Shareholder
Encyclopedia
A shareholder or stockholder is an individual
or institution (including a corporation
) that legally owns one or more share
s of stock
in a public or private corporation. Shareholders own the stock, but not the corporation itself (Fama 1980).
Stockholders are granted special privileges depending on the class of stock. These rights may include:
Stockholders or shareholders are considered by some to be a subset
of stakeholders, which may include anyone who has a direct or indirect interest in the business entity. For example, labor, suppliers, customers, the community, etc., are typically considered stakeholders because they contribute value and/or are impacted by the corporation.
Shareholders in the primary market who buy IPOs provide capital to corporations; however, the vast majority of shareholders are in the secondary market and provide no capital directly to the corporation.
Therefore, contrary to popular opinion, shareholders of American public corporations are not the (1) owners of the corporation, (2) the claimants of the profit, nor (3) investors, as in the contributors of capital.
Individual
An individual is a person or any specific object or thing in a collection. Individuality is the state or quality of being an individual; a person separate from other persons and possessing his or her own needs, goals, and desires. Being self expressive...
or institution (including a corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
) that legally owns one or more share
Share (finance)
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in...
s of stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
in a public or private corporation. Shareholders own the stock, but not the corporation itself (Fama 1980).
Stockholders are granted special privileges depending on the class of stock. These rights may include:
- The right to sell their shares,
- The right to vote on the directors nominated by the board,
- The right to nominate directors (although this is very difficult in practice because of minority protections) and propose shareholder resolutions,
- The right to dividends if they are declared,
- The right to purchase new shares issued by the company, and
- The right to what assets remain after a liquidationLiquidationIn law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
.
Stockholders or shareholders are considered by some to be a subset
Subset
In mathematics, especially in set theory, a set A is a subset of a set B if A is "contained" inside B. A and B may coincide. The relationship of one set being a subset of another is called inclusion or sometimes containment...
of stakeholders, which may include anyone who has a direct or indirect interest in the business entity. For example, labor, suppliers, customers, the community, etc., are typically considered stakeholders because they contribute value and/or are impacted by the corporation.
Shareholders in the primary market who buy IPOs provide capital to corporations; however, the vast majority of shareholders are in the secondary market and provide no capital directly to the corporation.
Therefore, contrary to popular opinion, shareholders of American public corporations are not the (1) owners of the corporation, (2) the claimants of the profit, nor (3) investors, as in the contributors of capital.