What Are Stockholder Voting Rights and Who Gets a Vote

Stockholder Voting Rights: What Are They and Who Gets a Vote?

Stockholder voting rights allow shareholders of a corporation to vote on corporate policy matters. Shareholders commonly express their vote by proxy, either by mailing in their response or by assigning their vote to a third-party proxy voter.

Unlike in democratic governments where individuals typically have single-vote rights, the number of votes a shareholder has corresponds to the number of shares they own. This means that someone who owns more than 50% of a company’s shares has a majority of the vote and is said to have a controlling interest in the firm.

Key Takeaways:

– Stockholder voting rights enable shareholders to vote on specific corporate actions.

– Stockholder votes pertain to major corporate actions such as electing new directors or approving new securities.

– Shareholders can vote at a company’s annual meeting or use proxy voting if they are unable to attend.

– Common shares usually carry one vote per share, while preferred shares typically have no voting rights.

Understanding Stockholder Voting Rights:

Shareholders have the right to vote on corporate actions, usually at the company’s annual shareholder meeting. These actions may include determining the composition of the board of directors, issuing new securities, initiating corporate actions like mergers or acquisitions, approving dividends, or making substantial changes to the corporation’s operations or policies.

Shareholders do not have the right to vote on day-to-day operational or management issues, as these are handled by the corporation’s officers and board of directors. However, they can vote on significant corporate matters, such as changes to the charter or board membership.

Generally, common shareholders have one vote per share, while preferred shareholders often have no voting rights.

To be eligible to vote, shareholders must be listed in the corporate records on the record date preceding the meeting. Private corporations’ charters and bylaws, along with state corporation laws, govern shareholders’ voting rights. Publicly traded companies must comply with regulations set by the Securities and Exchange Commission (SEC) and the listing exchange(s).

Voting and Quorums:

Corporate bylaws usually require a quorum for voting at a shareholder meeting. A quorum is typically reached when shareholders present or represented own over half of the corporation’s shares. Some state laws allow resolution approval without a quorum if all shareholders provide a written endorsement.

Resolutions are typically approved by a simple majority of share votes. Certain exceptional resolutions, like seeking a merger or dissolving the corporation, may require a higher percentage of votes.

Proxy Voting:

Shareholders can assign their voting rights to another party through proxy voting if they are unable or unwilling to attend the annual or emergency meetings. The proxy will then cast votes on behalf of the shareholder without consulting them. In some cases, companies or individuals may pay for proxies to gather enough votes to replace the existing management.

Before the meeting, shareholders receive proxy materials that include disclosure documents, a proxy statement, and a Proxy Card or Voter Instruction Form. The designated proxy collects these cards and casts proxy votes according to the shareholder’s instructions.

Proxy votes can be cast by mail, phone, or online before the cutoff time, usually 24 hours before the meeting. Options include "For," "Against," "Abstain," or "Not Voted."

The Impact of Stockholder Votes:

In large publicly held companies, shareholders have more influence by electing directors. However, in small, privately held companies, officers and directors often own significant portions of shares, limiting the impact of minority shareholders’ votes. It is also possible for one person to own a controlling share of the company’s stock, granting them substantial decision-making power. While shareholders may vote on elections or resolutions, their votes may not significantly affect major company issues.

How to Vote By Proxy as a Shareholder:

If you cannot attend a company’s annual meeting, you can vote by proxy. The company will provide information on the upcoming vote, along with instructions for proxy voting by mail, phone, or online. Some companies offer voting through an app. Proxy votes must be cast before the set cutoff time, usually 24 hours before the meeting.

What Is a Controlling Interest in a Company?

A shareholder or group of shareholders is considered to have a controlling interest in a company when they hold more than 50% of the company’s voting stock. Having a controlling interest allows them to influence many of the company’s decisions.

In conclusion, stockholder voting rights enable shareholders to vote on specific corporate actions. These votes are cast at annual meetings, but if shareholders cannot attend, they have the option to vote by proxy. While shareholders have the power to vote on major corporate actions, the day-to-day operations are managed by the corporation’s officers and board of directors.