Scribd
Upload
3 views2 pages

Understanding Shareholder Roles and Ethics

Shareholders are the owners of a company who provide financial backing in exchange for potential dividends, and they can become shareholders through various means such as subscribing during incorporation or purchasing shares. It is a misconception that shareholders do not contribute to profits, as they risk their capital and earn dividends as a return on their investment. The relationship between shareholders and managers is ethical, with managers acting as agents for shareholders and being compensated for their roles.

Uploaded by

sidney phiri
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
3 views2 pages

Understanding Shareholder Roles and Ethics

Shareholders are the owners of a company who provide financial backing in exchange for potential dividends, and they can become shareholders through various means such as subscribing during incorporation or purchasing shares. It is a misconception that shareholders do not contribute to profits, as they risk their capital and earn dividends as a return on their investment. The relationship between shareholders and managers is ethical, with managers acting as agents for shareholders and being compensated for their roles.

Uploaded by

sidney phiri
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Shareholders are the owners of a company and provide financial backing in return

for potential dividends over the lifetime of the company. A person or corporation can

become a shareholder of a company in three ways:

 By subscribing to the memorandum of the company during incorporation

 By investing in return for new shares in the company

 By obtaining shares from an existing shareholder by purchase, by gift or by will

Subscribers are usually the party who initiate the incorporation of a company and

automatically become the first shareholders after incorporation.

While it is possible for shareholders to transfer their shares, it is also possible for private

companies to place restrictions on this process in the articles of the company ( Pearse-

Trust, 2018)

From the above it is clearly a misconception to state that shareholders do nothing

to create profits. Shareholders risk their money by investing in the business inform of

capital employed. The profits they earn in form of dividends is thus the return on their

investment and it is merited.

The people who work for the corporation deserve the profits but not all of it since

they are recruited to work as the agents of the shareholders for which they are paid

respective salaries. The agreement between the shareholders (principal) and managers

(agents) stipulates the duties and responsibilities of the latter and the amount to be paid

for the same. This is ethical and in line with what the corporate structures prescribes.

the managers on the other hand working for shareholders recruits employees to help in
jobs in various department for a fee (salary) determined by the market. Consequently,

the earnings by shareholders is ethical as their money is working for them. This is a

good and ethical business practice (Velasquez & Velazquez 2002).

Reference

Velasquez, M. G., & Velazquez, M. (2002). Business ethics: Concepts and cases

(Vol. 111). Upper Saddle River, NJ: Prentice Hall.

Pearse -Trust. (2018, March 12). Roles & Responsibilities of a Company Shareholder.

Retrieved September 14, 2020, from [Link]

responsibilities-of-company-shareholder

You might also like