What are shareholders and what is their role in a company?

What are shareholders and what is their role in a company?

On Behalf of | Feb 24, 2016 | Uncategorized |

“Shareholders” is a word business owners in Louisiana may have heard on a number of occasions, but they may have wondered what shareholders are and what their role in a company is? Shareholders are owners of a company. Small businesses can have one shareholder who is also the owner. Public companies may have many shareholders, which can include institutional shareholders. Shareholders play a role in the governance, operations and financing of the company and exercise control over certain parts of the business.

Shareholders play direct and indirect roles in the operation of a company. Shareholders are responsible for electing directors who have the responsibility of appointing and supervising the senior staff of the company. The board of directors of a company is answerable to the shareholders and not to the management of the company. It is the shareholders that typically determine who controls the company. Companies without a majority shareholder can be vulnerable to hostile takeovers. In some circumstances, shareholders can block takeover attempts.

Public companies are required to provide timely disclosures to shareholders. The disclosures must also be complete in nature, and senior executives of a company typically meet with shareholders on a quarterly basis to review the conditions of the business and other related concerns. Going public and deciding to acquire shareholders is one way for a company to raise funds. There are certain costs, however, to public companies associated with shareholders, which include investor relations and communication expenses.

There is a lot to know about shareholders and the ways they impact a company and can benefit a company. As is true of any business formation, business contracts, development or growth opportunity, it is important to be familiar with the ins and outs of the business opportunity beforehand to help better ensure the move’s success.

Source: Smallbusiness.chron.com, “The Importance of Shareholders in Business,” Chirantan Basu, Accessed Feb. 21, 2016