What are 'Voting Shares'

Voting shares are shares that give the stockholder the right to vote on matters of corporate policy making as well as who will compose the members of the board of directors.

BREAKING DOWN 'Voting Shares'

Different classes of shares, such as preferred stock, sometimes do not allow for voting rights. The holders of voting shares have the ability to weigh in on decisions about a company’s future direction. For instance, if a company is considering an acquisition offer by another company or a group of investors, the owners of voting shares would be able to cast their vote on the offer.

Shareholders who own voting shares typically receive regular communications from the company regarding matters that would require a vote for the organization to act. The decision to vote or not vote on such issues does not directly affect their ownership of shares or their value, however there may be subsequent actions that result from the votes that may affect market value.

How Voting Shares Can Affect the Direction of a Company

It is not uncommon for so-called activist investors to seek the support of the owners who hold voting shares to cast their vote in favor of an action or decision the activist investor want the company to pursue. Hostile bids to acquire a company may see the prospective buyers campaign to the holders of voting shares in the hopes of gathering enough support to effect a new direction at the company. This may include a change of the current board of directors, which would allow for further changes at the organization such as the removal and replacement of executive officers of the company.

If the board of directors agrees to such actions as the sale of the company, the approval process for the deal includes a vote among shareholders who own voting shares. The owners of voting shares could reject an offer if they believe the bid does not meet their valuation of the company.

Depending on the types of shares issued, shareholders may have varying levels of voting power. For example, a company may reserve a class of shares for the founders, upper management, and early employees of the company that grants each of them several votes for each share they own. They then might issue additional voting shares that carry just one vote per share. Shares that hold no voting power may also be issued.

Such an arrangement would grant a segment of stakeholders greater individual voting power for the decisions that shape the organization. The different types of voting shares might also have different market value, particularly if new shares are offered through a stock split.

RELATED TERMS
  1. Voting Right

    The right of a stockholder to vote on matters of corporate policy ...
  2. Voting Trust Agreement

    A voting trust agreement transfers the voting rights of shareholders ...
  3. Voting Trust

    A voting trust is a legal trust created to combine the voting ...
  4. Class A Shares

    Class A shares refer to a classification of common stock that ...
  5. Class B Shares

    Class B Shares are a classification of common stock that may ...
  6. Common Shareholder

    The rights of common shareholders give shareholders the ability ...
Related Articles
  1. Investing

    How Your Vote Can Change Corporate Policy

    Shareholders are getting a bigger say in how companies are run. Find out how you can be heard.
  2. Investing

    Britain Votes to Leave the European Union

    The British people have voted to leave the European Union.
  3. Tech

    How Blockchain Technology Can Prevent Voter Fraud

    As a technology, blockchain is quickly becoming unrivaled. One of the biggest problems that blockchain’s decentralized muscle can solve is voter fraud.
  4. Tech

    Bitcoin May Go Up if Italy Referendum Votes 'No'

    If Italy votes 'No' on Sunday, the Eurozone economy may destabilize. Awesome news for Bitcoin.
  5. Investing

    Why the AB InBev Miller Merger Is More at Risk

    As shareholder voting gets underway on the $100 billion merger of SABMiller (NASDAQOTH: SBMRY) with Anheuser-Busch InBev (NYSE: BUD), the risk of the deal getting blocked by a small group of ...
  6. Investing

    What are Class B Shares?

    Class B shares are one classification of common stock issued by corporations.
  7. Investing

    Zynga Founder Gives Up Voting Control

    Zynga founder Mark Pincus has agreed to convert his 'super-voting' shares into common shares.
  8. Investing

    FTSE Could Lose 20% On Brexit Vote: UBS

    UBS analyst says the FTSE could fall as low as 4900 if the U.K. votes to leave the EU
  9. Managing Wealth

    Executive Pay: How Much Do Shareholders Really Care?

    How much do shareholders - or the public - really care about executive pay? A new SEC proposal may be aimed at finding out.
  10. Insights

    A Breakdown on How the Stock Market Works

    Learn what it means to own stocks and shares, why shares exist, and how you buy and sell them.
RELATED FAQS
  1. Do Shareholders Get a Say in a Firm's Operation?

    Stock ownership often provides a vote on board membership and other issues put out for shareholder approval. Read Answer >>
  2. What can shareholders vote on?

    Understand the usual voting rights of common stock shareholders, along with the importance of shareholders exercising their ... Read Answer >>
  3. Why would a company have multiple share classes, and what are super voting shares?

    Before investing in a company with multiple share classes, be sure to learn the difference between them. Read Answer >>
  4. What Voting Rights Do Shorted Shares Have?

    When it comes to short sales, the problem that arises is determining who is the holder of record. Read Answer >>
  5. How do a corporation's shareholders influence its Board of Directors?

    Find out how shareholders can influence the activity of the members of the board of directors and even change official corporate ... Read Answer >>
Hot Definitions
  1. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  2. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  5. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
  6. Ratio Analysis

    A ratio analysis is a quantitative analysis of information contained in a company’s financial statements.
Trading Center