Shareholder

Overview

A shareholder, also known as a stockholder, is an individual, company, or institution that owns at least one share of a company’s stock. Ownership implies a stake in the company’s assets and earnings. Shareholders are essentially part-owners of the corporation.

Key Concepts

Types of Shareholders

Shareholders can be broadly categorized:

• Common Shareholders: Possess voting rights and receive dividends if declared.
• Preferred Shareholders: Typically do not have voting rights but receive dividends before common shareholders and have a higher claim on assets.

Rights of Shareholders

Key rights often include:

• Voting on corporate matters (e.g., electing directors).
• Receiving dividends.
• Accessing company financial records.
• Suing the company or its directors for wrongdoing.

Deep Dive

Shareholder Value

The primary goal for many companies is to maximize shareholder value. This is often achieved through increasing stock prices and paying dividends, reflecting the company’s profitability and growth prospects.

Applications

Corporate Governance

Shareholders play a crucial role in corporate governance. Through their voting power, they influence the company’s direction, management decisions, and the election of the board of directors. Activist shareholders may push for specific changes.

Challenges & Misconceptions

A common misconception is that all shareholders have equal influence. While common shareholders have voting rights, the weight of their vote depends on the number of shares owned. Also, the interests of shareholders may sometimes conflict with those of other stakeholders, such as employees or customers.

FAQs

What is the difference between a shareholder and a stakeholder?

A shareholder owns stock in a company. A stakeholder is anyone affected by the company’s actions, including employees, customers, suppliers, and the community, not just owners.

How do shareholders make money?

Shareholders can profit through capital appreciation (selling shares for more than they paid) and by receiving dividends, which are portions of the company’s profits distributed to shareholders.