What Is a Shareholder

What Is a Shareholder (Stockholder)?

6 min read

If you own shares in a company, you are automatically a shareholder, also called a stockholder. The basic definition is very straightforward, but subtleties depend 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 below. 

To begin with, most shareholders hold a minority stake in a public company. So most people are 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 company’s founders, descendants, or top-level management.

Most owners have a huge influence on the company’s operations and 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. 

What Is a Shareholder?

Who Can Be a Shareholder?

Shareholders aren’t only limited to individual investors. Investment firms, private associations, governments, businesses, and other public companies can all have a stake in a public company.

In most countries, disclosing the top 10 stakeholders of any public company is mandatory. As a result, most worldwide funds, founders, and company executives are in the top 10. 

Let’s take a look at Meta Platforms (NASDAQ: FB). It is little surprising 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 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%, either. 

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 ten 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 addition, 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. But, again, each company establishes different requirements.

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. 

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Shareholder Rights

Below are the traditional shareholder rights. Of course, some companies deviate from the standard.

Attending annual meetings: Public companies will share their outcome for the upcoming year, revenue and sales forecast, and 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 to potential shareholders. It can be found either on the company’s website or online.

Suing the corporation: When wrongdoings happen, shareholders can 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 dividend distributions. 

Buying and selling shares: Shareholders should always have the right to buy or sell more company shares. 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 to purchase or sell 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 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. In addition, 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 one share will cost over $500k. But, the perks of the annual shareholder meeting are legendary. Shareholders can shop at luxury brands with heavy discounts and 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.

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

Ford (NYSE: F): Ford offers discounts to anyone who has held 100 shares for over six 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.

Final Thoughts: What Is a Shareholder?

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. Utilities, financials, materials, and industrials are the top sectors that distribute dividends. 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 take is the money they invest in the stock. Shareholders aren’t responsible if the company commits fraud or other criminal acts.

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

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