STOCKHOLDER RIGHTS AND

CORPORATE GOVERNANCE
Presented by Madelyn Ochoa
Stockholders (shareholders)
Legal owners of business corporations.
They are considered one of the market stakeholders
of the firm.

Two types of stockholders

Individual stockholders are people who directly own
shares of stock issued by companies.
Institutions such as pensions, mutual funds, insurance
companies, and university endowments, also own stock.
https://www.youtu
be.com/watch?v=
qGzmdQCN2rA
 CORPORATE GOVERNANCE?
The corporate governance refers to the process
by which a company is controlled, or governed

The Board of Directors

Plays a central role in corporate governance.
The board of directors is an elected group of
individuals who have a legal duty to establish
corporate objectives, develop broad policies,
and select top-level personnel to carry out
these objectives and policies.
 The Board of Directors
Contd..
Reviews management's performance to be
sure the company is well run and
stockholders interests are protected.
Vary in size, composition, and structure to
best serve the interests of the corporation
and the shareholders.
According to a survey of governance
practices in 100 market-leading firms; 12
members
 BOARD OF DIRECTORS CONTD

Chief executives, major

shareholders, bankers, The compensation committee
former government officials, The nominating committee
academics, representatives The executive committee
of the community, or retired The audit committee
executives from other firms.
Corporate of directors are
typically well paid.
 LIST OF GOOD GOVERNANCE
Select outside directors to fill most positions
Hold open elections for members of the board
Appoint an independent lead director and
hold regular meetings without the CEO
present
Align director compensation with corporate
performance
Evaluate the Boards performance on a
regular basis
 EXECUTIVE COMPENSATION
Is one of the most important
functions of the board of directors.
An important mechanism for
aligning the interests of the
corporation and its stockholders
with those of its top managers is
executive compensation.
Many critics feel that executive pay
has become excessive.
Executive compensation in the
United States, by international
standards, is very high.
In 2011, the median total
compensation of chief
executives of large
corporations was 9.6 million:
Including salaries, bonuses,
and the present value of
retirement benefits,
incentives plans and stock
options.
The highest paid executive
in 2011 was Timothy D.
Cook, the new CEO of Apple,
who took home $378 million.
Large institutions:
One reason institutions have become more active is
that it is more difficult for them to sell their
holdings if they become more dissatisfied with
management performance.

Large institutions have less flexibility than

individual shareholders, because selling a large
block of stock could seriously depress its price,
and therefore the value of the institutions
holdings.

Research shows involvement of institutional

investors can improve company performance.
 SHAREHOLDER ACTIVISM
CONTD

Social Investment:
Sometimes is called social responsibility
investment. Refers to the use of stock
ownership as a strategy for promoting
social objectives.
Stock Screening: In 2010, $3.1
Shareholders wishing to choose trillion in the
stocks based on social,
United States
environmental, or governance
criteria often turn to screened was invested in
funds. mutual funds or
Several number of mutual funds pensions using
and pension funds use social social
screens to select companies in responsibility
which to invest, overpay their
as an
executives, discriminate against
employees or do business in investment
countries with poor human rights criterion.
records.
 Shareholder Activism
Shareholder Lawsuits
If owners think they or their company have
been damaged by actions of company
officers or director, they have right to bring
lawsuits

Can be initiated to check abuses, for example

insider trading, inadequate stock buyout
price, or timely disclosure of material
information

The outcome can be very expensive for

companies
The major government agency protecting
stockholders interest is the securities and
exchange commission. Established in 1934 in the
wake of the stock market crash and the Great
Depression, its mission is to protect stockholders
rights by making sure that stock markets are run
fairly and that investment information is fully
disclosed.
 STOCKHOLDERS AND THE
CORPORATION
Stockholders have become an
increasingly powerful and vocal
stakeholder group in corporations
Provide capital
Monitor corporate performance
Assure the effective operation of
stock markets
Bring new issues to the attention of
management
 REFERENCES
Lawrence A. T. and Weber J. (2017). Business and
Society. Stakeholders, Ethics, Public Policy 15th Ed.

Town, P. (2014, November 13). Bull Market vrs Bill

Market. [VideoFIle]. Retrieved from
https://www.youtube.com/watch?v=qGzmdQCN2rA
THANKS FOR YOUR
ATTENTION!!!!!!!!