Stockholder
Max B. E. Clarkson and Michael Deck
Is the owner of one or more shares of the authorized common stock issued by a corporation; also called shareholder. Share certificates specify the number of shares owned, which entitles the holder to a proportionate share of any distribution of the corporation’s residual equity, after the payment of the claims of creditors, employees, and governments. The shares are not assess able and the stockholder has no liability for claims against the company. The stockholder’s return on investment may be realized through dividends or an increase in the value of the shares. But there may also be no dividends and the company’s shares may decline in value or become worthless.
Stockholders have rights, such as voting for directors and auditors, attending annual or special meetings, and voting on changes in the capital structure of the company. However, the stockholders do not ‘‘own the company.’’ The corporation is not a piece of property. The board of directors, elected by the stock holders, is legally responsible for the management of the corporation. The fiduciary duty of the board is to the corporation itself and not solely to the stockholders in order to maximize their wealth. ‘‘Constituency statutes,’’ now enacted in over forty states, recognize explicitly that the board may consider the best interests not only of stockholders, but also of the corporation’s other stakeholders, such as the employees, customers, suppliers, and communities.
The corporation is a legal construct of society for accomplishing economic and social ends through the attraction and employment of private capital. Economic theory as commonly taught asserts that the relationship between the stockholder and the management of a publicly held corporation is a simple extension of the relationship between an entrepreneur (as principal) and a hired manager (as agent). This leads to the erroneous notion that ‘‘managers are agents of the stockholders.’’ Managers are in fact and in law agents of the corporation.