A shareholder, also called a stockholder, is a person, company or institution that owns one or more shares of a company's stock. Owning shares makes the holder a part-owner of the business, with rights to vote on certain decisions, to receive any dividends the company declares and to receive information about how the company is run. In UK company law the formal term is "member", and the company's register of members lists them.
Shareholders range from individuals with a handful of shares to pension funds, insurers and asset managers holding billions of dollars of stock on behalf of savers. A shareholder is different from a stakeholder: employees, customers, suppliers and local communities all have a stake in a company's success, but only shareholders own it. The terms "shareholder" and "stockholder" mean the same thing; US corporate statutes such as Delaware's tend to say "stockholder". Because shareholders usually hire managers to run the business for them, the gap between owners' and managers' interests creates agency costs, such as monitoring expenses and decisions that favour managers.
Think of a members' sports club. Each member has paid in, so each owns a share of the club. Members do not run the bar or mow the pitch; they elect a committee to do that, and they get a vote at the annual meeting. They see the accounts each year. If the club makes a surplus, the committee might hand some back to members. If it goes bust, members lose what they put in, but nobody can chase them for the club's unpaid bills.
A shareholder is in the same position. The amount at stake is what they paid for their shares and no more, they choose the board that supervises the managers, and their reward depends on how the business performs.
The precise rights depend on company law where the company is incorporated, its articles or charter, and the class of share held. Holders of common stock usually have the broadest rights; holders of preferred stock typically give up voting in exchange for priority on dividends. The main rights are:
- Limited liability. A shareholder's loss is capped at the amount invested; the company's creditors cannot pursue shareholders' personal assets, except in rare cases where courts disregard the company as a sham.
- Voting. Shareholders elect directors and approve major actions such as mergers and changes to the charter. Most vote through proxy voting before the annual meeting.
- Dividends. Shareholders share in any dividend the board declares, in proportion to their holdings; the date that decides who qualifies is tied to the ex-dividend date.
- Information. Listed companies must publish an annual report and other filings. In Delaware, Section 220 of the General Corporation Law lets a stockholder inspect books and records for a proper purpose.
- Proposals and meetings. In the US, SEC Rule 14a-8 lets shareholders who meet holding thresholds put proposals on the company's proxy ballot; in the UK, members holding at least 5% of voting rights can require the directors to call a general meeting under the Companies Act 2006.
- Legal action. Shareholders can sue directors on the company's behalf in a derivative action, or bring class actions for securities fraud.
Record owners and beneficial owners
Most shareholders today never appear on the company's books. A registered or "record" owner is named in the register kept by the company's transfer agent, either holding a certificate or a book-entry position, for example through the Direct Registration System in the US. A beneficial owner is the person who enjoys the economic benefits of the shares even though someone else is the record holder.
In the US the bulk of listed shares are registered in the name of Cede & Co., the nominee of the Depository Trust Company (DTC). DTC's participants, mainly brokers and banks, keep records of how many shares each customer owns. Shares held this way are said to be held in "street name". It makes trading and settlement fast and cheap, but it adds layers between the company and its owners: dividends, proxy material and votes all pass through the chain of brokers and intermediaries. US rules let beneficial owners choose whether the company may learn their identity; those who agree are called non-objecting beneficial owners (NOBOs), and those who refuse are objecting beneficial owners (OBOs). Similar nominee and custodian chains exist in Europe, where the Shareholder Rights Directive (2017/828) requires intermediaries to help companies identify their shareholders and pass on information.
Retail shareholders are individuals who buy shares directly or through a custodial account. Institutional shareholders, such as pension funds, insurers, hedge funds and managers of mutual funds, hold most of the shares in large listed companies in the US and UK and therefore carry most of the votes. Large asset managers use investment stewardship teams to vote and to hold corporate engagement meetings with boards.
A controlling shareholder holds enough votes to decide outcomes alone, as is common in family-owned firms, in companies with dual-class shares and in subsidiaries of a holding company. Activist shareholders buy a stake and push for changes in strategy, management or capital returns. In the US, anyone who acquires more than 5% of a listed company's voting shares must disclose the stake to the Securities and Exchange Commission (SEC), and directors, officers and 10% holders face reporting rules and restrictions linked to insider trading. This strategy is known as activist investing, and campaigns often rely on public letters, proxy fights and board nominations to win support from other shareholders.
All of these arrangements sit inside the wider system of corporate governance, which sets out how shareholders, boards and managers share power. In regulated industries such as banking and money transmission, supervisors also vet significant shareholders before they take control, a process described under management and shareholder verification.