How does shareholder voting work?

The record date decides who gets to vote

A public company sets a "record date" ahead of its annual or special meeting, and only investors who owned shares on that date have the right to vote, regardless of whether they still hold the stock by meeting day. After the record date passes, the company sends one of three things: a notice that proxy materials are available online, a full package with a proxy card or voting instruction form plus the annual report and proxy statement, or a package with an annual report and information statement but no card at all. How do I know when to vote? explains which of these an investor should expect and why the record date, not the meeting date, is what matters for eligibility.

Registered owners versus beneficial owners

How a vote gets cast depends heavily on how the shares are titled. A registered owner, or record holder, owns shares directly with the company and receives an actual proxy to vote. A beneficial owner holds shares indirectly through a bank or brokerage firm, often in "street name," which is how most U.S. investors hold stock; they receive a voting instruction form and direct their broker how to vote, and the broker or custodian then casts the actual proxy with the company. Investor.gov explains the registered-versus-beneficial distinction and how that difference plays out when voting on corporate matters. It matters practically because a beneficial owner who wants to vote in person, or who misses the broker's instruction deadline, faces extra steps a registered owner does not.

The mechanics: in person, by mail, phone, or online

Companies typically offer several ways to cast a vote. A shareholder can attend the annual meeting in person, following the attendance and voting requirements, date, time, and location spelled out in the meeting materials. They can vote by mail, filling out a paper proxy card if they are a registered owner or a voting instruction form if they are a beneficial owner. Many companies also allow voting by phone using a number and control number printed in the materials, or online through a designated website with that same control number. Investor.gov details these four voting channels and what each requires.

What shareholders vote on

The proxy statement a company files lays out everything up for a vote, most commonly the election of directors, ratification of the outside auditor, and any shareholder or management proposals on the agenda. Since Dodd-Frank Act reforms took effect, most public companies must also hold a separate, non-binding "say-on-pay" advisory vote on executive compensation, along with a periodic vote on how often that say-on-pay vote should recur; companies soliciting votes on a merger must separately disclose golden-parachute compensation and, in some cases, put it to its own advisory vote. Details of that mandate are in the SEC's rule on shareholder approval of executive compensation and golden-parachute compensation.

Shareholders can put their own proposals on the ballot

Beyond voting on management's agenda, an eligible shareholder can force the company to include the shareholder's own proposal in the proxy statement under Exchange Act Rule 14a-8. To qualify, a shareholder must meet one of three ownership thresholds: at least $2,000 in company stock held continuously for three years, at least $15,000 held for two years, or at least $25,000 held for one year, and each co-filer on a joint proposal must independently meet one of those thresholds. A shareholder is limited to one proposal per meeting, and a proposal that was already voted on and failed to gain sufficient support faces rising resubmission thresholds of 5%, 15%, or 25% depending on how many times it has been submitted before. These rules, adopted in 2020, are summarized in the SEC's small entity compliance guide on Rule 14a-8's procedural requirements and resubmission thresholds. A company that wants to leave a proposal out of its proxy materials must notify the shareholder and, in most cases, explain its reasoning to the SEC.

Contested director elections use a universal proxy card

When an activist investor or other outside party nominates its own slate of directors against management's slate, the SEC's universal proxy rules require both sides to use a single card listing every nominee from every side, rather than each side circulating a card with only its own nominees. Under Rule 14a-19, the dissident group generally must notify the company of its nominees at least 60 days before the anniversary of the prior year's annual meeting, file a definitive proxy statement, and solicit at least 67 percent of the voting power entitled to vote, while the company must notify the dissident of its own nominees at least 50 days ahead of that anniversary. This lets a shareholder mix and match candidates from competing slates on one ballot rather than being forced to choose one full slate over the other, a change that took effect for meetings held after August 31, 2022.

Where the votes actually go, and how to find out how they were cast

Once ballots and instructions come in, brokers and custodians aggregate beneficial owners' instructions and submit the combined vote to the company or its tabulator, while registered owners' proxies go straight to the company. Mutual funds and other registered investment companies that vote proxies on behalf of fund shareholders must disclose how they voted through Form N-PX, which is searchable through the SEC's mutual fund proxy voting record search. That gives investors in a fund a way to see how the fund voted their shares on specific director elections or proposals, since the fund itself is a registered owner voting on the underlying shareholder's behalf.

Anyone with shares in a company that has an upcoming meeting should check the proxy materials they receive for the record date, the specific voting deadlines, and the control number needed to vote by phone or online, and can start with the SEC's shareholder voting resources at Investor.gov for the ownership and mechanics questions that come up most often.