Shareholders

Definition

Shareholders are individuals or entities that own shares in a corporation, giving them partial ownership of the company. Their investment provides the company with capital, and in return, they may receive dividends and voting rights, influencing corporate decisions and strategies.

5 Must Know Facts For Your Next Test

1. Shareholders can be classified into two categories: common shareholders who have voting rights and preferred shareholders who receive fixed dividends but typically do not have voting rights.
2. In multinational corporations, shareholder interests must be balanced with those of other stakeholders, such as local communities and employees in different countries.
3. Shareholders play a critical role in influencing corporate strategy through their voting rights during annual general meetings (AGMs).
4. Institutional investors, such as pension funds and mutual funds, are significant shareholders that can impact corporate governance through their investment decisions.
5. The rise of socially responsible investing has led many shareholders to consider not only financial returns but also environmental and social impacts when evaluating companies.

Review Questions

• How do shareholders influence the management decisions of a multinational corporation?
  • Shareholders influence management decisions through their voting rights during annual general meetings where they can approve or reject significant changes like mergers or acquisitions. They can also express their opinions on corporate governance issues, prompting management to align their strategies with shareholder interests. This dynamic is crucial for multinational corporations that must consider diverse shareholder perspectives across different markets.
• Discuss the implications of shareholder activism in multinational corporations regarding corporate governance practices.
  • Shareholder activism can significantly shape corporate governance practices within multinational corporations. Activist shareholders often push for changes in management, strategic direction, or corporate policies that prioritize sustainability or ethical conduct. This pressure can lead companies to adopt better practices that not only improve profitability but also enhance their reputation and relationship with other stakeholders globally.
• Evaluate the challenges multinational corporations face in balancing shareholder interests with those of other stakeholders in diverse markets.
  • Multinational corporations face the challenge of balancing shareholder interests with those of other stakeholders such as employees, local communities, and customers across various countries. This often involves navigating different regulatory environments and cultural expectations that may prioritize stakeholder needs over immediate shareholder returns. Companies need to create strategies that align long-term value creation for shareholders while ensuring social responsibility and ethical considerations are met across all markets.

Related terms

Dividends: Payments made by a corporation to its shareholders, usually derived from profits, as a return on their investment.

Corporate Governance: The system by which companies are directed and controlled, focusing on the relationships between shareholders, management, and the board of directors.

Stakeholders: Individuals or groups that have an interest or investment in a company, including employees, customers, suppliers, and the community, in addition to shareholders.