Shareholder facts for kids
A shareholder is someone who owns a small part of a company. When you buy a share, you are investing your money in that company. This means you become a part-owner!
Shareholders get to vote on important decisions, like choosing the people who run the company. These people are called the board of directors, and they help guide the company's plans and make sure it's managed well.
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A shareholder is a person, group, or even another company that owns one or more shares of a company's stock. Think of a company as a big pie. If you buy a share, you get a small slice of that pie. The more shares you own, the bigger your slice!
Companies need money to grow, invent new things, or expand their business. One way they get this money is by selling shares to people. When you buy a share, you're giving the company money, and in return, you get a piece of ownership.
Shareholders can make money in a few ways:
- Dividends: Some companies share a part of their profits with shareholders. This is called a dividend, and it's like getting a small reward for owning a piece of the company.
- Stock Price Increase: If the company does well, its shares might become more valuable. If you sell your shares later for more than you paid for them, you make a profit!
Being a shareholder comes with certain rights, which are like special privileges:
Voting Rights
One of the most important rights is the ability to vote. Shareholders can vote on:
- Electing Directors: They choose the members of the board of directors. These directors are like a team of leaders who make big decisions for the company.
- Major Company Decisions: Sometimes, shareholders vote on very important company actions, like merging with another company or changing the company's rules.
Information Rights
Shareholders also have the right to get information about the company. This includes:
- Financial Reports: They can see how much money the company is making or spending.
- Annual Meetings: They can attend meetings where company leaders talk about what's happening and what's planned for the future.
There are different kinds of shares, but the two main ones are:
Most shareholders own common shares. These usually come with voting rights, meaning you get to have a say in how the company is run. The value of common shares can go up or down a lot, depending on how well the company is doing.
Preferred shares are a bit different. They usually don't have voting rights. However, preferred shareholders often get paid dividends before common shareholders, and they might get their investment back first if the company ever closes down.
The Role of the Board of Directors
The board of directors is a group of people elected by the shareholders. Their main job is to oversee the company's management and make sure it's being run properly and ethically. They set the company's goals and strategies, but they don't usually handle the day-to-day operations.
The idea of owning a part of a company through shares has been around for a long time. One of the earliest examples was the Dutch East India Company, founded in 1602. People could buy shares in this company to fund long voyages to trade goods. This allowed many people to invest small amounts of money, sharing both the risks and the rewards of these big adventures.
