As a common stockholder, you have the right to vote on the major issues facing the corporation. You are a part owner of the company and, as a result, you have a right to say how the company is run. The biggest emphasis is placed on the election of the board of directors.
Common stockholders may also vote on:
- The issuance of bonds or additional common shares
- Stock splits
- Mergers and acquisitions
- Major changes in corporate policy
Methods of Voting
There are two methods by which the voting process may be conducted, and they are known as the statutory and cumulative methods of voting. A stockholder may cast one vote for each share of stock owned and the statutory or cumulative methods will determine how those votes are cast. The test focuses on the election of the board of directors, so we will use that in our example.
An investor own 200 shares of XYZ. There are 2 board members to be elected and there are 4 people running in the election. Under both the statutory and cumulative methods of voting, you take the number of shares owned and multiply them by the number of people to be elected to determine how many votes the shareholder has.
In this case, 200 shares x 2 = 400 votes. The cumulative or statutory methods dictate how those votes may be cast.
|1||200 votes||400 votes|
The statutory method requires that the votes be distributed evenly among the candidates that the investor wishes to vote for.
The cumulative method allows the shareholder to cast all of their votes in favor of one candidate, if they so choose. The cumulative method is said to favor smaller investors for this reason.
Liability And Transferability
InvestingVoting shares, in person or via proxy ballot, is a right every shareholder should exercise. Here's why.
InvestingThis stockholder voting structure, one of three types, has advantages and disadvantages. Here’s a look at the pros and cons of all three.
InvestingYou have the right to take part in important company decisions - even if you cannot attend the meetings.
InvestingHow your fund votes on proxy issues will reveal whether it's acting in your best interest and according to your beliefs.
Managing WealthTaking a company public doesn't mean founders must completely give up calling the shots. Before the IPO, consider these tactics to keep control after it.
InvestingElectronic voting booths need upgrades, but 3/4s of the country still votes on paper.
InsightsThe weird and wonderful scenario of an election tie.
InvestingThe decision to leave the EU underscored the growing gap between the wealthy and everyone else.
Small BusinessZuckerberg has pledged his wealth for charity, which includes his Facebook stock ownership. Here's how he will still control the Facebook business forever.
InvestingThe British people have voted to leave the European Union.