Benefits of Having Shareholders in a Company
Upon electing the seniors in the company, the shareholders tend to authorize and not the management. Most companies do benefit from shareholders as the cash is used to manage and run the company thus when shareholders are more the more profitable the company becomes. However this is two way as the shareholders too will benefit from the company and in case the company fails then the shareholders lose too. Shareholders play a big role in controls and financing in the company that’s why any company with shareholders tend to rely on shareholders and be very keen with management. Both the company and shareholders depend on each other and that’s why they must work together to achieve their goals.
The company relies on shareholders big time as they know that they hold the biggest share thus in case they blocked them the company might die. Investors need a company that generates cash and can easily meet its expectations and any company that seem inferior in meeting its goals you will never find investors there since it’ll be a waste of money and time. Investors are beneficial people and in case they realize the company they have invested on doesn’t perform adequately then they tend to quit with their shares. Shareholders are very powerful in the company as they have authority to elect the seniors i.e. the Chief Executive Officer and also the Chief Finance Officer and this is done without the management’s consent. The shareholders are beneficial as they benefit from the company and vice versa that means they need each other to prosper. The best thing any company must do is to meet their goal as that’s the only way to win the shareholder’s trust. Failure to that the company will get pressurized by shareholders and to some extend they also feel threatened since they feel the shareholders might terminate their shares if they don’t perform adequately.
If shareholders don’t push, the company might lose its value and that is a loss to all shareholders and the company that’s why shareholders must ensure effectiveness is met in the company. And that’s why most companies who have shareholders must deliver and stay focused to be able to convince the shareholders that they are reliable and can meet their target. The public companies are at a high risk of losing its shareholders since the shareholders have a say in electing new seniors and also if they feel dissatisfied they can easily quit which is a threat to the company. This is done for safety of the shares in the company as it involves a lot of investors and the stock is usually huge for shareholders to lose. The decision will be determined by shareholders and the management will do per as directed by the shareholders without any say, that means the board of directors must adhere in addressing the shareholders in case of any issue and not the management.