Any number of reasons may prevent a board director or member of a corporation from attending an important meeting, such as a special meeting or an annual meeting. The member doesn’t always have to be physically present to cast a vote. Members may authorize a proxy to speak or vote on their behalf. Proxies can vote by a show of hands or on an official ballot.
Members and proxies need to follow all of the rules for proxy voting, so that votes get counted as valid. State laws and the corporation’s bylaws outline the rules for proxy voting, including how to authorize and revoke proxy votes. The rules vary a little between for-profit corporations and non-profit organizations.
Definitions of a Board Meeting Proxy
A proxy is a written statement by a shareholder (or unit owner, in the case of a homeowner association) that authorizes a specific other person to vote the shareholder’s shares or common interests at a shareholder or special interest meeting. A general proxy means that the voting member leaves the vote to the discretion of the proxy voter. A specific proxy or limited proxy means that the voting member gives the proxy voter specific instructions on how to place the member’s vote.
Rules for Proxy Voting
Robert’s Rules of Order lists specific rules for proxies to follow. The proxy should be separate of the other voting members to ensure an independent and democratic vote.
Robert’s Rules details how proxy voting works well for stock corporations. Stock corporations typically only meet annually, and the purpose of the meeting is to elect board directors. The corporation is required to give proxies to the members for the election. Once the election is over, the proxy has no further role and no more voting power.
State laws overrule a corporation’s bylaws, so if a state law allows members of all corporations to appoint proxies at all business meetings, the bylaws cannot disallow proxy voting. State laws generally only pertain to using proxies for the purpose of electing directors and officers.
Using Proxies as Strategy
The bylaws of some boards don’t allow members to use proxies for regular or special board meetings, but the bylaws may allow members to use them at the annual meeting. Most boards require a quorum to conduct voting and proxies can be useful in establishing a quorum. Some boards have a standard practice of having the secretary send out reminder notices to board members prior to the annual meeting asking them to send in proxy notices if they will not be present, so their presence will be included in the quorum count. Shareholders may submit a proxy notice even when they plan to attend, just in case something prevents them from attending the meeting at the last minute.
What if a member doesn’t really want to take a stand on a particular vote? Members can use their right to not designate a proxy and not attend the meeting to avoid having to cast a vote.
An organization’s bylaws may allow for a member’s proxy to be counted only for the purpose of establishing a quorum, but not as a vote for or against an issue.
Avoiding a Conflict of Interest
Board members sometimes use independent employees or principals of the managing agent to avoid a conflict of interest and preserve the integrity of the voting process.
Members have the right to revoke proxies, but they cannot revoke votes already cast on a ballot. It’s important that all instructions for giving authorization or taking it away be done in writing.
A member who gives up their right to vote to a proxy may give written notice to the board secretary or other Inspector of Election revoking the proxy vote prior to the meeting or prior to the vote.
A member may also revoke a proxy by appearing at the meeting in person and exercising his or her right to vote.
Proxy Voting for Non-Profit Organizations
The rules for proxy voting at a non-profit organization are slightly different than for a for-profit corporate entity. Non-profits are social, benevolent or religious organizations, and they don’t have rules about being transparent or open to the public. It’s generally advised that members of non-profit organizations do their best to attend the annual meeting and vote on their own behalf.
Robert’s Rules doesn’t allow for proxy voting for non-profit organizations. Robert’s Rules states, “…proxy voting is incompatible with the essential characteristics of a deliberative assembly in which membership is individual, personal, and nontransferable….” Non-profits that want to allow proxy voting need to overrule Robert’s Rules by writing the exception into their bylaws.
Proxy voting for non-profit organizations is legislated by each state. Most states only allow members to use proxy voting. Other states, like Arizona, allow proxy voting for members and directors.
The non-profit’s bylaws will spell out any other rules for using proxies. For example, most non-profit organizations’ bylaws require that members must choose other members as proxies because they would likely have the best interests of the organization at heart. If an unlimited number of non-member proxies were voting at their own discretion, it could interfere with the mission and vision of the organization.
Unlike standard corporations, proxies for non-profit organizations are usually valid only for one month.
The Proxy Voting Form
It’s important to heed all the special rules for the proxy voting form so that votes will be properly counted and not be subject to challenge. The most important rule is that the proxy permission must be in writing.
This is a sample of an annual meeting proxy card. Notice that it’s pretty simple and straightforward. The proxy form is clear and simple so that the intent of the owner is clear.
The owner or member must sign the proxy form or the proxy must have Power of Attorney, Letters Testamentary or Letters of Administration that the proxy is allowed to sign as Attorney in Fact. If the owner dies or is incompetent at the time of the voting, the proxy is valid unless the secretary gets notice of such in writing prior to the meeting.
If a member or owner has more than one proxy, the later proxy is the one whose vote should be counted. Proxy forms are typically valid for 11 months.
Concluding Points on Proxy Voting
Proxy voting was designed to allow every voting member a fair chance to have their say, but it can also lead to problems with voting. Some problems can have legal ramifications, so it’s best for members to vote for themselves whenever possible. It’s also vitally important for voting members to know, understand and abide by all the rules for proxy voting to prevent any undue problems with the outcome of a vote.