Question

Question 1 Angus is a 44-year-old high school teacher who wishes to invest his savings of $100,000 by building up a blue-chip share portfolio. Angus was a keen observer of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in 2019 and has strong views about corporate ethics and the remuneration of directors. Angus wants to exercise his vote as a shareholder to ensure that company directors are not being overpaid. He is also keen to ensure there is proper corporate governance and the directors are managing the company efficiently and ethically. Angus is unsure whether he should buy shares in a public company or a proprietary company. He is also unclear about what class of share/s would best suit his particular investment interests. Angus seeks your professional advice.

b) On what issues do shareholders have a right to vote and how many votes do they have?

Answer 1

a.

Public company and proprietary company have many differences. Like proprietary company can be formed with minimum of one shareholder and maximum of 50 shareholder and with operating restrictions subject to jurisdictions. Public companies are the company where there is no maximum limit on number of shareholders and receive money from public in the form of shares. Public company have huge capital base and shareholder base. So, if he want proper control over director remuneration and corporate governance of company, then he should invest in proprietary company. As in public company control can be exercised over director remuneration and corporate governance but the voting right is limited to number of shares held in the company. So, it cannot be absolutely guaranteed whether decision will be according to the wishes of Angus. Alternatively he can invest in public company.

Angus should invest in the common stock of the company i.e., equity shares. Equity shareholders are the real owners of the company. They make the decisions which drive the future of the company.     

b. Issues on which shareholder have right to vote:

1. Right to vote in elections for board of directors.

2. Right to vote on matters that directly affect their stock ownership, such as the company doing a stock split or a proposed merger or acquisition.

3.  Right to vote on executive compensation packages and other administrative issues

4. Right to vote on proposed operational alterations, such as shifts of corporate aims and goals.

Number of votes of shareholders : Nature of rights and specific issues on which shareholders can vote vary from company to company. Some companies grant voting rights based on number of shares held by each shareholder while other companies grant one vote for each shareholder irrespective of number of shares held.