shareholder rights

Statutory Power

Voting on major changes like mergers or acquisitions is a primary function of these entitlements. Every person with shareholder rights can influence the long-term direction of the company by choosing who sits on the board. This power forces the executive team to remain transparent and accountable to the owners.

Economic Interest

Dividends and capital gains represent the financial reward for the risk taken by the investor. When a company is successful, shareholder rights ensure that the profit is distributed according to the number of shares held. This economic link connects the performance of the manager to the wealth of the owner.

Managing the expectations of these owners takes a significant amount of time from the founder, especially during investor relations cycles. The hours spent on these communications are a cost of having external capital in the business.

Charter Protection

Specific classes of stock may carry more weight in a vote than the common shares held by the public. Charters often state that these powers remain in effect as long as the shares are held.