Investors who invest in stocks primarily do so to enjoy high returns while also dealing with high risk. Earning high returns is not the only benefit that investors can enjoy while investing in equity. Since stock investors are also shareholders of the company, they get voting rights in certain important decisions that the company takes.
Let us have a look at shareholder voting and how investors can make the most of it.
Shareholder voting is a right to vote that is available to existing shareholders of a company. This right allows shareholders to vote on matters that are crucial for the corporation’s performance.
When it comes to listed companies, certain important matters are not only limited to be decided by the company’s management. With shareholder voting, various aspects like corporate policies, the election of board members, financial investment, operational decisions, approval of dividends, mergers, etc can be influenced by existing shareholders.
- In shareholder voting, a shareholder gets the number of votes in direct proportion to his/her investment or the number of shares held.
Thus, if a shareholder owns more than 50% of a company’s shares, they can enjoy a majority vote or a controlling stake in the company. This allows the shareholder to significantly impact the company’s crucial decisions including its policies.
- With shareholder voting, shareholders can vote on many aspects pertaining to the corporation. This can include its day-to-day operations or even appointing the board of directors who look after the company’s day-to-day operations.
Shareholders can use their voting rights to influence the choice of the organization’s directors. Investors may cast a vote in decisions such as a proposed investment opportunity.
Investors can also use their vote to be in favour or against decisions like stock split or bonus issues and maximise their benefits.
Shareholders can use their voting right to indirectly impact the company’s profitability and influence its investment success. If a company takes profitable decisions, in the long run, investors can gain from it too.
All in all, with their voting rights, shareholders can feel empowered as part owners of the company.
As per voting statistics related to the Nifty50 composite stocks, the total number of retail shareholders who exercised their voting rights is as below:
- 2016-17 – 88,685
- 2017-18 – 1,13,507
- 2018-19 – 1,21,537
This participation is not in line with the rise in the total retail shareholder base during these years. Only 0.6% of the total retail shareholders exercised their voting rights across these years.
Shareholders play an important role in a company’s decision-making by using their voting power as per their current shareholding. Whether it is about appointing an auditor and taking a decision regarding the company’s insolvency, shareholders can influence all such major decisions.
Shareholder voting is one of the important non-monetary benefits that shareholders can get once they invest in a company. By influencing a company’s decisions, shareholders can ensure future profitability for themselves.
Every shareholder of a company is intimated about any upcoming important decision surrounding the company’s benefit. Companies generally explain the process by which shareholders can exercise their voting rights. Thus, shareholders can exercise their votes either by email, in person, or by phone, depending on the company’s process.
Preferred stockholders do not enjoy voting rights in a company while common stockholders do. However, preferred shareholders enjoy priority claim to a company’s income. Thus, they are paid dividends before common shareholders and in case the company is liquidated, preference shareholders will get back their capital investment before common shareholders.
No, since bondholders are creditors of the company, they do not have ownership of the company and hence do not enjoy any voting rights.
Voting rights of shareholders are generally limited to their shareholding in the company. Thus, the number of shares held by a shareholder will determine his/her extent of voting rights.
Shareholders will be intimated by the company about any upcoming decision-making and related voting process.