be spread over the entire nation, it is infeasible for them all to vote in person, and therefore, management and other interested parties "campaign" and secure "proxy votes" by solicitations such as a proxy statement.

The cost of producing a proxy statement, ensuring its compliance with the SEC, and mailing it to all shareholders as required, is astronomical. As a result, typically only the company's management, or an activist institutional shareholder, will be able to make a proxy statement, often ensuring that board election is uncontested. As an attempt to remedy this undemocratic element created by the amazing cost of the endeavor, the SEC has required corporate boards to, at their own cost, place shareholder proposals which meet certain indicia on management's own proxy statement.