A shareholder is an individual or a company that legally owns shares of stock in a joint stock company. The shareholders, also knows as stock holders, of a company own it collectively so it is important to them to increase their value. Shareholder Value is the part of a companyís market capitalization that is equity rather than a companyís long-term debt, for a publicly traded company. This would be approximately the number of outstanding shares multiplied by the current share price, in the case of only one type of stock. Dividends stocks actually augment shareholder value while issuing of shares lower it. (Stock options)
Shareholder equity is a firmís total assets minus its total liabilities. This type of equity represents the amount by which a company is financed through preferred and common shares. The formula used to calculate a firmís shareholder equity is the retained earnings plus the share capital minus treasury shares. This type of equity comes from two main sources. The original source is the money that was originally invested in the company including any investments made afterwards. The other source is the retained earnings accumulated over time by a company. The second source, retained earnings, is typically the largest factor in long term investing.
Shareholders have rights under the Commission Action Plan which deals with company law and improvement of rights of stockholders of companies. Such rights include the right of stockholders to be granted timely access to complete information that is relevant to general meetings and facilitates the rights by proxy. This was imposed by a directive that was adopted in June 2007. This directive provides the replacement of share blocking through a record date system.
Stockholders are given special privileges depending on the class of stock. One of these privileges in the right to vote on matters such as the right to share in distributions of the companyís income, the right to purchase new shares issued by the company, elections to the board of directors, and the right to a companyís assets during liquidation of the company. It is typically one vote per one share that the stock holder gets to cast, but it may differ in some situations. As a rule, all the shares are of the same class known as ordinary shares. All these ordinary shares carry one vote each. This clearly demonstrates the majority shareholders control the company.
A Shareholder agreement is a set of points within the structure of which two parties decide to conduct business that is used to ensure smooth functioning. It is mandatory for stockholders to have in that it contains matters related to the ownership of the business among the partners. This agreement will ensure that changes in partnership will be determined before the event takes place, thus no surprises, investing errors, or interruptions in the companyís ability to function. The agreement will include information such as the principles and investment philosophy regarding company functions and individual agreements with information like sharing of profits and the partnersí stakes in the company. Very sensitive information about the partners as well as the organization is contained is this agreement.
Shareholders are the first to be considered when management makes business decisions for a company however we unfortunately have those CEOís and other managers who are clearly taking action in direct opposition to the interest of shareholders. Understanding the rights and responsibilities along with an ethical attitude should hopefully prevent these instances from occurring in the future and will lead to better investing.