Shareholders, also referred to as stockholders, are individuals or institutions that own shares of stock in a company. In general, shareholders own the business or organization. This type of ownership may occur in both public and private companies. If you are considering buying stock or investing in a particular company, you may have one or several objectives as a company shareholder.
Increase Stock Value
Most shareholders’ main objective is to increase stock value, rather than losing money with less valuable stock. In fact, the main purpose of purchasing shares in a company is to earn money when the stock appreciates. Profit is the prime objective, or motive, behind the majority of shareholders’ decisions to buy into a company.
Increase Overall Wealth
When a shareholder’s stocks increase in value, his overall wealth typically increases as well. This is a main objective for shareholders of all ages and wealth levels, whether or not they want to keep or sell their stocks. For example, shareholders who work for the company and plan on retiring need their stocks to appreciate in order to build enough retirement savings. Retirees also may plan on living on the quarterly dividends from their stocks, and they also rely on the overall value of their shares as a major part of their net worth.
Increase Firm Value
While profit-making is often the top priority for shareholders, increasing the firm’s overall value is another type of objective. When the firm, or company, is worth more, the stocks are worth more. Some ways that companies can increase their value is by focusing on customer satisfaction, expanding into new markets and increasing their market share. Improving and increasing brand recognition positively is another way to increase a firm’s value. Shareholders ultimately want their firm to have long-term success in order to keep reaping profits for many years.
Difference Between Shareholders and Stakeholders
While all shareholders are considered stakeholders, not all stakeholders are shareholders. The main difference between the two is that shareholders have ownership in the company via stocks, while stakeholders are interested in more than just stock appreciation – they are also interested in the overall performance of the company. Stakeholders may include company employees, vendors or customers. Shareholders have more privileges than stakeholders, as they are typically allowed to vote on issues regarding the control of the business, such as for board of directors candidates.