Public companies have both shareholders and employees, and must find ways to maximize their value separately. Shareholders are considered partial owners of an organization, although business owners retain majority ownership. Employees work for companies and receive wages for their job performance, but do not own any part of the company unless they purchase stock or acquire it through benefits. Managers who understand the importance of shareholders and employees find ways to maintain shareholder and employee satisfaction.
When investors buy shares of a company’s stock, they acquire ownership rights to the organization. However, shareholder ownership rights are usually limited. A corporation’s bylaws outline the specific rights of shareholders. In most cases, shareholders acquire rights to vote in members of a corporation’s board of directors, and to vote on certain issues that impact the organization. The voting power of shareholders is dependent on the number of individual shares owned. Shareholders possess certain rights to a company’s assets and dividends. If a company goes bankrupt, a bankruptcy court may award shareholders the rights to receive money from the liquidation of the company’s assets.
Importance of Shareholders
Companies depend on shareholders to buy their stocks to raise money for growth, research, development and marketing. The importance of shareholders to a business causes some managers to cater to the desires of shareholders without considering how they affect employees. In some cases, shareholders can pressure firm directors by refusing to reelect them, effectively excluding employee interests. Shareholders who exercise their power are usually institutional shareholders with a large financial interest in the company. If an institutional investor buys a large amount of a company’s shares to gain control of the company, the institutional investor is engaging in a hostile takeover.
Although different from shareholders' rights, employees also have rights within a company. Employees are protected from discriminatory acts by employers, such as decisions based on sex, age, gender, sexual orientation, race, religion and national origin. Most state laws grant employees the right to privacy. Employers are prohibited from sharing employees’ personal information and accessing employees’ personal possessions without approval. Employees can seek legal counsel if they feel their employer violated their rights under federal or state law. In some companies, employees may also own shares of their employer’s stock as part of their benefits package, making them shareholders as well. Employees who own shares possess both shareholder and employee rights.
Importance of Employees
Employees are important to businesses, because they directly affect productivity and profitability. A company that sacrifices employee morale to cater to shareholders may find themselves with an unmotivated workforce. Employees who lack motivation do not benefit an organization. Employers must take an interest in the satisfaction of their employees. When employees are happy, organizations experience an increase in productivity and employee morale. A company’s management and leadership skills play an important role in employee satisfaction.
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