Fundamental Analysis For Dummies, 2nd Edition

Chapter 9

Mining the Proxy Statement for Investment Clues

IN THIS CHAPTER

Expanding your fundamental analysis to include items in a company’s proxy statement

Comprehending how corporate governance works and what it means for your investment

Weighing how to consider if corporate directors may have potential conflicts of interest

Evaluating shareholder resolutions and executive pay

When you think of fundamental analysis, you’re probably focused primarily on the number-crunching aspect of it. There’s no shortage of ratios and other quantitative measures to consider when evaluating an investment.

But fundamental analysis really is as much of an art than a science in many ways. Even when it comes to interpreting financial results and valuations, there’s a great amount of judgment that goes into it. And judgment becomes even more important when considering the proxy statement.

The proxy statement, or proxy, is one of the more interesting financial documents. Interesting financial reports, now there’s an oxymoron for you. But seriously, inside the proxy statement companies lay out many of their deep, dark secrets that just don’t fit into the neat rows and columns of the financial statements. Some of these details include executive pay, composition of the board of directors, and even how much the accounting firm is paid to watch over the financial statements.

This chapter explores finding interesting details about a company and its management team that go beyond the confines of the financial ...