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On money

By HELEN HUNTLEY, Times Staff Writer

© St. Petersburg Times, published June 16, 2002

A proxy statement is not carte blanche for managers

A proxy statement is not carte blanche for managers

Q. Since I own shares in several companies, I receive proxy statements in the mail each year before the annual meetings. Most of them include a statement that says in effect that if I send in my proxy, I am giving permission for them to cast my vote for "any other business that comes up at the annual meeting." I do not sign those because it may give the officers carte blanche to pass anything using my vote. Am I wrong to assume this?

A. The situation is not as bad as you fear.

Proxy statements are mailed to shareholders to allow them to have a say in the issues being decided at the annual meeting even though they cannot attend. Signing and sending in a proxy statement authorizes someone else to vote your shares on your behalf at the meeting.

Even though you grant this voting power for "any other business," there are limitations on what sort of "other business" company managers can bring up for a vote.

"Our proxy rules require that managers disclose any material information to their shareholders," said John Wilcox, vice chairman of Georgeson Shareholder Communications, a New York company that solicits proxy statements on companies' behalf. "They can't just suddenly decide at the meeting that they're going to introduce an important item and use that blanket authority to vote it in. That would be illegal."

He said the power is primarily used to deal with issues shareholders raise at a meeting or to handle procedural issues such as voting to adjourn the meeting.

Since Wilcox's company is in the business of soliciting proxies, he naturally says you should always mail yours in -- or vote through the Internet if the company permits it.

"It can be very important," he said. "In some companies the retail shareholders own a lot of stock and the company cannot achieve a quorum without them."

Wilcox said some companies take pride in their shareholder participation rates because sending in a proxy can be viewed as a vote of confidence in management. Of course, that assumes that you vote the way management recommends!

Q. We have a 30-year, $130,000 mortgage at 7.87 percent with a monthly payment of $952 that we took out two years ago. We have more than $200,000 in our savings accounts paying about 3 percent interest. We are in our mid 50s with an annual income of $75,000. Each year we receive about $5,000 in bonuses from work. Should we put that money into our savings account or toward the principal of our mortgage? At what percentage rate should we consider refinancing our mortgage?

A. Consider refinancing right now. There no longer is a reliable rule of thumb about how much rates have to fall to make refinancing worthwhile. Get information about rates and closing costs for mortgages of similar length to yours. Divide your closing costs by the amount of your monthly savings to figure out how many months it will take you to recover your closing costs. Assuming you are going to be in the home longer than that, refinancing is a good deal.

Putting your bonuses toward repayment of your mortgage is definitely better than putting them into a 3 percent savings account. But that doesn't make it the best of all possible options.

It is not a good idea to have so much money in such a low-yielding investment. Even if you want to stick with the bank, you would do better with certificates of deposit in varying maturities. Since you have to get together all your financial information to refinance, this is a good time to go over your entire financial situation.

If you have not already done so, open an individual retirement account to shelter some of your earnings from taxes. You could open a Roth IRA for you and your spouse and, if you follow the rules, you will never have to pay taxes on the interest earnings.

Online money map

Check out a charity before you write a check. Two places to do that online are GuideStar, the National Database of Nonprofit Organizations (www.guidestar.org) and Better Business Bureau Wise Giving Alliance (www.give.org).

-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

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