Shareholder

What Is a Shareholder?

A shareholder, also called a stockholder, is any person or entity that owns shares in a corporation. Each share represents a small slice of ownership in the company, so a shareholder holds a proportional claim on the business. Shareholders can be individuals, such as someone who bought stock through a brokerage account, or institutions, such as pension funds, mutual funds, insurance companies, or corporations that hold shares in other firms.

What Rights Do Shareholders Have?

Ownership of common stock typically comes with a set of rights defined by the company's governing documents and by corporate law. Common shareholder rights include:

• Voting on major corporate matters, such as electing the board of directors and approving significant transactions
• Receiving a share of profits when the company pays dividends
• Inspecting certain corporate records, depending on jurisdiction
• Receiving a portion of remaining assets if the company is liquidated, after creditors and preferred stock holders are paid

Shareholders generally do not manage day-to-day operations. That responsibility belongs to the company's officers and management, who answer to the board.

Why Shareholders Matter to Investors

Shareholders bear the financial risk and reward of the business. If the company performs well, the value of their shares may rise, and some may receive dividends. If it performs poorly, the value may fall, and shareholders are paid last in a bankruptcy, after bondholders and other creditors. Because of this position, shareholders are sometimes called the residual owners of a company.

Shareholders also play a role in corporate governance. Through voting, they can influence who sits on the board and how executive pay and major strategic decisions are handled. Many shareholders vote by proxy rather than attending meetings in person.

Shareholders and Ownership Concentration

Ownership of a public company is often spread across thousands of shareholders, though a single investor or group may hold a large percentage. A company's shareholder base and the size of individual stakes are typically disclosed in regulatory filings, which allows the public to see who holds significant ownership.