What it is:
A ballot reflects a shareholder's vote on a corporate decision.
How it works/Example:
Most corporations have an annual shareholders meeting in which shareholders come to listen to presentations by the company's management and to vote on key issues. Shareholders cast their votes via ballots. Ballots are traditionally on paper, but some companies allow shareholders to cast their ballots via phone or the Internet.
A proxy is a person, agency, or entity authorized to act on behalf of another person, agency or entity. In the finance world, proxy most often refers to an entity authorized to vote on behalf of a shareholder. It also commonly refers to Securities and Exchange Form 14-A (the "proxy statement"), which is the document containing the actual voting ballot and disclosing information related to management compensation and matters on which to vote. The Securities and Exchange requires public companies to file proxy statements annually prior to the companies' annual shareholder meetings; the objective is to inform shareholders of the meeting, what matters are up for a vote, and instructions for voting.
Why it matters:
Ballots are how shareholders vote. Shareholders are the owners of companies, and they have the ultimate say in what a company decides, who serves on the board of directors, and whether to sell the company.
In many cases, shareholders don't actually receive a ballot in the mail if they own indirectly, as is the case with mutual funds (in that situation, shareholders own shares of the mutual fund rather than shares of the underlying companies the mutual fund invests in). Investors who hold shares in street name (that is, the shares are registered to the investor's brokerage firm rather than in his or her own name) might also not receive ballots. In these cases, the fund manager or brokerage firm is the actual shareholder in the eyes of the company, and they receive the ballot and can vote the shares. These people are responsible for voting the shares in the best interest of their investors, and in many cases, a mutual fund is a sizeable shareholder -- its vote may have a significant impact on the company.