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Stockholders | Types, Powers & Rights

Fernando Pale, Jennifer Lombardo
  • Author
    Fernando Pale

    Fernando Pale has taught college and highschool math and physics for over 2 years. They have a Bachelors in physics from Universidad Veracruzana. They also have Certifications in Python programming.

  • Instructor
    Jennifer Lombardo

    Jennifer Lombardo received both her undergraduate degree and MBA in marketing from Rowan University. She spent ten years in consumer marketing for companies such as Nielsen Marketing Research, The Dial Corporation and Mattel Toys. She is currently an adjunct professor of marketing at Rowan University and a social media marketing consultant.

Learn the shareholder definition and stockholder meaning. Read about the types of shareholders. Explore stockholder powers, rights, and responsibilities. Updated: 02/14/2022

What is a Shareholder?

A definition for shareholder is given as any individual, company, or institution that owns a certain number of shares within an organization, which allows them to have a specific degree of participation in the company, depending on the total percentage of shares owned by them.

A shareholder is involved in the management of the company. Their responsibility and decision-making power depends on the percentage of capital they contribute to it.


Any individual or institution that buys shares of a company becomes a shareholder.

An individual with money looking to buy shares of a profitable company.


The property of the company that corresponds to a shareholder is based on the number of shares that it has, on the total in which the capital of the same is divided. The fact of having part of that capital gives the shareholder various rights and obligations of a political and economic nature.

What is a Shareholder Activist?

Being a shareholder comes with a degree of power and influence, and any individual who makes use of it is what is known as a shareholder activist. A shareholder activist is one in a corporation who attempts to use his or her shareholding in a company to achieve certain goals. The main goal of shareholder activists is to bring about change within or for the company. They are intended to affect the behavior of a company by exercising their voting power or influencing other shareholders. A shareholder activist does not necessarily need to own a large shareholding in a company. However, a large equity stake provides the opportunity to exert greater influence over the company's operations.

The activist shareholder may have a variety of goals. Sometimes, with others, he tries to guide the business or financial strategy of the company in financial or non-financial directions.

What is a Stockholder?

The meaning of stockholder has the same definition as that of shareholder: the individual, company, or institution that owns one or more shares of a company in the stock market. While both words refer to the same thing, technically speaking, shareholder is more correct. However, both terms can be used interchangeably.

Stockholder Definition

Do you know the answer to this simple question? Who is the owner of a public company? The answer would be any stockholder, or any person or business that owns at least one share of a company's stock.

Stockholders are also known as shareholders, and they are the risk takers and supporters of businesses. If a company they invest in makes a profit, then they also have a chance to make a profit as well. On the other hand, if a company does poorly, they will also have to face a loss.

Eddie is learning all about stockholders for his economics class. He was assigned a project to purchase one share of a stock to get an understanding of what it means to be a stockholder. Eddie's project will provide you the definition of a stockholder and identify the kinds of stockholders, their objectives, the separation of powers and their legal rights and protection. In addition, the lesson will touch on the idea of shareholder activism.

Eddie has chosen to purchase one share of stock for Pear Products, a high technology company, at a cost of $123. He also was able to spend time at Pear Products' management, where he gleaned helpful information about how the company views stockholders. Let's take a look at his class project.

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  • 1:23 Kinds of Stockholders
  • 2:35 Stockholder Objectives
  • 3:54 Separation of Powers
  • 4:44 Shareholder Activist
  • 5:36 Lesson Summary
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Types of Shareholders

Shareholders are investors who own a percentage, or shares, of a company. They are entitled to a portion of the company's profits, which they receive through dividends. The different types of shareholders depend on the type of investor, type of share, and type of company.

