Shareholder Definition, Roles, and Types of Shareholders

Negative shareholder equity means that the company’s liabilities exceed its assets. This is the percentage of net earnings that is not paid to shareholders as dividends. Retained earnings are part of shareholder equity as is any capital invested in the company. The dictionary definition of a shareholder, also known as a stockholder, is a person who holds at least one share in a company. They’re not the same as a stakeholder though – this is someone who has an interest but doesn’t necessarily hold shares.

  1. UK businesses must file an annual confirmation statement with Companies House containing details of all shareholders, and this statement is publicly available.
  2. If a company’s shareholder equity remains negative, it is considered to be balance sheet insolvency.
  3. Shareholders, also called “stockholders,” are people, organizations, and even other companies that own shares of stock in a company and therefore are partial owners of a business.
  4. There is no personal liability if a company faces insolvency – creditors will not be able to pursue them.
  5. Shareholder and Stakeholder are often used interchangeably, with many people thinking that they are one and the same.

Stakeholders and shareholders also may have competing interests depending on their relationship with the organization or company. But these ways of increasing profits go directly against the interests of stakeholders such as employees and residents of the local community. Shareholders buy shares in a business with the intent of earning a profit either from dividend payments made by the company, or through an appreciation in the market price of the shares. In older, more established companies, majority shareholders are frequently related to company founders. That’s why many companies often avoid having majority shareholders among their ranks. The shareholder, as already mentioned, is a part-owner of the company and is entitled to privileges such as receiving profits and exercising control over the management of the company.

shareholder American Dictionary

These decisions may increase shareholder profits, but stakeholders could be impacted negatively. Therefore, CSR encourages corporations to make choices that protect social welfare, often using methods that reach far beyond legal and regulatory requirements. A shareholder is interested in the success of a business because they want the greatest return possible on their investment. Stock shareholder meaning prices and dividends go up when a company performs well and increases its value, which increases the value of stocks the shareholder owns. For example, a shareholder might be an individual investor who is hoping the stock price will increase because it is part of their retirement portfolio. Shareholders have the right to exercise a vote and to affect the management of a company.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. Shareholders are also protected by the mandatory offer rule under the Takeover Code in the UK.

Buying a stock, which represents an ownership claim in a company, provides certain rights. While common shareholders might be the last to be paid when it comes to liquidation, this is balanced by other opportunities such as share-price appreciation. Although the SEC and other regulatory bodies attempt to enforce a certain degree of shareholder rights, well-informed investors who fully understand their rights are less susceptible to risks.

Shareholders are always stakeholders in a corporation, but stakeholders are not always shareholders. A shareholder owns part of a public company through shares of stock, while a stakeholder has an interest in the performance of a company for reasons other than stock performance or appreciation. (They have a „stake“ in its success or failure.) As a result, the stakeholder has a greater need for the company to succeed over the longer term. In the event of the liquidation or sale of a business, shareholders have residual rights to any remaining assets. If there are no residual assets remaining after creditors have been paid, then the shareholders will have lost their investment in the business. Conceptually, shareholders have the greatest risk of loss of any stakeholders in a business, but can also profit the most handsomely from an increase in the value of the business.

SE is a number that stock investors and analysts look at when they’re evaluating a company’s overall financial health. It helps them to judge the quality of the company’s financial ratios, providing them with the tools to make better investment decisions. UK businesses must file an annual confirmation statement with Companies House containing details of all shareholders, and this statement is publicly available. If a shareholder has more than 50% of stock, they’re a majority shareholder; if it’s less than that, they’re a minority shareholder.

You’ll find a wealth of further information about shares, dividends, preferred stock and common stock in our extensive glossary. The Companies Act gives all shareholders certain basic rights, but minority shareholder rights under the Act are rather limited. For example, those with a shareholding of 5% or more can require the circulation of a written resolution, to require the company to call a general meeting, and to prevent the deemed re-appointment of an auditor.

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Common shareholders have an equity stake in the business as well as a voting right equal to their percentage of ownership. Common shareholders elect the board of directors who in turn appoint the executives to run the company. However, preferred stockholders are further in front in the queue, i.e. preferred stockholders are paid first, and common shareholders will get what’s left over. Stakeholders make up a broad group that includes anyone who stands to be affected by the business (employees, investors, etc.). Although stakeholders include creditors and shareholders, stakeholders do not necessarily provide capital to the business and may not receive a payment like shareholders and bondholders.

All shareholders are stakeholders, but not all stakeholders are shareholders. A CEO is a stakeholder in the company that employs them, since they are affected by and have an interest in the actions of that company. Many CEOs of public companies are also shareholders, especially if stock options are a part of their compensation package. However, if a CEO does not own stock in the company that employs them, they are not a shareholder.

Aside from stock (common, preferred, and treasury) components, the SE statement includes retained earnings, unrealized gains and losses, and contributed (additional paid-up) capital. Shareholders can be individuals, groups of people, a partnership or an organisation. The largest risk of being a common stockholder is that they are in the back of the queue if the company goes bust. Under this theory, prioritizing the needs and interests of stakeholders over shareholders is more likely to lead to long-term success, both for the business and for the communities that it is a part of. This stakeholder mindset is, in turn, likely to create long-term value for both shareholders and stakeholders.


A high rate of both inventory turnover and accounts-receivable turnover increases shareholder value. M&S also faced scrutiny at its AGM for paying a £1.6 million bonus to its chief executive but no dividend for the last two years, with 30% of shareholders voting against its executive pay policy. Shareholders in UK companies have the right to attend a general meeting and vote, with shares typically carrying one vote each.

This measure excludes Treasury shares, which are stock shares owned by the company itself. Being a shareholder confers certain rights and responsibilities such as voting rights and the right to receive dividends if the company makes a profit. Stakeholder Theory suggests that prioritizing the needs and interests of stakeholders over those of shareholders is more likely to lead to long-term success, health, and growth across a variety of metrics. Shareholders have the power to impact management decisions and strategic policies. However, shareholders are often most concerned with short-term actions that affect stock prices. Stakeholders are often more invested in the long-term impacts and success of a company.


If the company is getting liquidated and its assets are sold, the shareholder may receive a portion of that money, provided that the creditors have already been paid. In addition to the six basic rights of common shareholders, investors should thoroughly research the corporate governance policies of the companies they invest in. These policies determine how a company treats and informs its shareholders.