Shareholder management: what you need to know to get it right and maximise value 

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Frequently disregarded and denied the attention it is due by business owners. That’s the definition that could be easily applicable to shareholder management policies. Yet, this proceeding is a vital aspect of a well-run company. Since they own substantial parts of the business via share capital, they have a rightful interest in the way the company is run. And this is where the importance of managing shareholders comes into play. If you adopt a successful strategy in this area, you are guaranteed to keep track of the shares in your brand and direct all the ventures involving shareholders at the same time. 

What’s a shareholder? 

Shareholders are individuals or entities (such as businesses, legal trusts, and partnerships) who own shares in a public or private company. Often used interchangeably with the term “stakeholder,” the two actually designate different concepts. In your corporation, the latter is a party with an interest, a “stake.” And while the large umbrella of stakeholders includes shareholders, it also incorporates supplies, creditors, employees, customers, the general public and activist groups. 

There are two main types of shareholders, common and preferred. The former own ordinary stock, which tends to generate higher return rates, therefore making them owners of significant portions of your company. Those retaining preference shares lack some of the privileges allotted to their peers, such as electing company board members, but their position also implies fewer risks. Suppose the business is liquidated. These shareholders are able to claim assets before their fellows. 

Depending on jurisdiction and the specific rules of each corporation, shareholders enjoy a number of rights, including:

  • Voting for the appointment into office of nominated directors
  • Express opinions on and bring changes to the corporate charter
  • Sell and purchase new shares within the company
  • Make decisions on management proposals
  • Sue the company for fiduciary duty violations

With all this in mind, it becomes very easy to see that investors are significant to your business and can influence it in many ways, which brings you to the following point. 

What is shareholder management? 

Shareholder management refers to the processes through which a company navigates its shareholder-related activities. Simply put, it helps you keep track of everything that has to do with stockholders in your company, including their number and the type of assets they own in your firm. This is vital information to control, as it ensures that you can run your business efficiently. When you implement a management policy, you are also obligated to relay any information pertaining to changes in the internal makeup of the company. If there are changes in shares ownership, you must notify the other stockholders and directors. Modifications in the number and stock owned by each shareholder are subjected to quick shifts, as stocks can be transferred between parties. The clauses of a management policy should stipulate the entrance and exit of shareholders from your corporation, as well as the rights they have over buying and selling shares. 

Management solutions to consider 

There are several methods you can use when looking to manage your business better in this aspect. Look into shareholder management tools to help you save time and stay at the top of your game. You can unify the cap table in a single view and access financials, all with a single button. It also becomes easier to access your company’s equity rates (the difference between total assets and liabilities) in order to determine your net worth. 

With software management software at your disposal, you can easily manage access for each stockholder and manage their rights and attributes. Setting up initial shares and monitoring levels becomes much more manageable. You can arrange a capitalisation table without notary help. You can rest assured that you’ll never forget to look into essential files again, as the operating system allows you to set reminders for company documents. You’ll never miss a deadline again. Finally, you know how changeable the industry is. With the help of this software, you can arrange future scenario models. Preparing for hypothetical business frameworks is vital when you’re trying to stay on top of your game. The software helps you assemble a plan for fundraising or capitalisation shifts, so you’re never caught off guard. 

Increasing value ethically 

The term shareholder value is a concept designating that the success of a corporation is dependent on the augmentation of stockholder earnings. Over the years, this model has come under a great deal of scrutiny and criticism, being seen as a cynical practice that devalues the work of other members of the company, particularly employees. It’s true that companies in pursuit of profits have sometimes neglected a precise measure of ethical business practices, environmental issues and inequalities, but that doesn’t have to be the case for your business. Here are a few tips on how you can help your business achieve its full shareholder value potential without disregarding other factors: 

  • Make strategic decisions. When looking to maximise value, you must consider how likely a particular strategy is to generate revenue and how vulnerable it is in the face of potential shifts and financial variables. 
  • Carry only assets that yield returns. You can quickly achieve this by focusing on activities that bring revenue like marketing, research or design ventures. Not exploiting these opportunities is a detriment to added value and, therefore, to your business as a whole. 
  • Reward employees for their task execution on key value drivers that they impact directly. 
  • Give value-relevant information to investors. Include accruals such as amortisation or depreciation, as well as performance indicators that assess the company’s value. 

It’s not easy running a business. There are many variables to take into account, and shareholder management is one of the main ones. Given its importance in a corporation’s progress and inner workings, you shouldn’t ignore this aspect and use all the tools at your disposal to direct all the processes accordingly. It is essential to get the hang of it in order to enjoy all the benefits of a prosperous company.

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Watch My Wallet has everything you need to know about money, written by real people who’ve been there. Inspired by the philosophy of Early Retirement Extreme (ERE), our goal is to make informed decisions about our finances in order to achieve financial independence.