What are proxy rights?

In the United States and many other jurisdictions, shareholders have a legal right to appoint an agent—a proxy—to vote shares and otherwise act on their behalf. Historically, this right allowed shareholders who were unable to attend a corporation’s shareholder meeting to still exercise their rights as owners. Shareholders can dictate how a proxy is to act on their behalf, or they can leave that decision to the proxy.

Today, the notion that shareholders can select their own proxy resembles the remark attributed to Henry Ford that people can buy any color of Model T they want—so long as it is black. Before each annual meeting, managers mail to shareholders proxy assignment cards allowing them to appoint those same managers as their proxy. That is the only choice the cards offer—take it or leave it. The system is so broken down that managers seek proxy rights more to ensure a quorum at the shareholder meeting than out of fear that they might actually lose a vote. Only in rare circumstances does a proxy fight arise in which a competing group also sends out a mailing to shareholders soliciting a grant of proxy rights. That situation is akin to offering automobiles that are either black or gray.

Proxy assignment cards are not necessary to appoint someone a proxy. In theory, shareholders can appoint anyone they like as their proxy, but this doesn't happen in practice.