What Is a Shareholder?

If you own shares of a company, you are automatically a shareholder, also called a stockholder. The basic definition is very straightforward, but there are subtleties depending on the company you are invested in and the type of stock you own. Shareholders are one of the many legal owners of a public company. They are entitled to many rights which we will discuss in detail below. 

What Is a Shareholder?

To begin with, most shareholders hold a minority stake in a public company. In fact, most people reading this own less than 1% of any company they are invested in.

Very few stockholders own a majority of any public company. Those who own more than 50% are usually one of the founders, descendants or top-level management of the company.

The majority owners have a huge influence on the company operations and company executives. Shareholders aren’t responsible for the day-to-day business operations unless they are also employees. 

One of the very few examples of a multinational company with a majority shareholder is Dell Technologies (NYSE: DELL).  Its founder and CEO, Michael Dell, owns a 52% stake in the company. 

Who Can Be a Shareholder?

What Is a Shareholder

Shareholders aren’t only limited to individual investors. In fact, investment firms, private associations, governments, any type of business and other public companies can all have a stake in a public company.

In most countries, it is mandatory to disclose the top 10 stakeholders for any public company. When we take a look, it is mostly worldwide funds, founders and company executives sitting in that top 10. 

Let’s take a look at Meta Platforms (NASDAQ: FB). It comes with little surprise that the largest shareholder is founder and CEO, Mark Zuckerberg. He owns 16.8% of all outstanding shares. The second and third spots belong to giant investment firms Vanguard (7.7%) and BlackRock (6.6%). Facebook’s CTO, CFO and CRO own together less than 0.04% of all outstanding shares.

Types of Shares

The majority of companies have different share structures. Each has its pros, cons and unique characteristics. Just because someone owns 10% of all outstanding shares, doesn’t mean their vote counts for 10% as well. 

Ordinary Shares

The most common types of shares are ordinary shares. They usually carry one vote per share. Alphabet shares are a subclass of ordinary shares. Class A shareholders can carry 10 times (example) as much voting power as Class B shareholders. Each company has a different breakdown. 

Preferred Shares

Preferred shareholders can benefit from a higher dividend payout. In case of bankruptcy, they have an earlier claim to the company’s assets over ordinary shareholders. Lastly, their shares carry no voting power. 

Redeemable Shares

Now, we venture into less common classes of shares. When a company issues redeemable shares, it can buy them back at a pre-determined date or price or sometime in the future. Different requirements are established by each company.

Management Shares

Finally, these shares are reserved for… the management. They hold extra voting rights. They are aimed to give company directors more power in case of a decision against outside shareholders. 

Shareholder Rights

What Is a Shareholder

Below are the traditional shareholder rights. Some companies deviate from the standard.

Attending annual meetings: Public companies will share their outcome for the upcoming year, revenue and sales forecast as well as quarterly earnings. Shareholders can attend in person or via web conference.

Voting on critical matters and corporate matters: Voting can be done in person, by mail or online for various matters such as naming board directors, approving mergers and acquisitions, salaries etc.

Inspecting books and records: This information is publicly available even to potential shareholders. It can be found either on the company’s website or online.

Suing the corporation: When any wrongdoings happen, shareholders have the right to sue the company. This includes fraudulent financial statements, misleading claims about company earnings and fraud in general. 

Receiving dividends: As we established earlier, there are different classes of shares and each has its own dividend distributions. 

Buying and selling shares: Shareholders should always have the right to buy or sell more shares of a company. Brokers are not allowed to block them from doing so. You might remember the Robinhood fiasco with GameStop, AMC, BlackBerry and other meme stocks. Many brokers including RH didn’t allow existing and new shareholders from purchasing or selling their shares. This was a blatant violation of shareholder rights.

Claiming assets: In the case of bankruptcy, shareholders are entitled to what’s left of company assets. However, there is an order. Creditors have the first claim, followed by preferred shareholders and finally ordinary shareholders.


Some companies will reward their shareholders with some perks if they hold a minimum number of shares.

The most popular industry to give perks is cruise companies. Companies such as Carnival Corporation (NYSE: CCL), Norwegian Cruise Line (NYSE: NCLH) and Royal Caribbean (NYSE: RCL) will offer many perks to their shareholders as long as they own at least 100 shares. Discounts can be applied to stays and onboard credits.

The list goes on with other popular holdings.

InterContinental Hotels (OTCMKTS: ICHGF) and Accor (OTCMKTS: ACCYY): room bookings

Berkshire Hathaway Class A (NYSE: BRK.A): For everyday traders, buying 1 share will cost over $500k. But, the perks of the annual shareholder meeting are legendary. Shareholders can shop at luxury brands with heavy discounts as well as meet the famous Warren Buffet.

Walt Disney (NYSE: DIS): Walt Disney used to give their shareholders discounts at their theme parks. Now, they offer an underwhelming collectible stock certificate….yayyy!

3M (NYSE: MMM): 3M is not only a great dividend stock (3.96% annual yield), but they also send a gift box to its shareholders containing a variety of its products.

Ford (NYSE: F): Ford offers discounts for anyone who holds 100 shares for more than 6 months. Qualified shareholders can purchase certain vehicles at a discounted price. Vehicles in short supply do not qualify. That’s a decent deal for spending about $1,500 on 100 shares and getting a 2.49% annual dividend yield.

Pros & Cons

In this final section, we will put everything we learned into perspective. Being a shareholder has its ups and downs. This is easily measured by capital appreciation or depreciation. In some cases, shareholders can benefit from a dividend yield. The top sectors that distribute dividends are utilities, financials, materials and industrials. The majority of the companies representing these sectors in the S&P distribute dividends. 

One of the major pros is that stock owners have limited liability in the company. This means the only risk they are taking is the money they invest in the stock. If the company commits fraud or any other criminal acts, shareholders aren’t responsible.

Finally, don’t forget to pay your taxes on capital gains and dividends. The IRS is ruthless toward those who avoid paying their taxes. 

Now You Know What Is a Shareholder

To conclude, anyone can become a shareholder. In 2021, a survey found that over 50% of Americans owned at least 1 stock. It is simple to open a brokerage account and start trading.

However, it is much more difficult to turn a trade into a profit. Before investing your hard-earned money into stocks, acquire the necessary knowledge and take relevant classes.

We offer basic and advanced classes with various related topics. Take a look at our library of classes to deepen your knowledge and become a successful trader.

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