The details vary, but publicly traded companies have different ownership categories. For example, three classes of securities are listed in descending order of hierarchy: bondholders, preferred stockholders and common stockholders.
Despite sitting at the bottom, common stockholders still enjoy many rights and protections. In return, the sale of common shares (also known as ordinary shares) enables the company to raise capital to fund or expand operations.
Seven benefits common shareholders can exercise
Exercising these benefits allows shareholders to wield influence, protect their interests and reap more significant financial gain:
- Voting: By proxy or individually, voters elect directors and enable shareholders to have a say in proposed mergers, acquisitions or other major issues.
- Dividends: They cannot determine the amount paid but receive them.
- Ownership: This enables to benefit from the rising value of the company’s stock.
- Limited liability: The liability is limited to the value of their stock.
- Transactions: They can exercise preemptive rights to buy new shares issued or sell shares they already own.
- Access: Common shareholders can access bylaws, board meeting minutes and other important papers.
- Accountability: They can file a class action when there are disputes or breaches in fiduciary duties.
Is it time to act?
Many state and federal laws regulate businesses and protect shareholders. Nevertheless, common shareholder benefits include the right to protect corporate and personal interests if there are disputes or instances of corporate misconduct, mismanagement and exploitation.
If this becomes necessary, knowledgeable legal guidance from business law attorneys can help hold others accountable for their actions.