Proxies are essentially the corporate law equivalent of absentee balloting. Essentially, it is the delegation to another member of a voting body of that member's power to vote in his absence and/or for the selection of additional representatives. Proxies allow shareholders to vote on certain matters prior to a meeting or assign the voting right to another person who will be present at the meeting. The person who designates someone else as the voter is called a "principal" and the person designated to vote is the "proxy." Right to vote
Proxy voting is sometimes utilized in closely held small, and quasi-public corporations. In publicly held corporations, proxy voting is used extensively (indeed, in nearly every corporation and on at least an annual basis). Frequently, in a large coropration, only a few shareholders attend the annual meetings or special meetigns that may be called at times other than the annual meeting.
Prior to the meeting, the incumbent management of the corporation solicits proxies from shareholders. Those proxies authorize two or three of the incumbent managers to vote the shareholder's shares at the annual meeting, principally for election of the slate of directors nominated by incumbent management but also for other items listed on the proxy card (appointment of auditors and approval of stock option plans for management are two frequent items) and on "such other business as may properly combe fore the meeting or any adjournment thereof.
Shareholders send in a card (called a proxy card) on which they mark their vote. The card authorizes a proxy agent to vote the shareholder's stock as directed on the card. The proxy card may specify how shares are to be voted or may simply give the proxy agent discretion to decide how the shares are to be voted. Under Securities Exchange Commission Rule 14a-3, the incumbent board of directors' first step in soliciting proxies must be the distribution to shareholders of the firm's annual report. An insurgent may independently prepare proxy cards and proxy statements, which are sent to the shareholders.