Shareholders own a piece of a company, and that ownership comes with a specific set of rights: voting on major corporate decisions, receiving a share of profits, and claiming a portion of company assets if the business closes. What shareholders generally do not do is run the company day to day. Their role sits between passive investor and active decision-maker, and the exact powers they hold depend on what type of shares they own.
Vote on Major Company Decisions
The most visible thing shareholders do is vote. Common stockholders typically get one vote per share, and they use those votes at annual or special meetings to shape the company’s direction on big-picture issues. The single most important vote is electing the board of directors, the group that oversees management on shareholders’ behalf. Beyond board elections, shareholders may vote on mergers and acquisitions, executive compensation packages, stock splits, and changes to the company’s charter or bylaws.
Voting can happen in person at a shareholder meeting or, more commonly, by proxy. A proxy is simply a form that lets you cast your vote remotely. If you own stock through a brokerage account, you’ll typically receive proxy materials by mail or email before an annual meeting, with instructions for submitting your choices online. Each share you hold counts as one vote, so larger shareholders carry more influence over outcomes.
Preferred stockholders, by contrast, usually do not get voting rights. They trade that influence for other benefits, primarily a more reliable income stream and higher priority when the company pays out money.
Receive Dividends
When a company earns a profit and decides to distribute some of it, shareholders receive dividends. Not every company pays dividends. Many fast-growing companies reinvest all their earnings instead. But for companies that do pay, dividends are one of the most tangible benefits of ownership.
Preferred shareholders get paid first, and their dividend is typically a fixed amount set when the shares are issued. If the company misses a preferred dividend payment, it must pay any accumulated arrears to preferred shareholders before it can send a single dollar to common shareholders. Common shareholders may or may not receive dividends depending on the company’s performance and the board’s decision about how to allocate profits. When dividends are paid to common shareholders, the amount can vary from quarter to quarter.
Benefit from Rising Share Prices
Beyond dividends, shareholders make money when the value of their shares increases. If you buy stock at $40 a share and it rises to $60, you have a $20 per-share gain you can realize by selling. This potential for price appreciation, often called capital gains, is the primary reason many people invest in common stock. Preferred stock prices tend to be more stable since their value is tied closely to their fixed dividend, while common stock prices can swing more dramatically based on the company’s growth prospects and overall market conditions.
Claim Assets If the Company Dissolves
If a company goes bankrupt or shuts down, its remaining assets are sold and the proceeds are distributed in a strict order. Creditors come first: banks that issued loans, bondholders, and anyone else the company owes money to. After all creditors are paid, preferred shareholders are next in line. Common shareholders are last, receiving whatever is left, which in many bankruptcy cases is nothing.
This priority system, called a liquidation preference, also applies in situations that aren’t technically bankruptcies. In venture capital, for example, the sale of a startup is often treated as a liquidation event. Venture capital investors holding preferred shares get repaid before the founders and employees who hold common stock. Understanding where you fall in this order matters most when a company is in financial trouble, because it determines whether you’ll recover any of your investment.
What Shareholders Don’t Do
Shareholders own the company, but they don’t manage it. The modern corporate structure separates ownership from control. Shareholders elect a board of directors, the board hires executives like the CEO, and those executives handle the daily operations: setting prices, hiring employees, negotiating contracts, and making strategic calls. A shareholder who owns 100 shares of a retail company can’t walk into headquarters and start directing inventory decisions.
This separation exists because most public companies have thousands or even millions of shareholders. Coordinating that many people on everyday business decisions would be impossible. Instead, shareholders exercise their influence indirectly, through board elections and votes on major corporate actions. If shareholders are unhappy with management, their primary tools are voting to replace board members or selling their shares.
Large institutional shareholders, like mutual funds and pension funds, sometimes have more direct influence. They may meet privately with company leadership to push for changes in strategy, executive pay, or environmental and governance practices. But even these large investors operate within the same legal framework: they vote their shares and engage with the board rather than stepping into operational roles.
Common Stock vs. Preferred Stock Rights
The type of shares you hold determines your specific rights as a shareholder. Common stock gives you voting power and unlimited upside if the company grows, but you’re last in line for dividends and liquidation payouts. Preferred stock gives you a fixed dividend and higher priority for payments, but you typically give up voting rights and your shares won’t appreciate as much during a boom.
Many investors hold common stock because they want growth potential and a say in how the company is run. Preferred stock appeals to investors who prioritize steady income and lower risk. Some companies issue multiple classes of common stock with different voting weights, which lets founders or early investors maintain control even after selling shares to the public. If you’re evaluating a stock purchase, check the share class to understand exactly which rights come with it.
How to Exercise Your Shareholder Rights
If you own individual stocks, you’ll receive proxy materials before each annual meeting. Read through the proposals, which typically cover board nominees, executive compensation plans, and any shareholder-submitted resolutions. Submit your proxy vote by the stated deadline, either online, by phone, or by mail.
If you own stocks through a mutual fund or exchange-traded fund, the fund manager votes on your behalf. You don’t get a direct say in those votes, though many fund companies publish their proxy voting guidelines and results so you can see how they’re using your collective influence.
Attending an annual meeting, whether in person or virtually, gives you the chance to ask questions directly to company leadership. Public companies are required to hold these meetings, and they’re open to all shareholders of record. For most individual investors, staying informed and consistently voting your proxy is the most practical way to participate in corporate governance.