The roles of a shareholder differ by the significance that the person holds within an organization. Some shareholders are merely stockholders, while others are acting managers. However, there are certain roles that hold no matter what the relationship of the shareholder to the organization. These roles exist because the shareholder becomes an owner once he purchases stock in the company.
There are several stakeholders of a public organization, include the managers, employees, Board of Directors, vendors, customers and shareholders. Each has a stake in the well-being of the company to continue as a going concern. It has long been suggested that the shareholder is the most important stakeholder within an organization. However, there is a lot of debate about the truth in this argument, as customers are the primary means of furthering a business. What is conclusive is that a shareholder has a certain role as an owner and a supplier of capital.
Shareholders, whether they own one share or numerous shares, are partial owners of a corporation. Warren Buffett puts it best when he said, "Charles Munger and I think of our shareholders as owner-partners." The provision of capital to the company helps to fund operations and growth, similar to a person who owns a sole proprietorship or partnership. The primary difference is that, as an owner of the corporation, the shareholder does not usually function in a managing capacity. But the shareholders do have the right to vote in who sits on the Board of Directors, which ultimately affects who manages the company, in many cases.
The Board of Directors is responsible for monitoring corporate governance within an organization. Corporate governance is the rules and practices by which a business holds accountable the managers and executives of a corporation to safeguard the interests of all stakeholders. Shareholders reserve the right to vote on issues arising in a business for which they own stock. By participating in these votes, often called proxies, the shareholders are participating in the corporate governance structure of the firm.
Other voting rights of the shareholder include those regarding actions that the business proposes to take in order to change or grow the business. A firm usually holds an annual meeting for the shareholders to attend; however, they may also submit their votes by proxy. Usually the company will send out a form to fill out for this purpose. The shareholder then votes on the action at hand, whether it be a change to the bylaws of the company, a merger, dissolution of the company or actions that are not in the general course of business. By voting, the shareholder enacts her ownership rights.
- Securities and Exchange Commission: Exercise Your Shareholder Voting Rights in Corporate Elections
- eNotes.com: Shareholder Rights
- "Financial Accounting Theory Analysis"; Richard Schroeder, et al.; 2005
- Harvard Law School Forum on Corporate Governance. "The Evolving Direction and Increasing Influence of Shareholder Activism." Accessed July 3, 2020.
- U.S. Securities and Exchange Commission. "SEC Adopts New Measures to Facilitate Director Nominations by Shareholders." Accessed July 3, 2020.
Christine Aldridge is a financial planner who has been writing articles related to personal finance since 2011. She has bachelor's degrees in political science from North Carolina State University and in accounting from University of Phoenix. Aldridge is completing her Certified Financial Planner designation via New York University.