Personal Investor: Every shareholder has rights
Some of the most widely held stocks in the biggest publicly-traded companies issue billions of common shares. If you own a few you might think your voice doesn’t count, but it does – at least in proportion to your minuscule stake in the company. Those tiny stakes add up and, in many cases, have the power to implement change.
The fact is you own part of the company and you are entitled to certain rights. They could vary across different jurisdictions and are normally subordinate to preferred shares, but here are some basic entitlements.
- Voting privileges on major issues: The flood of documents that come in the mail might seem annoying, but publicly-traded companies are bound to inform, and let you have a say on who sits on the board of directors and fundamental changes affecting the company such as mergers and acquisitions. They can also include options to cast a proxy vote, giving authority to someone else to vote on your behalf.
- Claim on company assets: As mentioned, a common share is literally an ownership stake in the company. That means a stake in company profits as they are reinvested in additional assets and share prices rise – or losses if they fall.
- The right to transfer ownership: Shareholders are allowed to trade their stock on an exchange.
- Entitlement to dividends: Dividend payouts are at the discretion of the company but shareholders are entitled to their piece of the profit pie.
- The right to sue: Shareholders have the right to launch class action lawsuits if the company has committed a wrongful act such as misstating earnings.
Publicly-traded companies are required by regulators to state common shareholders’ rights and policies in the company charter.