Role of Shareholders Essay Example | Topics and Well Written Essays - 3000 words

Role of Shareholders - Essay Example However, state laws and company bylaws determine the areas in which shareholders are entitled to vote Shareholder powers One of the main areas where shareholders are generally entitled to use their power is the election of the board members who are the â€Å"agents† of the corporation. The board of directors â€Å"acts on behalf of the shareholders† and is responsible for the maximization of shareholder value by incorporating appropriate policies through the managers they select for corporate operations (Reference for Business 2012). Any fundamental change which the organization plans to incorporate needs to be approved by the shareholders before implementation (Miller 2012). This implies that they have the power to approve a merger, change or amend the articles of incorporation of a firm, affect the sale of all or part of the company’s assets or even approve the dissolution of the corporation (Ronen and Yaari 2007). However, in many of such decisions prior board approval is required. They not only have the power to choose the members of the board of Directors but also to vote against them if found to be inefficient and remove them from the board. Generally a director is removed if there is sufficient cause for voting him out. However, certain state statutes and corporate articles allow their removal without any cause (Miller 2012). This means that if majority of shareholders feel that a particular director is not required, they can vote him /her out of office without giving any justification for their action. Shareholders can impact a company policy by proposing their own ideas for shareholder vote. However, for this they need to present their idea to the board of directors and ask them to distribute it to all the shareholders before the shareholder meeting by including it in the proxy papers sent to them (Miller 2012). However, this power is limited by the fact that SEC (Securities and Exchange Commission) has set a limit to who can forwa rd these proposals. As per SEC, only those shareholders who have stocks worth at least $1000 can submit such proposals (Miller 2012). This submission is also limited by the fact that the proposal should be related to some noteworthy policy concern and not any ordination day to day operational consideration (Ronen and Yaari 2007). Thus, we can see that though the shareholders have the powers to affect change, they are limited in their use of power. In general, each shareholder has voting rights in proportion to the number of shares held by him/ her. However, the company can limit the voting rights of certain categories of shareholders (Miller 2012). For example, most organizations do not give voting rights to preferred shareholders. The companies can do this by incorporating the same in the articles of incorporation. However, if the laws of the State of operation do not allow such provisions, then the organization has to abide by the law. Some times preemptive rights are granted to s hareholders. This gives them the right to subscribe to the â€Å"same percentage of new shares being issued as they already hold in the company† (Miller 2012). This helps them to maintain their â€Å"proportionate control† over the organization in terms of voting power and financial interest (Miller 2012). The implication of this right is significant when the organizati

REC, Inc. and seatle coffee products Essay Example | Topics and Well Written Essays - 2000 words

REC, Inc. and seatle coffee products - Essay Example On the basis of the previous results the company prepares projected income statement for the next accounting period in order to estimate the likely outcome of its operations and sales. This also helps the company to determine variances observed in the actual financial results of the company. The company’s expectations from its business for the complete year 2004 are given as budgeted income statement in Exhibit 2 which indicate that the company expects a monthly average profit of $60,000 (Profit Before Taxes: $720,000/12). These projections are based on the expected number of sales of equivalent units for the year 2004 i.e. the company estimated sale of 10,000 equivalent units which implies an average monthly sale of 830 or 840 units. Based on the comparison between the actual financial results of REC, Inc. and its budgeted income statement it could be ascertained that the company’s profit results for the month January 2004 have felt short by $78,000. This has been against the expectation of the company’s management as the business followed the trend that it has experienced in the last few years related to the market conditions and business cycle. The variation in the actual financial results from the budgeted income statement can be evaluated by examining every element of the actual income statement and comparing it to the budgeted figures for these elements. One of the limitations of the above presented budgeted financials on a monthly basis is that it does not take into account the changes in the business cycle and market conditions which may occur during the financial period. For example, sales of the business could be affected due to the seasonal downturn in a particular month. Therefore, better analysis would have been possible if the company was preparing budgeted income statement on a monthly basis. The table above indicates that the