o Owning stock comes with certain rights and privileges. What the rights of comm
ID: 2666046 • Letter: O
Question
o Owning stock comes with certain rights and privileges. What the rights of common stock holders as well as identify what measures firms are implementing today to increase the number of common stock shareholders?o Identify and discuss the most important corporate governance issues to you, and how would they affect your choice of which stocks to purchase or avoid?
o Shareholders have specific responsibilities to the firm; what are the most common responsibilities and how do they vary across firms?
Explanation / Answer
Rights of common stockholders: 1) Right to receive stock certificates as evidence of ownership 2) Right to vote at stockholder's meetings 3) Right to receive any declared dividends and to sell the stock 4) Right to information and receive financial reports about the company. 5) Right to purchase the newly issued shares of stock by the company before the shares are sold to the public. Common shareholders have voting rights to elect their Boars of Directors. But some firms do not use straight voting instead they use the "Cumulative voting" to maximise the minority representation. Cumulative voting is the election of directors means each shareholder is entitled to as many votes as shall equal to the number of shares the shareholder owns multiplied by the number of directors to be elected.Furthermore, the shareholders may cast all these votes for a single candidate or for any two or more of them. The crucial issues in Indian corporate governance are very different from those in the US or the UK.The critical issues in India include: 1) Weak oversight and monitoring as the biggest risk to corporate governance 2) Inadequate independence and lack of respect for the shareholder community 3) Low financial discipline 4) Management override Corporate governance limits the growth of the business organizations. The LIFO method has limited applicability and acceptance. LIFO as a method of closing stock valuation apparently takes care of this problem of capital erosion by way of its higher COGS calculation resulting in lower net income.Therefore, LIFO can be choosen as a method of stock valuation. The legal responsibilities of board and board members vary with the nature of the organization and within the jurisdiction with which it operates. For public companies, these responsibilities are much more vigorou and complex than for those of other types. Responsibilities of shareholders: 1) Governing the organization by establishing the broad principles and objectives. 2) Selecting, appointing, supporting and reviewing the perfomance of chief executive 3) Ensuring the availability of adequate financial resources 4) Approving annual budgets 5) Accounting to the stakeholders for the organizations performance.Related Questions
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