Lesson 3 - management notes PDF

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Lesson 3.2

Shareholders, Bondholders and Director

Bearing in mind the concept of corporation, and understanding the about the stakeholders, it about time to know who composed other people behind a corporation. They are the shareholders, bondholders and directors. They have claims over the corporation, the shareholders for example have claims in the form of dividends; for the bondholders, the claims is in the form of interest earned in the long-term investments, and the directors claims for the salaries, incentives, bonus as payments for the services rendered in the corporation. To gain thorough understanding on how they are related to the corporation, understand the following: 1.

Shareholders. They are also known as the stockholders of the

corporation. They have some privileges that may be enjoyed depending on the type of their stockholdings. Some of the rights are: a.

The right to vote;

b.

The right to propose shareholders resolutions;

c.

The right to receive dividend;

d.

The right to purchase new shares issued by the company to

maintain its percentage of ownership in the company. This is also known as Pre-emption right or it can also be called as the right to first refusal. e.

The right to liquidating dividends. This is the right of the

stockholder to receive company’s assets during liquidation of the business.

Remember that the stockholders’ right to a company asset is secondary only. The first priority will be the outside creditors. 2.

Bondholders. They are the person or entity holding

the outstanding bonds. A bond is a certificate of indebtedness of the issuing corporation. This is usually long term in nature.

In terms of liquidation of the assets of the corporation, the bondholders are given priority for settlement. The bond holders are also receiving regular interests during the life of the bond. 3.

Board of Directors.

They are the people who

exercises the corporate powers in the corporations in the conduct of all business and control. The Chairman is the head of the BOD and considered very influential in the corporation. The Board activities are determined by the powers, duties and responsibilities delegated conferred on by the authority.

Summary The stakeholders of the corporation are: creditors, shareholders, employees, clients, government and public. • Shareholders are enjoying privileges depending on the stockholdings. • The stockholders’ right to a company asset is secondary only. • The first priority will be the outside creditors. • Board of Directors and considered most influential in the corporation. • Learning Assessment Look for a particular company and identify its stakeholders. Explain how the identified persons are considered as stakeholders....