Canadian Securities Course (CSC) Level 1 Practice Exam

What is voting by proxy?

1. Voting by proxy is when a member of a company acts on behalf of shareholders and votes during meetings.

2. It is a method of direct voting at shareholder meetings.

3. Proxy votes are used to determine the CEO's pay.

4. It refers to the company's power to cast votes on behalf of the shareholders.

The correct answer is: Voting by proxy is when a member of a company acts on behalf of shareholders and votes during meetings.

Voting by proxy is when a member of a company, often referred to as a proxy holder, acts on behalf of shareholders to cast their votes during company meetings, such as annual general meetings. This mechanism allows shareholders who may not be able to attend in person to have their voices heard and influence decisions regarding corporate governance, such as electing directors or approving business proposals. The process involves shareholders granting authority to someone else to represent their interests and vote according to their instructions. This concept is crucial in corporate governance, as it enhances shareholder participation and ensures that their stakes in the company are acknowledged, even if they cannot be physically present at the meeting. The other options do not accurately describe voting by proxy. For example, direct voting at shareholder meetings does not involve a proxy; it is when shareholders themselves attend and vote. Proxy votes related to determining CEO pay is a specific application of proxies but does not encompass the broader definition of proxy voting. Lastly, while it may seem that the company might have a power over votes, voting by proxy specifically involves shareholders empowering individuals to act on their behalf, rather than the company itself casting votes.