Chapter 6 Common Stocks o The corporate form e Corporate charter A corporation exists only when it has been granted a charter, or certificate incorporation Charter is a document issued by a state to a corporation that specifies the rights and obligations of the corporation's stockholders. The charter is the most important constitution of a corporation It may be amended with the approval of the stockholders, perhaps by a majority or two-thirds vote, where each share of stock generally entitles its owner to one vote
Chapter 6 Common Stocks The corporate form ⚫ Corporate charter A corporation exists only when it has been granted a charter, or certificate incorporation. Charter is a document issued by a state to a corporation that specifies the rights and obligations of the corporation’s stockholders. The charter is the most important constitution of a corporation. It may be amended with the approval of the stockholders, perhaps by a majority or two—thirds vote, where each share of stock generally entitles its owner to one vote
Chapter 6 Common Stocks Both the initial terms of the charter and the terms of any amendment must also be approved by the state in which the corporation is chartered o Stock certificates e The ownership of a firm's stock has typically been represented by a single certificate, with the numbers of shares held by the particular investor noted on it o Shares of stock held by an investor may be transferred to a new owner with the assistance of either the issuing corporation or, more commonly its designated transfer agent
Chapter 6 Common Stocks Both the initial terms of the charter and the terms of any amendment must also be approved by the state in which the corporation is chartered. ⚫ Stock certificates ⚫ The ownership of a firm’s stock has typically been represented by a single certificate, with the numbers of shares held by the particular investor noted on it. ⚫ Shares of stock held by an investor may be transferred to a new owner with the assistance of either the issuing corporation or, more commonly its designated transfer agent
Chapter 6 Common Stocks Transfer agent is a designated agent of a corporation, usually a bank or other financial institution that administers the transfer of shares of a corporation's stock between old and new owners o votIng o Because an owner of a share of common stock is one of the owners of a corporation he or she is entitled to vote on matters brought up at the corporations annual meeting, and to vote for the corporation's directors. Any owner may attend and vote in person, but most choose instead to vote by proxy
Chapter 6 Common Stocks ⚫ Transfer agent is a designated agent of a corporation, usually a bank or other financial institution, that administers the transfer of shares of a corporation’s stock between old and new owners. ⚫ Voting ⚫ Because an owner of a share of common stock is one of the owners of a corporation, he or she is entitled to vote on matters brought up at the corporation’s annual meeting, and to vote for the corporation’s directors. Any owner may attend and vote in person, but most choose instead to vote by proxy
Chapter 6 Common Stocks Proxy fight ● Majority system ● Cumulative systen In the context of a corporation, a method of voting in which a stockholder is permitted to give any one candidate for the board of directors a maximum number of votes equal to the number of shares owned by that shareholder times the number of directors being elected n= 十 D+1
Chapter 6 Common Stocks ⚫ Proxy fight ⚫ Majority system ⚫ Cumulative system In the context of a corporation, a method of voting in which a stockholder is permitted to give any one candidate for the board of directors a maximum number of votes equal to the number of shares owned by that shareholder times the number of directors being elected. n=( )+1 ds D+1
Chapter 6 Common Stocks Where: n= minimum number of shares that must be owned d= number of directors the stockholder wants to be certain of electing s= number of shares outstanding D= number of directors to be elected In summary, the cumulative voting system gives minority stockholders the right to have some representation on the board of directors, provided that the number of shares owned is sufficiently large
Chapter 6 Common Stocks Where: n= minimum number of shares that must be owned; d= number of directors the stockholder wants to be certain of electing; s= number of shares outstanding D= number of directors to be elected In summary, the cumulative voting system gives minority stockholders the right to have some representation on the board of directors, provided that the number of shares owned is sufficiently large