In part one of my primer course on stocks, I wrote that businesses divide stocks into shares, and that each share represents a fraction of ownership. I told you that shares may come with various ownership rules, privileges, or share values. Also, I let you know about the two forms of stock: preferred stock and common stock. Now we’ll talk about shareholders.
A shareholder is a person or company that legally owns one or more shares of stock in a joint stock company. Shareholders get special privileges that depend on the class of the stock. Privileges include: the right to vote on matters like elections to the board of directors, the right to share in distributions of the company’s income, the right to buy new shares that are issued by the company, and the right to a company’s assets when a company liquidates. Directors and officers of a company are bound by fiduciary duties to act in the best interest of the shareholders.
Owners of a company may sell shares to build additional capital for investing in new projects within the company, or to get rid of some of their holding so they have more money freed for their own private use. When you buy a share you are literally sharing in the ownership of the company, a fraction of the decision making power, and potentially, a fraction of the profits.
Because there could potentially be thousands of shareholders in a large publicly traded corporation, shareholders will use their shares as votes in the election of members of the board of directors of the company.
Usually, each share equals one vote. Corporations might issue different classes of shares though, which might have different voting rights. Because shares are proportional to votes, owning most of the shares permits other shareholders to be out voted, which is how original owners of a large business will usually still have control of the company. To Be Continued In Part Three.
Mallory Megan works for Rapid Recovery Solution and writes articles about commercial collection agencies.
Tags: bonds, collection agencies, collection agent, collection companies, collection quote, debt problem, medical collections, stock market, stock market crash, stocks, stocks and bonds