The main types of shareholders are mentioned below:

  • Institutional shareholder: An institution. Generally, this type of shareholders grants a greater amount of capital to the company from which said shares come.
  • Individual shareholder: an individual, who through the ownership of a certain number of shares has a specific degree of participation in the company.
  • Minority shareholders: those who own a low percentage of shares, therefore having less power within the organization.
  • Majority shareholders: those who own the highest percentage of shares, and therefore the greatest power within the organization.
  • Common shareholders: those shareholders who have the right to participate directly in the administration and decision-making of the organization. This right is granted by the type of shares acquired.
  • Preferred shareholders: those who do not have the right to participate directly in the administration and decision-making of the organization. This right is granted by the type of shares acquired.

Majority vs Minority Shareholders

There are a number of features that characterize the profile of the majority shareholder.

  • Personality: This type of shareholder can take the form of both an individual and an institution. There are often groups or syndicates of shareholders that act together.
  • High decision capacity: They have great control over the companies, reaching positions of influence and responsibility.
  • Right to economic incentives: This translates into the right to benefit and the collection of a higher level of dividends or profits from the business.
  • Identity: In many cases, these types of shareholders own their predominant volume of shares by being creators or founders of the company.

Minority shareholders, on the other hand, do not share the features of the majority shareholder.

  • They have less power and control of the company because they, as individuals, own less than 50% of it.
  • They suffer from oppression when the majority acts against the benefit of the minority. This mostly happens in smaller companies.

Common vs Preferred Shareholders

Shareholders are free to decide when to market the shares they own and freely determine their value; in turn, depending on the type of shares acquired, they may have access to participate directly, through the right to vote, in the company's management. This is what it means to be a shareholder.

People who own common (ordinary) stocks are called common shareholders. A common stockholder's investment in a corporation is represented by a common stock certificate. Ordinary shareholders have the right to elect directors and to vote on mergers and other important matters. In exchange for their investment, common shareholders receive dividends declared by the board of directors.

People who own preferred shares are called preferred stockholders. As is the case with common shareholders, preferred shares do not expire; however, unlike ordinary shares, preferred shares do not grant their holder the right to vote, nor do they assign some participation in the capital of the company. Also, the return on preferred stock is not guaranteed, since it is tied to making a profit.

Kinds of Stockholders

Eddie's project illustrates that there are two kinds of stockholders. The first type is a common stockholder in which a shareholder purchases common stock and is able to vote to elect the board of directors. Eddie has purchased Pear Products common stock, so he has been able to vote on issues, such as stock splits, where a company splits current stock into multiple shares. In fact, during the time of the project, his stock split into two shares. In addition, Eddie received dividends that were declared by Pear Products and amount to quarterly payments paid to the shareholders based on profits.

Eddie did share with his class that he is ranked unfortunately behind preferred stockholders by Pear Products. Preferred stockholders receive a steady dividend before a common stockholder. This worries Eddie because if Pear Products has financial difficulties in the future, then he will not get his money back until preferred stockholders receive their money first. Eddie explains that although preferred stockholders are first in line to get paid, they cannot vote on any company issues.

Stockholder Objectives

Eddie's objective for purchasing a share of Pear Products was to make a profit. He explained to the class that there are four specific types of stockholder objectives that include short-term profit, long-term profit, strategic influence and minimizing of risk.

Eddie felt that he was initially going to be interested in just a short-term profit objective, as Pear Products was known to produce blockbuster products. After much consideration, Eddie changed his objective to long-term profit. He believed they were the leader in technology, and his one share could end up very profitable years from now.

During his tour of Pear Products, he met some investors who maintain large shares of the company so they can exert their strategic influence, or affect policy changes within the firm. Eddie revealed that his one share would not put him in that position of influence.

Eddie also had an objective to minimize risk to his investment. This is when a person invests in stock that will likely have a good return with minimal chance of a loss. He felt that although a Pear Products share was expensive, he would have a safe, sound investment with minimal risk in both the short- and long-term.

Separation of Powers

Eddie's tour of Pear Products gave him firsthand knowledge about how shareholders, managers, board of directors and employees all have separate powers that act as checks and balances within the organization. The board of directors is focused on protecting the rights of the shareholders. They have the power to fire top executives and ensure the development of excellent replacements.

