Proxy voting lets shareholders vote on the decisions at a company's annual general meeting (AGM) or other meetings without attending in person. The system then collects and counts the votes. A proxy is a person or a system that is authorised to vote on someone else's behalf.
At an AGM, shareholders vote on resolutions, such as approving the accounts, paying a dividend or reappointing a director. A large company may have lakhs of shareholders, spread across the country and the world. Very few of them can attend. So in India, listed companies must let shareholders vote electronically before the meeting. This is called remote e-voting. The depositories and the registrars, the firms that keep a company's list of shareholders, run e-voting systems.
Here is how a vote works. The company fixes a cut-off date, no earlier than seven days before the meeting. The depository provides the list of everyone who owned the shares on that date, and how many shares each owned. The company emails each shareholder the notice of the meeting and a link to vote. Voting stays open for a few days. Each shareholder logs in and votes For or Against each resolution. Each share carries one vote. When voting closes, an independent person called the scrutiniser counts the votes and reports the result.
Large investors vote too, and their votes count most. A mutual fund or an index fund may hold shares in hundreds of companies, and must vote at every one of their meetings. Many funds read the reports of a proxy advisory firm, which studies each resolution and recommends how to vote. Funds in India must also publish how they voted.
In America, a single company sends the voting papers and collects the votes for most listed companies, on behalf of the brokers whose clients own the shares. This work is closely linked to post-trade processing, because it depends on the same records of who owns what. Individual investors can usually reach the vote from their stock trading app.