A stock is one small part of the company itself, and so if you have even 1 single stock, you are a part owner of the business. Of course since the company has a large number of stocks in the market, there are many other owners too – those who have more stocks naturally hold a bigger portion of that company. So as the part owner of the company, you have certain privileges along with the many other owners too, and because of these privileges, you can be part of some of the decision making the business makes.

But before we go any further, let us take a look at why the company or its owners want to divest a portion of the ownership to others.

Why Are Stocks Sold To Divest Ownership By The Management?

The business owners need not own 100% of the stocks of the company. This is not needed to gain executive control of the business. The entrepreneur just needs to ensure that control over the maximum number of stocks are maintained to retain control. Often the company goes public and a designated portion of it is divested to bring in more stock holders. This allows the company to raise capital from the market for business expansion. Sometimes a portion of the stocks is also given to banks and other financial institutions who are the money lenders, and when such entities hold a large number of stocks, their representative can also be a part of the board to oversee the business decisions and their implementation.

Ownership Privileges of the Stock Owner – Individuals or Institutions

As the stock holder, you surely enjoy some privileges. To begin with, you have the right to cast your vote to select the Board of Directors. Plus, you can ask for the accounts or the book of records for examination, even if you are a very small investor. And of course as a compensation of your ownership, you are entitled to a portion of the company’s business profits which is distributed in the form of dividends. But it is the business that decides whether to issue the dividend or not, when to issue it and what should be the percentage of it. If there has been no profit or even if the company wants to roll back the profit amount as an investment for some expansion plan or a big project, the company may decide not to issue the dividend for the time being. But as the owner of the stock, you can expect a larger chunk of the profit when these new investments begin to bring back bigger profits.

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