Business, Legal & Accounting Glossary
An owner of a corporation whose ownership interest is represented by shares of stock in the corporation. A shareholder — also called a stockholder — has rights conferred by state law, by the bylaws of the corporation and, if one has been adopted, by a shareholder’ s agreement (often called a buy-sell agreement). These include the right to be notified of annual shareholders’ meetings, to elect directors and to receive an appropriate share of any dividends. In large corporations, shareholders are usually investors whose shares are held in the name of their broker. On the other hand, in incorporated small businesses, owners often wear many hats — shareholder, director, officer and employee — with the result that distinctions between these legal categories become fuzzy.
A shareholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders may be referred to as members of a corporation.
Typical shareholders have limited influence over publicly traded companies beyond voting for the Board of Directors. Shareholders who hold large percentages of a company must meet additional regulatory requirements, such as publicly reporting the extent of their holdings. Shareholders who are also company insiders are required to file public disclosures whenever they wish to increase or decrease their holdings.
A shareholder or stockholder is an individual or company (including a corporation), that legally owns one or more shares of stock in a joint-stock company. Companies listed in the stock market strive to enhance shareholder value. Stockholders are granted special privileges depending on the class of stock, including the right to vote (usually one vote per share owned) on matters such as elections to the board of directors, the right to share in distributions of the company’s income, the right to purchase new shares issued by the company, and the right to a company’s assets during liquidation of the company. However, the stockholder’s rights to a company’s assets are subordinate to the rights of the company’s creditors. This means that stockholders typically receive nothing if a company is liquidated after bankruptcy, although a stock may have value after bankruptcy if there is the possibility that the debts of the company will be restructured.
Stockholders or shareholders are considered by some to be a partial subset of stakeholders, which may include anyone who has a direct or indirect equity interest in the business entity or someone with even a non-pecuniary interest in a non-profit organization. Thus it might be common to call volunteer contributors to an association, such as a hypothetical online open-content encyclopedia, stakeholders, even though they are not shareholders.
Shares are not by themselves slips of paper. Well, actually, most of us hold our shares in street name, leaving the shares at our brokers, so we never see those slips of paper. But that’s beside the point. Shares, instead, are parts of a business and the shareholder is a part-owner of that business. This is true whether the business is the private one run by your friend or a large public corporation.
However, in the past, some shareholders were, like the animals in Orwell’s Animal Farm, more equal than others. (And even today, large shareholders still are.) But Reg FD eliminated a lot of the discrimination against small shareholders by making information publicly available to all shareholders at the same time. That, along with the growth of the internet and easy dissemination of information, and the growth of individual stock ownership, has led to the marginal shareholder (you and me, unless you are running a mutual fund or something) having the same access to things like quarterly earnings conference calls and other things once reserved strictly for Wall Street.
Being a shareholder doesn’t mean that you can just sit back, collect your dividend check, and watch the price of your shares rise. You also have the responsibility to vote your shares as you see fit on such things as the appointment of people to the board of directors, stock option plans, employee stock purchase plans, and hopefully someday soon, management payment. These are things that affect the running of the business which you own a part of and thus it is in your own self-interest to pay attention. If you do not understand what you read in the proxy statement, which outlines things like the above to be voted on at the annual meeting, give a call to the company’s investor relations department. They should be happy to answer your questions.
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A shareholder is a person or entity that owns shares in a corporation, whether it be a single share or every one of the total shares outstanding. A shareholder is therefore a part-owner.
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This glossary post was last updated: 28th November, 2021 | 0 Views.