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What Are Stockholder Voting Rights, and Who Gets a Vote?

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Updated January 10, 2024

What Are Stockholder Voting Rights?

A voting right is the right of a shareholder of a corporation to vote on matters of corporate policy. It is common for shareholders to voice their vote by proxy by mailing in their response or by relinquishing their vote to a third-party proxy voter.

Unlike the single-vote rights that individuals commonly possess in democratic governments, the number of votes a shareholder has corresponds to the number of shares they own. Thus, somebody owning more than 50% of a company's shares has a majority of the vote and is said to have a controlling interest in the firm.

Key Takeaways

Stockholder voting rights allow shareholders of record in a company to vote on certain corporate actions.
Stockholder votes concern major corporate actions, such as electing a new board of directors or approving new securities.
Shareholders cast votes at a company's annual meeting. If they cannot attend, they may utilize a proxy vote to convey their wishes.
Typically common shares carry one vote per share, while preferred shares have no voting rights.

Understanding Stockholder Voting Rights

Shareholders have the right to vote on corporate actions, often at the company's annual shareholder meeting. These decisions can include:

The makeup of the board of directors
Issuing new securities
Initiating corporate actions like mergers or acquisitions
Approving dividends
Substantial changes in the corporation's operations or policies

Because a corporation’s officers and board of directors (BOD) manage its daily operations, shareholders have no right to vote on basic day-to-day operational or management issues. However, shareholders may vote on major corporate issues, such as changes to the charter or to vote in or out members of the board of directors.

Common shareholders typically have one vote per share, while owners of preferred shares often do not have any voting rights at all.

Typically, only a shareholder of record is eligible to vote at a shareholder meeting. Corporate records will name all owners of outstanding shares along with a record date preceding the meeting. Shareholders not listed in the record on the record date may not vote.

Provisions in a private corporation’s charter and its bylaws govern shareholders’ rights, including the right to vote on corporate matters. Along with state corporation laws, these provisions may limit the voting rights of shareholders. When a company goes public, shareholder rights are determined by the corporation but must follow rules and guidelines established by the Securities and Exchange Commission (SEC) as well as any rules set out by the exchange(s) that list the shares of the company.

Voting and Quorums

Corporate bylaws typically require a quorum for voting at a shareholder meeting. A quorum is typically reached when the shareholders present or represented at the meeting own over half of the corporation’s shares. Some state laws allow approval of a resolution without a quorum if all shareholders provide a written endorsement of a measure.

Approving a resolution typically requires a simple majority of share votes. A greater percentage of votes may be needed for certain exceptional resolutions, such as seeking a merger or dissolving the corporation.

Proxy Voting

Shareholders may assign their rights to vote to another party without giving up the shares if they are unable or unwilling to attend the company's annual meeting or any emergency meeting. The person or entity given the proxy vote will cast votes on behalf of several shareholder without consulting the shareholder. In certain extreme cases, a company or person may pay for proxies as a means of collecting a sufficient number and changing the existing management team.

Shareholders will all receive a package of proxy materials ahead of the meeting that will contain disclosure documents of the annual report, proxy statement ,and most importantly, a Proxy Card or Voter Instruction Form for the upcoming annual shareholder meeting. The person designated as a proxy will collect these cards and will cast a proxy vote in line with the shareholder's directions as written on their proxy card.

Proxy votes may be cast by mail, phone, or online before the cutoff time, which is typically 24 hours before the shareholder meeting. Responses may include "For," "Against," "Abstain" or "Not Voted."

How Much Impact Do Stockholder Votes Have?

In large, publicly held companies, shareholders exert the most control by electing the company’s directors. However, in small, privately held companies, officers and directors often own large blocks of shares. Therefore, minority shareholders typically cannot affect which directors are elected. It is also possible for one person to own a controlling share of the company’s stock. Shareholders may vote in elections or on resolutions, but their votes may have little impact on major company issues.

How Do I Vote By Proxy As a Shareholder?

If you cannot attend the annual meeting of a company in which you are a stockholder, you have the option to vote by proxy. The company in which you own shares will typically send you information by mail or email about the upcoming vote, along with information on how to vote by proxy. Most companies will allow proxy voting by phone, mail, or online. Some companies provide for voting via an app. Proxy votes must usually be cast before a set cutoff time, usually 24 hours before the shareholder meeting.

What Is a Controlling Interest in a Company?

A shareholder, or a group of shareholders acting together, is said to have a controlling interest in a company when they hold more than 50% of the company's voting stock. Having a controlling interest in a company allows that person or group to direct many of the decisions made by that company.

The Bottom Line

Stockholder voting rights are given to shareholders of record in a company, allowing them to vote on certain corporate actions of that company. These actions can include things like electing a new board of directors, approving the issue of new securities, and initiating a new merger or acquisition.

Stockholder votes are cast at a company's annual meeting. If shareholders cannot attend, they have the option to vote by proxy, usually by phone, mail, or online. Stockholders vote only on major corporate actions; daily operations are managed by a corporation’s officers and board of directors.

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