Role of Shareholders Essay Example | Topics and Well Written Essays - 3000 words

Role of Shareholders - Essay ExampleHowever, state laws and company bylaws determine the areas in which shareholders are entitled to vote Shareholder force plays One of the main areas where shareholders are gener all(prenominal)y entitled to delectation their power is the election of the board members who are the agents of the corporation. The board of directors acts on behalf of the shareholders and is responsible for the maximization of shareholder prise by incorporating appropriate policies through the managers they select for corporate operations (Reference for Business 2012). Any fundamental transfer which the organization plans to incorporate needs to be approved by the shareholders before implementation (Miller 2012). This implies that they have the power to approve a merger, change or amend the articles of incorporation of a firm, affect the sale of all or part of the companys assets or even approve the dissolution of the corporation (Ronen and Yaari 2007). However, in ma ny of such decisions prior board approval is required. They non only have the power to take in the members of the board of Directors but also to vote against them if found to be inefficient and remove them from the board. Generally a director is removed if there is sufficient cause for voting him out. However, certain state statutes and corporate articles acknowledge their removal without any cause (Miller 2012). This means that if majority of shareholders feel that a particular director is not required, they laughingstock vote him /her out of office without giving any justification for their action. Shareholders can impact a company policy by proposing their own ideas for shareholder vote. However, for this they need to presend their idea to the board of directors and affect them to distribute it to all the shareholders before the shareholder meeting by including it in the proxy papers sent to them (Miller 2012). However, this power is demarcationed by the fact that SEC (Secu rities and Exchange Commission) has set a limit to who can forward these proposals. As per SEC, only those shareholders who have stocks worth at least $1000 can relegate such proposals (Miller 2012). This submission is also limited by the fact that the proposal should be related to close to noteworthy policy concern and not any ordination day to day operational affection (Ronen and Yaari 2007). Thus, we can see that though the shareholders have the powers to affect change, they are limited in their use of power. In general, each shareholder has voting rights in proportion to the number of shares held by him/ her. However, the company can limit the voting rights of certain categories of shareholders (Miller 2012). For example, most organizations do not give voting rights to preferred shareholders. The companies can do this by incorporating the same in the articles of incorporation. However, if the laws of the State of operation do not allow such provisions, hence the organization has to abide by the law. Some times preemptive rights are granted to shareholders. This gives them the right to need to the same percentage of new shares being issued as they already hold in the company (Miller 2012). This helps them to substantiate their proportionate control over the organization in terms of voting power and financial care (Miller 2012). The implication of this right is significant when the organizati