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Video Transcript

Stockholder Definition

Do you know the answer to this simple question? Who is the owner of a public company? The answer would be any stockholder, or any person or business that owns at least one share of a company's stock.

Stockholders are also known as shareholders, and they are the risk takers and supporters of businesses. If a company they invest in makes a profit, then they also have a chance to make a profit as well. On the other hand, if a company does poorly, they will also have to face a loss.

Eddie is learning all about stockholders for his economics class. He was assigned a project to purchase one share of a stock to get an understanding of what it means to be a stockholder. Eddie's project will provide you the definition of a stockholder and identify the kinds of stockholders, their objectives, the separation of powers and their legal rights and protection. In addition, the lesson will touch on the idea of shareholder activism.

Eddie has chosen to purchase one share of stock for Pear Products, a high technology company, at a cost of $123. He also was able to spend time at Pear Products' management, where he gleaned helpful information about how the company views stockholders. Let's take a look at his class project.

Kinds of Stockholders

Eddie's project illustrates that there are two kinds of stockholders. The first type is a common stockholder in which a shareholder purchases common stock and is able to vote to elect the board of directors. Eddie has purchased Pear Products common stock, so he has been able to vote on issues, such as stock splits, where a company splits current stock into multiple shares. In fact, during the time of the project, his stock split into two shares. In addition, Eddie received dividends that were declared by Pear Products and amount to quarterly payments paid to the shareholders based on profits.

Eddie did share with his class that he is ranked unfortunately behind preferred stockholders by Pear Products. Preferred stockholders receive a steady dividend before a common stockholder. This worries Eddie because if Pear Products has financial difficulties in the future, then he will not get his money back until preferred stockholders receive their money first. Eddie explains that although preferred stockholders are first in line to get paid, they cannot vote on any company issues.

Stockholder Objectives

Eddie's objective for purchasing a share of Pear Products was to make a profit. He explained to the class that there are four specific types of stockholder objectives that include short-term profit, long-term profit, strategic influence and minimizing of risk.

Eddie felt that he was initially going to be interested in just a short-term profit objective, as Pear Products was known to produce blockbuster products. After much consideration, Eddie changed his objective to long-term profit. He believed they were the leader in technology, and his one share could end up very profitable years from now.

During his tour of Pear Products, he met some investors who maintain large shares of the company so they can exert their strategic influence, or affect policy changes within the firm. Eddie revealed that his one share would not put him in that position of influence.

Eddie also had an objective to minimize risk to his investment. This is when a person invests in stock that will likely have a good return with minimal chance of a loss. He felt that although a Pear Products share was expensive, he would have a safe, sound investment with minimal risk in both the short- and long-term.

Separation of Powers

Eddie's tour of Pear Products gave him firsthand knowledge about how shareholders, managers, board of directors and employees all have separate powers that act as checks and balances within the organization. The board of directors is focused on protecting the rights of the shareholders. They have the power to fire top executives and ensure the development of excellent replacements.

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Create your account

Frequently Asked Questions

What is an easy definition of a shareholder?

A shareholder is the individual or institution who owns one or more shares of a company, and this gives them the status of owner and partner with powers, rights, and benefits. The mores it has, the more it owns.

What does being a stockholder mean?

A stockholder is a person who owns a part of a company through the shares it issues. This means, for example, that if a group of people found a company, the ownership of that company is divided among its shareholders.

Is a shareholder an owner of the company?

A shareholder is an individual, company, or institution that has a share of a company's stock among its assets. Shareholders essentially own the company and therefore reap the benefits of its success.

A shareholder has the ownership of shares in which the company is divided. This makes them a partner who, at the same time, has the capacity to participate in management and decision-making bodies.

What is an example of a stockholder?

Characters like Warren Buffet, Deirdre O'Brien, John Donahoe, and Jeff Bezos are some of the best examples of stockholders. They hold big portions of shares in a number of companies.

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