Stakeholders and Shareholders - Paper Sample

Introduction

Shareholders play a crucial role in influencing policies, both social and political, at the corporate level. Shareholders, also referred are primary stakeholders, invest directly in the corporate sector through buying shares. Shareholders' ability to influence policies at the corporate level has been changed by the Securities and Exchange Commission. The commission plays a vital role in regulating the stock exchange industries and, in this context regulating the shareholders eligible to submit proposals.

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Current Rules

The current rules that have been used even in the past dictate that shareholders with more than $2000 in a public company is eligible to submit a resolution for investors to vote in the annual company meetings. In the recent past, progressives have tried to limit corporate proxy voting in an effort to use business policies to advance their political agenda. However, to deal with this, The Securities and Exchange Commission (SEC) has come up with new rules. SEC has, under the new rules, increased the threshold required to submit proposals. Shareholders will be required to own more than $25000 in a public company to allow them to submit proposals(WSJ).

Furthermore, SEC has also made changes regarding the procedures followed when resubmitting the proposal. The current rules dictated that the company should reach the voting threshold of 3% in the first try,6% and 10% in the second and third respectively. However, under the new rules, shareholders will have to reach 5% in the first try and 15% and 25% in the second and third, respectively. The rule also prohibits shareholders who fail to meet the required thresholds from joining in resubmitting proposals. The main benefit of these changes is that it will limit the shareholders who hound corporate management through their proposals, which attracts very few shareholders. With these rules, SEC will regulate firms, especially those with institutional investors, and reduce proxy voting.

Corporate Governance

In the recent past, shareholders often referred to as primary stakeholders, have played a crucial role in improving corporate governance. It is good to note that shareholder proposals' effectiveness is highly dependent on the communication between the shareholders and the company. If the proposals draw support from the majority of the shareholders, there is a high chance that they will prove effective in promoting shareholder's interest and the public.

The current event in this article relates significantly to the course material. The article has captured key concepts such as the role of shareholders and voting procedures in annual general meetings has also discussed how to share equity affects voting rights, especially in US companies. The article has also, to some extent, outlined the role of primary stakeholders in corporate governance. Primary stakeholders have a significant influence on the direction the company takes because they own the company. Therefore, companies must invest in their shareholders by coming up with policies that aim to maximize their earnings. The article has also given insight on shareholder proposals and their relevance. Shareholder proposals, as articulated by the article, require that certain criteria are met before submission. These proposals allow the shareholders to make submissions on changes they wish to see in the company's governance.

Conclusion

In conclusion, the SEC plays a crucial role in regulating the stock market. However, the changes made in the recent past have had both negative and positive impacts. For instance, raising the bar for shareholders when submitting proposals has been criticized by institutional shareholders. They feel that SEC is undermining them in the sense that some shareholders' rights have been curtailed. Moreover, some shareholders have positively taken these changes because they stand a better chance of participating in corporate governance.

Works Cited

Editorial. Board. "Stakeholders VS Shareholders." The Wall Street Journal, 23 Sept. 2020, https://www.wsj.com/articles/stakeholders-vs-shareholders-11600901702.