When we think of corporate governance, we generally think of a board of directors or family. Both are important, but there is another group no less important, perhaps even more so, than the board of directors that works for them: the shareholders. Stocks are often passed off as a tax strategy. In some cases, there are so many shareholders that it's not clear who they are. For many, this means much more than obtaining a nominal or significant financial return on the businesses they own. Shareholders who are not educated, involved, and informed don't remain shareholders for a long time.
Shareholders own the company and are responsible for approving changes that will affect the organization in general, such as electing or removing directors, reviewing the bylaws, conducting mergers and acquisitions, altering the capital structure and organizational culture. This does not mean that the shareholders define the strategic vision for the company, since the board does this. They also don't get involved in daily operations as management does this. But shareholders can influence company matters through monitoring.
Talking about responsible shareholders involves a conversation about shareholder rights and responsibilities. While the shareholder is entitled to the expected return on the capital invested in the company, he must know how to interpret a balance sheet, the statement of cash flow and income, to be able to engage in a conversation about possible liquidity needs for capitalization, for example.
While the shareholder has the right to information and transparency, they must strive to comply with meeting schedules and read the materials provided by the company. Shareholders are also involved in selecting the members of the board of directors, as they are the ones who represent them in decision-making. Therefore, they need to understand the role of the board, create job descriptions and prospectus, helping to ensure that appropriate members are selected. In addition, elected members who represent the shareholder group and educate new shareholders as they join, allow the entrepreneur's mentality and family values not to be lost from one generation to the next.
Shareholders are also entitled to transfer ownership, in accordance with the contract. Creating and financing ways for shareholders to clearly transfer their shares allows those involved to remain, ensuring that the company does not experience financial difficulties during transfer periods.
It should be borne in mind that responsible shareholders are not just listed. They create reciprocal relationships with the board of directors or family. Being a shareholder also means staying informed of company matters. Receptive shareholders don't show up overnight. But with time and effort, they can add real long-term value and help with good governance.
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