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Introduction
by WealthEffect Staff

 
 

The proxy statement gives you a look at management compensation, including options
 
  You can also get a sense of the qualifications and of the Board of Directors  
  Issues which require a shareholder vote are disclosed in the proxy, as well  
 
1.

The proxy statement is both the most boring and the most interesting document you might find. Its carefully constructed legalize has the power to lull an angry rhino to sleep, but the lessons behind the language can be fascinating. How a management is paid tells a good deal about their priorities.
 
 
2.

The proxy also provides information regarding the members of the Board of Directors. Remember, management works for the Board, and the Board works for the shareholders — in theory. The backgrounds of the board members give you some basis for judging their abilities and independence — the more successful they have been in business themselves and the more removed they are from any personal or professional ties to the CEO, the better. The number of shares owned by each board member is revealed, as well — it's worthwhile to check how many on the board own significant positions.
 
 
3.

When a company needs a vote from its shareholders — often to approve an increase in its option program (!) — the details are provided in the proxy. Shareholder-initiated proposals, which have met the requirements for consideration and usually seek to change business practices, are also included. If you like good odds, always bet that the company proposals will pass and the shareholder-initiated ones will not.

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