Stock With Voting Rights

By Business & Finance Last updated Friday, June/14/2024

Common Stock

Common stock is the normal stock offering that public companies provide to public investors. It is under no specific restraints, and so it comes with the right to vote in company decisions. Investors typically buy common stock either for dividends, the profits that companies pay back to their shareholders, or for the increased value that stock gains in the market as the business grows. Owners of the company with a controlling percentage of stock (greater than 50 percent) are able to control business decisions. When companies acquire other businesses, they can choose to buy up common stock until they have a controlling percentage.

Preemptive stock is a unique type of common stock that helps protect people who are already owners of the company. Shareholders who are interested in company ownership and their voting rights prefer the protection granted by preemptive stock. When the company makes a new stock offering, those with preemptive stock have the option to purchase the new shares before other investors, inasmuch as it would maintain their previous percentage of company ownership. Otherwise, ownership will be diluted among new investors.

Preferred stock is another popular form of stock that companies sell. It is known as preferred stock because it comes with a safeguard: if the company fails, then remaining funds will be used to pay off investors with preferred stock before those with common stock -- although lenders and investors with bonds will be paid before anyone. In exchange for this benefit, investors buying preferred stock do not buy the right to vote in the company, only a portion of ownership.

Some companies with large stock offerings prefer to categorize stock even further. They divide common stock into different ratings. Class A stocks receive the most voting power, such as 10 votes per share. Under this premium stock are other classes such as B and C, which may offer only one vote or a fraction of a vote per share. This helps the company center ownership, just like preemptive options allow.