Anyone who owns one or more of a corporation’s shares can be referred to as a “shareholder”. When you’re a shareholder it means that if the corporation gets better over time your shares will be worth more money, and if the company gets worse over time your shares might be worth nothing. Another thing you usually get when you own a share is a vote on some SUUUUPER important things that we don’t have words yet to describe. For now, let’s just say that a vote is a unit of authority. Like when you were ten years old and you wanted pizza for dinner, but your parents and brother and sister wanted tacos – you had one authority unit, but it was no match for the combined might of their four authority units. In the end, the tacos were pretty bad and you were right all along… so at least you have that going for you. In almost all situations every share you own gets you one vote.
To summarize, if Reallie Steilish Inc. sells shares to other people (shareholders) three big things happen: 1) your corporation gets money, 2) the shareholders get to earn or lose money depending on how good your corporation is, and 3) you’re giving some of your authority away to other shareholders. Reallie Steilish Inc. can even sell so many shares to other people that they end up owning more shares than you do, meaning they have more authority than you. In that case, if you play your cards right, your corporation might get money *and* awesome pizza every night, or maybe something even better (some extra spicy misir wat?). But there’s always the looming spectre of a lifetime of mediocre tacos, or maybe something way worse…
Shareholders come in *so* many different shapes and sizes – both literally and figuratively. Some shareholders are just regular schmoes like you or Mr. Bananaman (except taller). You’d buy a share of a corporation hoping that it will do a really good job and somebody – maybe a really muscular person – will want to buy your share from you for more than you paid. Other shareholders are corporations themselves. In some cases, those corporations’ entire business is to buy shares and then try to sell them for more than they paid.
Ground-Up Governance is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Nate’s drawings are perfection!