How the Stock Market Operates: Do You Really Own Part of the Company?

By holding stock you really own a part of a company, which means that you have a say in how the company is run and who runs it. You may also be entitled to a share of company's profits. Stock you own can be common or preferred.

Information

As one of the owners of a company, you have the right to know how the company is run. You receive annual financial reports and, in some cases, minutes of the meetings of the board of directors.

Voting

If you are a common stockholder, you also have a say in who sits on that board. The more stocks you own, the bigger your say. When a company is electing a new board, you can cast your vote in person, by mail, or by delegating someone else to vote for you. However, you don't have a say in who the nominees are.

Dividends

You may also be entitled to a share of company's profits, paid in the form of dividends. However, a company's board of directors can decide not to pay dividends, but rather invest the profits into further expansion. If dividends are paid, preferred stockholders get them first.

References

• QFinance: An Overview of Stockholders' Agreements
• This Matter: Common Stocks, Preferred Stocks
• Shares Explained

Resources

• CNN Money: How to Buy Stocks