The Right to Vote

As a stockholder, you have the right to vote on major policy decisions, such as whether a company should issue additional stock, sell itself to outside buyers, or change the board of directors. In general, the more stock you own, the greater your voice in company decisions. In addition, if you've held shares for more than a year, you may present a proposal to be voted on at the annual meeting, provided it meets the requirements of the Securities and Exchange Commission (SEC).

ALL STOCKS ARE NOT EQUAL
Usually, each share of stock gives you one vote. Some companies, however, issue different classes of stock with different voting privileges. When stocks carry extra votes, a small group of people can control a company's direction while owning fewer than 50% of the shares. That may happen, for example, with shares held by a company's founding family.

THE WAY YOU VOTE
You can attend the company's annual meeting and vote in person. Or you can cast your vote by mail using a ballot called a proxy, over the telephone or, increasingly often, online at a designated website.

CUMULATIVE VOTING
As a shareholder, you typically get one vote for each share of stock you own. But when you vote for the board of directors in some companies, you may have the opportunity to cast your votes in a nontraditional way.

In traditional corporate voting — called statutory voting — you cast the same number of votes for each director running for election. In cumulative voting, on the other hand, you can combine your votes and cast different numbers of votes for different candidates.

For example, if you owned 100 shares and eight directors were running for election, in a statutory vote, you'd cast 100 votes for each of the candidates, for a total of 800 votes. In a cumulative vote, you could still do that, or you could distribute your 800 votes among some of the candidates, assigning no votes to others. You could even cast all 800 votes for a single candidate. The purpose of cumulative voting is to give small shareholders, known as minority shareholders, more voice in corporate governance.

Before the annual meeting you receive a proxy statement, a legal document that presents information on planned changes in company management that require shareholder approval. By law, it must also present shareholder proposals, even if they are at odds with company policy. The statement also identifies the nominees for the board of directors, and lists the major shareholders.

SEC rules require proxies to show, in chart form, the total compensation of the company's top five executives. The proxy must also report the company's stock performance in relation to comparable companies in its industry and to the Standard & Poor's 500 Index (S&P 500).

The proxy asks shareholders to elect a board of directors and vote on one or more issues. The directors oversee the operation of the company and set long-term policy goals. You can support them all, vote against them, or vote for some but not others.

The proxy lets shareholders vote yes or no or abstain on shareholder proposals and other issues affecting the corporation. The directors want you to vote yes on the issues they support and no on the others. If you don't vote, your opinions aren't counted.

CHANGING ATTITUDES
Institutional investors who own large blocks of stock are increasingly demanding a say in corporate affairs. For example, they may express concern about how effectively the board of directors sets policy and oversees the performance of the company's chief executive. They also want to confirm that current business practices provide an acceptable profit. There is increasing pressure, as well, for these institutional investors to reveal how they vote so that their shareholders and other stakeholders are informed about decisions made in their name.

Similarly, socially and environmentally conscientious individual shareholders are becoming more involved in the voting process. Typically they want more information about corporate policies that touch on issues such as the environmental impact of company operations, the working conditions of employees and suppliers, and other ethical concerns. Although individuals may find it difficult to affect corporate policy directly, their inquiries, and their shareholder proposals, can force companies to explain and sometimes alter their business practices.

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