The details in a company charter will vary, but publicly traded companies will usually have different ownership levels. For instance, there are three classes of securities: bondholders, preferred stockholders and common stockholders. Each has its benefits, but common stockholders are at the bottom of the hierarchy. They still have rights.
Common stockholder benefits
While more limited than other categories, they still can assert influence and reap financial gain. The benefits include:
- Ownership: Similar to other categories, they benefit from increasing stock’s value and can partake in the profits.
- Voting power: They may vote by proxy or individually to elect directors or on proposals for mergers, acquisitions and other significant issues.
- Dividends: They receive a portion but do decide on the amount paid.
- Transfer ownership: They can sell their stock, which enables them to cash in.
- Access to the books: They have access to all fundamental documents, including company bylaws and board meeting minutes.
- Accountability: They can sue the company through a class action if there is a fiduciary breach or dispute.
Depending upon the business, there may be other benefits, such as discounts on the company’s services or products.
Understand your rights
Some laws regulate businesses and protect shareholders from poor corporate management or exploitation, but it is still wise to know and understand the rights enjoyed by common stock shareholders. There may be a time when they need to exercise them to protect their interests and those of the company.