Shareholders in Business

How do Shareholders Influence a Business

For a company to have a profitable year it means that what power do shareholders have in business? The shareholders in business are the ones that own a percentage of the business. It is the shareholders that decide how much they want to invest and when they want to invest. If a shareholder agrees to invest a certain amount, they will receive that amount plus whatever dividends are given. The amount of profit for a business will be dependent on what power do shareholders have in business.

A shareholder can invest in a company that has the company already in operation or they can invest in a new start up company. When a shareholder invests in a new start up company, there is potential for them to earn even more profits than they would with an established company. Investors who buy into these companies have more control than they would have if they invested in a company that was already successful. Investors like this are usually called founders.

One of the most important questions that needs to be asked when talking about what power do shareholders have in business is what happens to the company in the event of a bankruptcy. The shareholders will suffer the loss of the business because they are the ones who put money into the business. If there is a successful business they get a percentage of the profits and the losses of the business are theirs. If a company goes out of business, they don’t lose anything because they are not the ones that invested in the company.

Usually, when a company is going through a loss they will make some cuts to different areas of the business. There may be some reduction in the work force or some of the products may be substituted. Some smaller businesses will make their profit by paying cash dividends. Other areas of the business that aren’t so small will pay out profits to the shareholders in the form of dividends. These dividends are paid on a regular basis either monthly or yearly depending upon the wishes of the shareholders.

It is important to note that what power do shareholders have in business isn’t the same thing as how much they have. A shareholder doesn’t have the right to have control over what goes on with the company. They can’t hire the employees, for example. If the company has been established and is doing quite well then it isn’t necessary to pay out any dividend because the company will be doing well anyway. So, just because a shareholder receives a profit for the business does not mean that they have any say over what happens at the company.

In order to understand what power do shareholders have in a business it helps to look at what power do shareholders have in the financial world. When a business is successful there is usually an increase in the net worth of the business. The shareholders receive a profit from the business because they invested in it. This profit is what is known as the equity in the business. When the equity increases then so does the shareholder’s share, which is what power do shareholders have in business.

The question at hand is what power do shareholders have in the sense of being able to change the direction of the company? Obviously if the shareholders don’t think that the direction is moving in the right direction then they can vote them out of office. This isn’t always possible though. If the company is successful financially then it is very likely that the shareholders won’t have much to say because they will be entitled to their dividends automatically.

It is a good idea to keep track of what power do shareholders have in business. This way you will know whether or not you need to concern yourself with voting out certain directors or shareholders. If you find that there is a conflict of interest with one director against another then you should take the matter into your own hands and remove them. It may seem like a difficult task but the best interests of the business are what you need to be thinking about at all times.

Dan Lewis is a business and finance consultant who stared is career with Capital One and worked as a business and finance analyst for over 25 before leaving the corporate world to create this blog.