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Shareholder

A mutual 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. A company's shareholders collectively own that company. Thus, the typical goal of such companies is to enhance shareholder value. A shareholder is different to a stakeholder, see below for more information.

Stockholders are granted special privileges depending on the class of stock. These rights may include:

  • The right to vote on matters such as elections to the board of directors. Usually, stockholders have one vote per share owned, but sometimes this is not the case.
  • The right to propose shareholder resolutions.
  • The right to share in distributions of the company's income.
  • The right to purchase new shares issued by the company.
  • The right to a company's assets during a liquidation of the company.

However, 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 (if the company had had enough to pay its creditors, it would not have entered bankruptcy), although a stock may have value after a 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 stakeholders, even though they are not shareholders.

Although directors and officers of a company are bound by fiduciary duties to act in the best interest of the shareholders, the shareholders themselves normally do not have such duties towards each other.

However, in a few unusual cases, some courts have been willing to imply such a duty between shareholders. For example, in California, majority shareholders of closely held corporations have a duty to not destroy the value of the shares held by minority shareholders.

The largest shareholders (in terms of percentage owned of companies) are often mutual funds, especially passively managed exchange-traded fund.

Shareholders play an important role in raising capital for organizations. So these figures pose a great opportunity for all those who are looking for a lucrative option to invest money. Companies typically provide all the necessary proofs to shareholders to show that they are investing at a right place. For example, fair and reliable audit figures from income statement and balance sheet are used as evidence of overall performance for the benefit of shareholders.

Shareholders' meeting

A shareholders' meeting is a meeting, usually annually, of the shareholders of a corporation to elect the board of directors and hear reports on the company's business results, prospects, and plans. In larger corporations, only a small percentage of the shareholders attend in person or vote, and many of those who do vote cast their vote by proxy.

Definition

Stockholders (Shareholders) are individuals, companies, or trusts, that own shares of a for-profit corporation. The individuals own a specific number of shares, which they each purchased at a specific price. The stockholders have invested their money to purchase these shares and they gain in two ways (1) through dividends paid on these shares due to the corporation's profits, (2) by selling their shares at a profit.

The rights of the shareholders are subordinated (placed under) the rights of bond-holders, so that shareholders lose the value of their shares if the corporation becomes bankrupt. Shareholders may also lose some or all of the value of their shares if the stock price is lower when they sell than the price when they bought.

Stakeholder (corporate)

A corporate stakeholder is a party that affects or can be affected by the actions of the business as a whole. The stakeholder concept was first used in a 1963 internal memorandum at the Stanford Research institute. It defined stakeholders as "those groups without whose support the organization would cease to exist." The theory was later developed and championed by R. Edward Freeman in the 1980s. Since then it has gained wide acceptance in business practice and in theorizing relating to strategic management, corporate governance, business purpose and corporate social responsibility (CSR).

Types of stakeholders

  • people who will be affected by an endeavor and can influence it but who are not directly involved with doing the work. In the private sector,*People who are (or might be) affected by any action taken by an organization or group. Examples are parents, children, customers, owners, employees, associates, partners, contractors, suppliers, people that are related or located near by. Any group or individual who can affect or who is affected by achievement of a group's objectives.
  • An individual or group with an interest in a group's or an organization's success in delivering intended results and in maintaining the viability of the group or the organization's product and/or service. Stakeholders influence programs, products, and services.
  • Any organization, governmental entity, or individual that has a stake in or may be impacted by a given approach to environmental regulation, pollution prevention, energy conservation, etc.
  • A participant in a community mobilization effort, representing a particular segment of society. School board members, environmental organizations, elected officials, chamber of commerce representatives, neighborhood advisory council members, and religious leaders are all examples of local stakeholders.

Stakeholder view theory

Post, Preston, Sachs (2002), in their theory called Stakeholder view, use the following definition of the term "stakeholder": "The stakeholders in a corporation are the individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and that are therefore its potential beneficiaries and/or risk bearers." This definition differs from the older definition of the term stakeholder in Stakeholder theory (Freeman, 1984) that also includes competitors as stakeholders of a corporation. Robert Phillips provides a moral foundation for stakeholder theory in Stakeholder Theory and Organizational Ethics. There he defends a "principle of stakeholder fairness" based on the work of John Rawls, as well as a distinction between normatively and derivatively legitimate stakeholders.
 

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