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What are the Different Types of Shareholder Benefits?

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  • Written By: H. Terry
  • Edited By: Jenn Walker
  • Last Modified Date: 06 September 2016
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    2003-2016
    Conjecture Corporation
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Shareholders are owners of stock in a company. When a company makes profits, they are entitled to a certain share in those profits according to the amount of stock they hold. This share in the profit, when paid out to shareholders, is called a dividend and is the most common way to compensate shareholders. Other shareholder benefits include voting rights and shareholder perks, such as bonuses and discounts or gifts related to the company's products or services.

There are two types of stock that a shareholder, or equity holder, can hold in a company: preferred and common, and each comes with its own unique shareholder benefits. Preferred stockholders usually have fixed dividends or assets, rendering them less vulnerable to sporadic changes in a company's wealth or even in times of bankruptcy or sale. Common stockholders, which usually represent the majority of a publicly traded firm's shareholders, have their dividends determined by the board of directors and thus either share in the company's profits or losses, as the case may be.

Preferred stock can offer more stability, whereas common stock, though more of a gamble, can earn higher dividends when a company does well. There are also stock options that allow for changes. For example, "convertible stock” is preferred stock that can be exchanged for common stock at the shareholder's discretion, and "redeemable stock" can be repurchased from the shareholder at the company's discretion.

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Another benefit to being a shareholder is the right to vote on decisions that affect the direction of a business. Though the particular voting rights of shareholders will vary depending on legal jurisdictions, common questions put to shareholder votes concern changes related to the company's name, interests, brand image, services or products and matters such as mergers and acquisitions. Shareholders are also normally entitled to elect the organization's board of director members and its corporate president.

Aside from the basic benefits of dividends and voting rights, other shareholder benefits can include such perks as bonuses, which are additional dividends paid out, usually to mark a strong growth in profits. Companies also might offer shareholder benefits in the form of low interest loans or the private use of company cars. In some cases, it will be agreed that such large benefits will replace part or all of a dividend as the shareholder's main compensation.

There is also a wide-range of unique company shareholder perks that depend largely on the nature of a firm's business. For example, a cruise ship operator might offer annual credit toward a vacation at sea, a clothing retailer might offer a 15% discount in their shops, or a company that sells chocolate might send a complimentary box of their product on Valentine's Day and at Christmas. Such perks are not offered by all companies and are not intended as principal shareholder benefits; they are novel extras used to court new investors and demonstrate a company's appreciation of its current shareholders.

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