A shareholder or stockholder is an individual or institution (including a corporation) that legally owns a share of stock in a public or private corporation. Shareholders are the owners of a limited company. They buy shares which represent part ownership of a company.
Stockholders are granted special privileges depending on the class of stock. These rights may include:
- The right to sell their shares.
- The right to vote on the directors nominated by the board.
- The right to nominate directors (although this is very difficult in practice because of minority protections) and propose shareholder resolutions.
- The right to dividends if they are declared.
- The right to purchase new shares issued by the company.
- The right to what assets remain after a liquidation.
Stockholders or shareholders are considered by some to be a subset of stakeholders, which may include anyone who has a direct or indirect interest in the business entity. For example, employees, suppliers, customers, the community, etc., are typically considered stakeholders because they contribute value and/or are impacted by the corporation.
Shareholders in the primary market who buy IPOs provide capital to corporations; however, the vast majority of shareholders are in the secondary market and provide no capital directly to the corporation.